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Fri 5 Feb 2010 03:17 PM

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Dubai eyes $1.2bn Limitless loan rollover - sources

Sources unclear on if banks will agree in absence of a standstill agreement.

Dubai eyes $1.2bn Limitless loan rollover - sources
CURBED LIMITS: Limitlesss two-year Islamic facility does not have the option of an extension. (ITP Images)

Dubai World will seek to roll over a $1.2 billion Islamic loan at its Limitless property unit due in March but it is unclear whether banks will agree in the absence of a standstill agreement, banking sources said on Thursday.The state-owned firm, which rattled global markets when it requested a delay on $26 billion of debt linked to its main property units Nakheel and Limitless World last November, has been negotiating with an unofficial bank coordinating committee. But it has yet to present a formal proposal on plans to repay some $22 billion in debt.

Limitless's two-year Islamic facility does not have the option of an extension which would mean the company would need to reach a new agreement with lending banks, according to loan documentation.

"It won't be a straightforward process," said a Gulf-based lender. "You can't say what the banks will do. Dubai World might approach and ask each and everyone to agree to a new agreement."

"If there was a standstill agreement, this would not be an issue."

Limitless's syndicated loan from 2008 was led by Emirates Bank -- now part of Emirates NBD -- Emirates Islamic Bank, Arab National Bank and National Bank of Abu Dhabi.

The Shariah-compliant facility included 18 banks from Asia and Europe as well as the Middle East.

The presence of a large number of local lenders may work in Dubai World's favour, with those lenders more amenable to a delay.

Dubai World declined to comment on the Limitless loan.

The group, which repaid a $4.1 billion Islamic loan linked to developer Nakheel in December after a last-minute bond from Abu Dhabi, has yet to arrive at a formal standstill agreement with creditors but a de facto one has been in place since a December creditors meeting.

A lack of information about the company's plans for the Limitless loan has prompted some lenders to organize a conference call to discuss their options.

"Till now, there's been no information about renewal or anything," said one banker, who asked not to be identified.

The banker said there had been talk the company would repay the loan, whose syndicate includes Royal Bank of Scotland and nationalized German property lender Hypo Real Estate.

Also included were banks in Malaysia, Pakistan and Taiwan. While creditors may be unwilling to jeopardize the entire debt process, another Gulf-based banker said Dubai World needed to present a specific plan soon on how it would repay the debt or risk losing creditors patience.

"The main issue remains the success of the restructuring plan and whether interest will continued to be paid," said a Dubai-based banker at mid-size international bank.

Dubai World has access to about $4.9 billion remaining of the funds provided by Abu Dhabi -- $5 billion in a Dec. 14 bond and $5 billion loaned by Abu-Dhabi-linked banks previously. The financial support, aside from paying Nakheel's bond, will cover working capital and interest expenses.

Most of Limitless's projects, valued at more than $100 billion, are overseas in Asia and the Middle East.

In Malaysia, the country is developing Puteri Harbour -- waterfront homes with individual berthing and high-end condominiums -- worth around $450 million as well as International Halal Park, a residential and business complex that is compliant with Islamic law.

In Dubai, its flagship project is the Arabian Canal, a 75-km man-made waterway and 14,000 hectare canalside city valued at $11 billion and $50 billion respectively.

The project is in its early stages.

"If in fact there is a roll over, the lenders have effectively agreed to reschedule their debts instead of continuing to fight with Dubai World to get fully paid," said Khuram Maqsood, managing director at Emirates Capital.

"Or indeed ending up with the borrower's assets on the bank's books... which in Limitless's case would be a lot of semi-constructed land." (Reuters)