DUBAI // Dubai World, the property conglomerate that owns the developer Nakheel, has clinched a deal with its bank creditors intended to speed up economic recovery in the emirate. The seven leading bankers to the group have agreed in principle to accept lower repayment terms on $14.4 billion (Dh53bn) of loans. The proposals must now be agreed by remaining creditors.
The deal, announced yesterday by Dubai World's restructuring chief, Aidan Birkett, paves the way for a Dubai Government injection of nearly $10bn into the emirate's economy to revive the property and financial markets. It will free up payments to dozens of contractors, enabling the reactivation of stalled projects and helping to revive the job market in the property sector, which underpins the wider economy.
Mr Birkett said: "This is an important milestone and reflects our efforts to achieve the best possible solution for all shareholders." For the Dubai Government, Sheikh Ahmed bin Saeed Al Maktoum said the deal was the result of "efforts by a large number of stakeholders who share a common interest in Dubai's future." The banks - four British, two from the UAE and one Japanese - speak for 60 per cent of Dubai World lending. They have agreed to extend repayment periods on their loans to between five and eight years. Most will receive only 1 per cent interest, far lower than they had previously agreed.
They are also being offered guarantees by the Dubai Government to cover any shortfall at the end of the repayment period. Dubai World expects to sell some assets to make up part of the new obligations. The deal is expected to help to free up the financial markets, especially bank and mortgage lending, which have been tight since the global financial crisis. Mr Birkett said the strategy of regenerating the economy through the property market, and especially through Nakheel, the developer of Palm and World, was on track. "Nakheel is an important part of the Dubai real estate market, and I remain confident of that strategy," he said.
Local markets reacted positively. Hamad Buamin, director general of the Dubai Chamber of Commerce, said: "Now this is resolved a lot of the risk has gone to minimum."