Dubai Group lenders reject debt offer

Struggling investment firm sees offer of 18.5 cents on the dollar rejected by 20 lenders

United Arab Emirates' Vice President and Prime Minister and Ruler of Dubai Sheikh Mohammed bin Rashid al-Maktoum (AFP/Getty Images).

United Arab Emirates' Vice President and Prime Minister and Ruler of Dubai Sheikh Mohammed bin Rashid al-Maktoum (AFP/Getty Images).

Dubai Group, a unit of the emirate's ruler's personal investment firm currently restructuring US$6bn in debt, saw an offer of 18.5 cents for every dollar rejected in favour of full repayment over a 12-year period by around 20 banks, Bloomberg reported.

The 20 banks were part of a group of lenders that had provided the investment firm a US$1.5bn Islamic murabaha loan in 2008. The offer was extended to the banks after earlier being accepted by a separate group of four lenders, including Royal Bank of Scotland and Standard Chartered, which recently dropped arbitration proceedings against Dubai Group.

A spokesperson for Dubai Group declined to comment on the latest 18.5 cents per dollar offer.

Dubai Group was hit hard by the global financial crisis in 2008 due to excessive use of leverage in its investments and a sharp decline in asset values.

After missing interest payments on two loan facilities in 2010 it spent years trying to persuade its lenders to extend repayment deadlines so that its asset values could have time to recover before it was forced to sell them to pay back debts.

The Dubai government walked away from negotiations in January 2012, dashing hopes of state-backed aid.

Of Dubai Group's US$10bn total debt, US$6bn is owed to banks and the remaining $4bn is classed as inter-company loans.

Dubai Group’s portfolio includes stakes in Dubai-based investment bank Shuaa Capital, Cairo-based investment bank EFG-Hermes Holding and Oman’s BankMuscat.

* With agencies

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Posted by: mark nolan

its easy...because they can

and good luck to them
life is people not banks

mark nolan
v1twn ltd

Posted by: Kirra

I do not really think that $10 billion is that big amount for Dubai. This is one of the richest countries for sure. It should be hassle-free for them to return the debts. Or they can use our no fax payday loan lenders to give them some cash) OK, to be serious, I really do not see the problem for Dubai to settle this debt. It is not like we are talking about trillions, right? Or maybe they see some advantage for themselves in not paying back in time. Well hopefully things get sorted out for both countries any time soon? Thanx for the post guys

Posted by: Doug

Well, that's why the banks are holding out. If someone owned me $1000 and then said they'd give me $180, I'd laugh their offer out the door too. Assuming Dubai has the money, then they should get on and pay it.

Where things get interesting is if it turns out they don't have the money.

Posted by: Thabit

have you tried a debt collection company ? I know a good one. why dont you give me 25% of the money and 25% to charity and i will hook you up :)

Posted by: Jacky

Its no surprise the banks rejected. Why doesnt the dubai group borrow the 18.5% and pay back 100%?

Posted by: Paolo C

So the banks refused, then what about the other 4 billion USD? I myself as a private have a credit of 480K Aed towards a so called reseller. Does any reader believe that Rera, the police or any other authority in Dubai has raised a finger to help me? At this point I'm willing to donate 50% of the recovered sum to "Dubai Cares" which in a way is also my question. Don't believe me? I'll put it in writing.

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