Dubai Group's $10 billion debt restructuring will be managed by the head of another state-linked firm while two banks will have a monitoring role to ensure more oversight from creditors, sources aware of the matter said.
Dubai Group, a unit of ruler Sheikh Mohammed bin Rashid al-Maktoum's personal investment firm Dubai Holding, was one of several of the emirate's state-linked entities forced to restructure debt after the global financial crisis in 2008.
The group, hit by excessive use of leverage in its investments and a sharp decline in asset values, has been in debt talks for two years.
David Smoot, chief executive officer of Dubai International Capital (DIC), which itself agreed on a $2.5 billion debt deal in 2012, has been asked to manage Dubai Group's assets as part of the restructuring plan, the sources said speaking on condition of anonymity as the matter is not public. DIC is the private equity arm of Dubai Holding.
Dubai Group declined to comment.
In addition to Smoot's appointment, two banks will be named to a post-restructuring creditor committee to provide oversight of Dubai Group's business to ensure the interests of creditors are protected for the duration of the debt deal.
"There's going to be significantly more oversight from the creditors, given what has happened before," said one source aware of the matter.
It is not the first time creditors on a Gulf restructuring have insisted on an oversight role in the firm once the deal is struck. Kuwait's Investment Dar, which restructured 1 billion dinars ($3.53 billion) in 2011, agreed to a four-lender liaison committee who would ensure best practices at the firm.
Of the group's $10 billion total debt, $6 billion is owed to banks and the remaining $4 billion is classed as inter-company loans.
Documentation for the full restructuring has already been agreed with secured creditors and French bank Natixis, who are in a separate group of creditors, while it is still being completed for unsecured lenders.
In January, Dubai Group settled with banks who brought legal action to secure repayment of their share of the debt and this deal was signed on Thursday, two of the sources said.
The creditors included the four lenders who brought legal action in London: RBS, Standard Bank, Commerzbank and Commercial International Bank .
British Arab Commercial Bank joined them after the 18.5 cents on the dollar offer was extended to the other banks who are part of the unsecured creditor committee.
Most of the debt restructurings in Dubai are predicated on asset disposals to fund future repayments. But the emirate has not sold any of its major assets, blaming tough market conditions and a slow recovery in value.
Under Smoot, DIC agreed a $2.5 billion restructuring with lenders last April. Smoot, an American former investment banker, took the top job at DIC in 2010. Since then, he has turned around the firm, sold several assets under difficult market conditions and reached a debt agreement which saw liabilities extended for up to five years.
Smoot will manage the assets within the Dubai Group structure and they will not be transferred to another entity, three of the sources said.
Dubai Group cut half its staff of about 30 people late in 2012, including its chief investment officer, as part of cost-cutting measures and as executives were fired for failing to speed up asset sales.
Last month the group sold its 41 percent stake in Oman National Investment Corp Holding (ONIC) to an Omani sovereign wealth fund. [ID: nL6N0BS2B5]
That followed the sale in September of its Turkish insurance arm jointly to a company owned by former AIG chief executive Maurice Greenberg and to a unit of Dubai lender Mashreq Bank.
But such disposals have been minor in value and the group is yet to divest some of its larger assets.
It owns a 14.7 percent stake in Oman's top lender, Bank Muscat, holds an 18 percent stake in Egypt's EFG Hermes and has 17 percent ownership of Cyprus Popular Bank, formerly Marfin.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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