Dubai International Capital to challenge Oaktree takeover

Dubai International Capital, the fund owned by Dubai’s ruler, plans to sell bonds for the cash it needs to prevent Oaktree Capital Management from seizing its Almatis unit.

Dubai is planning to repay senior lenders to the German alumina products maker through a sale of high yield bonds, two people familiar with the situation said.

Two thirds of senior lenders to Almatis have already voted in favor of Oaktree’s proposal to take over the company in exchange for writing down more than half of its $1 billion of debt.

Dubai is seeking to issue between $600 million and $700 million of senior and subordinated bonds in Almatis, said the people, who declined to be identified because the information is private.

The fund is in talks with six banks regarding underwriting assignments, the people said.

The bond sale will jettison lenders from the negotiating table by prepaying about $660 million of loans they are due.

The payment is not conditional on their acceptance, and once they are paid, they will have no say in the company’s finances. Dubai is also mounting a legal challenge to Oaktree.

Almatis breached terms of the loans in the first half of last year as the global economic slowdown hurt demand for its products.

The S&P GSCI index of 24 raw materials has advanced 50 percent in the past year, helping to boost Almatis’s cash flow, according to lenders.

Los Angeles based Oaktree, the biggest holder of the company’s debt, rallied support in July for a takeover after the debt breach. Lenders to a company that violates loan conditions can demand immediate repayment by forcing it to default.

Lutz Golsch, a spokesman for Frankfurt-based Almatis, and Fiona Mulcahy, a London based spokeswoman for Dubai International, declined to comment. An official at Oaktree also declined to comment.

Dubai filed a court appeal against Oaktree last week. The petition filed in an Amsterdam Court of Appeals will give Almatis “time to fully explore a consensual refinancing and thereby ensure that the interests of all stakeholders, including the significant number of dissenting senior lenders and the junior lenders, are properly protected,” Dubai said in a statement on March 22.