Dubai World Given Chance To Pay Debts
December 21, 2009 Leave a comment
Dubai World’s leading banking creditors will attempt to force smaller lenders to accept a restructuring of the company’s $22 billion (£13.6 billion)debt at a meeting today.
State-backed Dubai World will hold talks with representatives of more than 90 banks in an effort to secure agreement for a six-month suspension of all debt repayments.
The Times has learnt that leading creditors have signalled before the meeting that they are prepared to agree to the standstill and will attempt to force smaller banks into accepting a restructuring of the debts.
The leading share index of Abu Dhabi, Dubai’s oil-rich neighbour, slumped 2.6 per cent yesterday to close at its lowest level since December 13 on fears the whole United Arab Emirates will suffer as it absorbs Dubai’s losses. This will be the first time that Dubai World has met its creditors since the conglomerate stunned international markets by requesting a standstill on November 25
The committee of creditors will be led by four London-listed banks — HSBC, Standard Chartered, Lloyds and Royal Bank of Scotland — as well as two local lenders, Emirates NBD and Abu Dhabi Commercial Bank. KPMG, the accountant, is the adviser.
Speaking to The Times yesterday, bankers from the committee said that they expected smaller creditors with little interest in furthering their relationship with Dubai to demand immediate repayment in full, but that such expectations were unrealistic given the scale of Dubai World’s difficulties.
Instead, the six leading banks, and others with long-term interests in Dubai and the Gulf region, will lean on their partners to settle for a longer-term restructuring, including the sale of some Dubai World assets.
Bankers say that, given the collapse this year of Dubai’s once-booming property market, many of Dubai World’s real estate assets are almost worthless. However, they can be expected to recover much of their former value within about three years and may be factored into a longer-term restructuring process.
Other trophy assets overseas, such as Barneys, the luxury American retail chain, and the QE2 cruise liner are expected to sold off.
Abu Dhabi stepped in last week with a $10 billion bond issue to bail out Dubai World, but said that the money was contingent upon Dubai World reaching agreement on a standstill with its remaining creditors. Dubai World insisted that the outlook for the group was more positive than at any other time since November 25.