Dubai World debt terms unchanged at meeting - bankers

Dubai World, the state-owned company seeking to renegotiate the terms on $23.5bn of debt, said it expects to complete the restructuring process in the “coming months” after a meeting with its creditors in the emirate on Thursday.

“As is customary at this stage of the process, this was an informational session and no resolution was sought in the meeting,” Dubai World said in an e-mailed statement. “Creditor banks will now have the opportunity to review the information provided before responding to the proposal. “The company expects to complete the restructuring over the coming months.”

Dubai World made the presentation to about 70 banks at the Atlantis hotel after a group of its seven biggest lenders said May 20 they agreed to its broad terms. The terms agreed by the main banks were unchanged when presented to other creditors on Thursday, two people who attended the presentation said.

Dubai World, the holding company whose real-estate unit Nakheel PJSC is building palm-shaped islands off the emirate’s coast, and its main creditor banks agreed in May to alter the terms on $14.4 billion of bank loans and $8.9 billion of government liabilities to resolve a crisis that roiled global markets last year. It said banks would be paid $4.4 billion in five years and another $10 billion over eight years at below- market interest rates supported by assets sales.

In the May 20 proposal, Dubai World offered banks various combinations of interest rates and principal repayment options depending on whether they lent in dollars or dirhams. Banks will be paid 1 percent interest on the loans maturing in five years. Lenders have three options under the eight-year maturities, with at least 1 percent interest over the life of the loan and varying additional rates from 1.5 percent to 2.5 percent at maturity. Two of these options also have shortfall guarantees.

“We don’t like it, the pricing is low,” said Suresh T Vaidyanathan, head of operations at Bahrain-based Alubaf Arab International Bank. “They said you take it as it is, otherwise we will go to liquidation. They made a presentation on cash flows, there is excess cash and there will be a big payment in kind” after eight years, he said.

A special court set up by the Dubai government in December to oversee the financial restructuring of Dubai World can enforce the agreement if the proposal received the support of banks representing more than two thirds of the value of outstanding loans.

Dubai and its state-owned companies have racked up $109.3 billion of debt, according to International Monetary Fund estimates, as the emirate transformed itself into a tourism, trade and financial services hub. About $15.5 billion of that is due this year, the IMF said.

Dubai World’s bank coordination committee, which negotiated with the company on behalf of the other lenders, represents about 60 percent of its bank loans, it said in May. The committee comprises Emirates NBD PJSC and Abu Dhabi Commercial Bank PJSC from the United Arab Emirates and foreign lenders, Royal Bank of Scotland Group Plc, HSBC Holdings Plc, Lloyds Banking Group Plc, Standard Chartered Plc and Bank of Tokyo- Mitsubishi UFJ Ltd.

Nakheel, which held a separate meeting with its lenders July 14, said a group of its creditors negotiating on behalf of banks “unanimously supported” a proposal on altering the terms on $10.5 billion of loans and unpaid bills. Nakheel expects to complete the restricting over the “coming months,” it said.

Nakheel plans to offer creditor banks an interest rate of 4 percentage points more than benchmark rates on new loans as part of the debt restructuring, two bankers with knowledge of the plan said July 13. In return, lenders would agree to extend the life of the loans by five years, they said. (Bloomberg)