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Thu 25 Nov 2010 12:15 AM

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Dubai may cede Alliance Medical to lenders in debt-equity swap

Dubai International selling assets over five years and restructuring $2.6 billion of debt

Dubai may cede Alliance Medical to lenders in debt-equity swap
Alliance Medical’s lenders agreed to waive debt covenants in May to give the company time to reorganize its debt(Getty Images)

Dubai International Capital, a buyout company owned by the Emirate, may lose control of medical imaging company Alliance Medical to lenders in a debt for equity swap, three people familiar with the plan said.

Under a debt restructuring proposed by senior lenders, creditors including Lloyds TSB Bank, Commerzbank AG and Prudential Plc’s M&G unit would seize the company in exchange for writing its debt down to 250 million pounds ($395 million) from 555 million pounds, said the people, who declined to be identified because the plan is private.

Dubai International may retain some shares in the company, the people said. Junior lenders, owed 140 million pounds, may also be allotted some shares rather than recouping their initial investment. Senior creditors may initiate legal proceedings at the UK’s High Court if the plan is opposed by junior lenders and Dubai International’s management, the people said.

An external Alliance Medical spokesman, who didn’t want to be identified citing company policy, declined to comment. Fiona Micallef Eynaud, a London based spokeswoman for Dubai International, declined to comment.

Dubai is struggling to revive its companies as it recovers from the worst financial crisis since the 1930s. Dubai International is selling assets over five years and restructuring $2.6 billion of debt.

Alliance Medical’s lenders proposed to provide the Warwickshire, England based company a super-senior ranking loan for 60 million pounds at 10 percentage points over benchmark rates, the people said.

Alliance Medical’s lenders agreed to waive debt covenants in May to give the company time to reorganize its debt after sales were crimped by healthcare cuts. Blackstone Group valued the company at 300 million pounds to 340 million pounds after it was hired to find potential buyers, a person with knowledge of the plan said Aug. 25. Dubai International paid 600 million pounds for the company in 2007.

Alliance Medical provides scanning services to diagnose cancer, X-rays and ultrasounds for health providers including the UK’s National Health Service.

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