Dubai World, dozens of creditor banks meet on $23.5B restructuring bid; resolution months away

By Adam Schreck, AP
Thursday, July 22, 2010

Debt-laden Dubai World tries to win over creditors

DUBAI, United Arab Emirates — Dubai World formally presented its $23.5 billion restructuring plan to scores of creditor banks Thursday as it seeks closure to its months-old debt crisis, but made clear that wrangling over the deal could grind on for some time.

The meeting was the first full gathering of the struggling conglomerate’s lenders since it outlined its financial rescue proposal earlier this year. It was held in the luxury coral-pink Atlantis hotel on the city-state’s manmade Palm Jumeirah island — itself one of the big-ticket projects Dubai World spent billions on before its finances turned sour.

The closed-door session was a chance for the indebted state-owned firm to present its proposal and answer questions from creditors, according to an official speaking on behalf of the company. The official, who spoke on condition of anonymity in line with company policy, said agreement on the deal was likely “some months” away.

“As is customary at this stage of the process, this was an informational session and no resolution was sought in the meeting,” Dubai World said in a brief statement following the gathering. “Creditor banks will now have the opportunity to review the information provided before responding to the proposal.”

Dubai World is seeking to win over 73 creditor banks to the restructuring plan it outlined in March.

The proposal offers creditors full repayment on the principal of their outstanding loans over a five to eight year period, and gives them a range of repayment options. Some bankers have criticized the interest being offered, starting at 1 percent, as too low and below market rates.

“We are not happy of course,” Suresh Vaidyanathan, head of operations at Bahrain-based Alubaf Arab International Bank, said as he left the meeting. He cited concerns about the low prices and repayment guarantees being offered, and said the proposal depends on the company’s ability to keep up its cash flow. But he acknowledged that his bank may need to take the offer on the table anyway.

“We don’t want to be left out,” he said.

Most other bankers attending the meeting declined to comment.

Dubai World already has the support of seven core banks owed about 60 percent of the debt. They formed a coordinating committee to thrash out the broad terms of a repayment deal, which they agreed to in principal in May.

The committee’s international members are Bank of Tokyo-Mitsubishi UFJ, HSBC Holdings PLC, Lloyds Banking Group PLC, Royal Bank of Scotland Group PLC and Standard Chartered PLC. Local lenders Emirates NBD and Abu Dhabi Commercial Bank are also part of the group.

Dubai World said it will carry about $14.4 billion in bank debt if the restructuring plan goes ahead.

The conglomerate’s acute credit problems shocked world markets last November, reminding investors that the world’s financial system remains exposed to immense amounts of debt that might not be repaid in full. Financial problems at the conglomerate — which has interests in businesses including ports, real estate and tourism — also raised fresh concerns about the lack of transparency in the oil-rich Gulf region.

The company’s main real estate arm, Nakheel, met with its own set of creditors last week as it works to dig out from under $10.5 billion in debt. Nakheel is the developer responsible for building a series of islands shaped like palm trees and a map of the world off Dubai’s coast.

The sheikdom’s financial problems don’t stop with Dubai World. The International Monetary Fund estimates the emirate of Dubai and its web of state-linked companies are shouldering as much as $109 billion in debt.

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