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Tue 25 Oct 2016 06:11 PM

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Dubai's Pacific Controls in talks to sell data centre to Etisalat

Technology firm is seeking one of the biggest debt restructuring deals in the Gulf since the economic slowdown

Dubai's Pacific Controls in talks to sell data centre to Etisalat

Dubai technology company Pacific Controls, which is seeking one of the biggest debt restructuring deals in the Gulf since the economic slowdown, is in talks to sell its data centre in the emirate to telecoms company Etisalat , four sources said.

Pacific Controls, which needs to raise cash in its effort to restructure 1.4 billion dirhams ($381 million) in debt, is also facing legal action from Emirates NBD, one of its creditors, concerning non-payment of some of its debt, said two of the sources familiar with the situation.

The legal action is complicating efforts to seal a conciliatory agreement with creditors in the absence of a modern bankruptcy law, the sources said.

Pacific Controls is one of many Gulf companies that began to flounder as more than two years of low oil prices dragged down economic growth and business activity and caused some payments to contractors from the government and government-linked companies to stall.

Creditors have urged Pacific Controls to accelerate asset sales to help support any debt restructuring plan. The company is due to submit a proposal to them on how to restructure its debt by the end of October.

Etisalat, a customer of the data centre, is conducting due diligence on the centre before deciding whether to pursue an acquisition, the sources said.

Pacific Controls and Etisalat were not immediately available to comment.

The technology company, which is being advised by KPMG, built the data centre in 2011 with an investment of $85 million in order to manage data services for building control and automation.

The negotiations with creditors are being assisted by a special mechanism set up by the UAE Banks Federation in March to help a company reach an agreement with creditors and mediate between short and long-term lenders, around 19 banks in this case.

Under the federation scheme, companies in difficulty could agree a new voluntary arrangement with lenders in return for all banks agreeing to suspend legal action until a deal can be reached.

Since launching in 2000, privately owned Pacific Controls has developed close ties to the government including Dubai Civil Defence, the Roads and Transport Authority, as well as government-controlled companies such as Etisalat.

But legal action being pursued by Emirates NBD casts doubt on a potential debt deal, the sources said, with one adding that the federation was working to bring Dubai's largest bank around the table.

Emirates NBD declined to comment when contacted by Reuters.

The mechanism was brought in by the banks federation due to the absence of an effective bankruptcy law and after a jump in so-called 'skipping' cases by SMEs which was forcing banks to set aside more cash for bad loans.

United Arab Emirates President Sheikh Khalifa bin Zayed al-Nahyan on Monday issued a new bankruptcy law by decree, providing for the first time a legal framework for companies struggling with debt. The new law will come into effect three months after its publication in the official legal gazette.

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