Dubai World files ‘voluntary arrangement notification’ over $14.6bn debt

State-owned conglomerate to pay back $2.92bn this year, to push back 2018 maturity to 2022
Dubai World files ‘voluntary arrangement notification’ over $14.6bn debt
By Ed Attwood
Mon 12 Jan 2015 02:26 PM

Dubai World has announced that it has applied for a ‘voluntary arrangement notification’ (VAN) under the terms of Decree 57, the insolvency legislation set up in 2009 to provide protection for the state-owned conglomerate and its entities, as part of a deal to restructure $14.6 billion worth of debt.

Four of its subsidiaries have also applied for a VAN, including Istithmar World Holdings LLC, Istithmar World PJSC, Port & Free Zone World FZE and Dubai World Group Finance Limited.

The move allows the company to propose a voluntary arrangement to its creditors and equity holders for approval, which can then be sanctioned by the Dubai World Tribunal. The arrangement must be be approved by a two-thirds majority of impaired creditors.

In a statement released by the company, Dubai World said that it had “reached formal agreement with a substantial majority by value of its creditor banks on its proposal to amend and extend the terms of its outstanding debt totalling $14.6 billion”.

The deal will involve full early repayment of 2015 maturities totalling $2.92 billion and the extension 2018 maturities to 2022.

“As part of its debt optimisation strategy, Dubai World entered into discussions with a wide range of representative creditors with significant holdings of its debt for several months around a voluntary transaction to improve terms and conditions of the existing credit agreement for both the Company and its lenders,” the statement added.

Dubai World said it was “delighted to have substantial majority support from its lenders on the proposals, as the agreement represents a "win-win" for the company and lenders, providing an improvement on the existing credit agreements for both sides.

“The commencement of the Decree 57 process which is tried and tested, and has very similar characteristics to parallel regimes in other international jurisdictions, is an entirely logical and expected step to complete the agreed debt optimization exercise.”

Dubai World had been in long-running talks with over 100 banks and financial institutions to reschedule its debt payments following a $25 billion restructuring agreement signed in 2011.

The entity had proposed to pay early and in full a $4.4 billion chunk of debt that matures this year, while at the same time pushing back the repayment of another $10.5 billion worth of debt to 2018.

In October, Mohammed Al Shaibani, the chief executive of Investment Corporation of Dubai (ICD), the emirate’s sovereign wealth fund, told Reuters that Dubai World was looking to extend its maturity on the 2018 payments “about three to four years”.  

In December, Dubai World chairman Sheikh Ahmed bin Saeed Al Maktoum said he was “very optimistic” that the proposal would be accepted, with around two thirds of creditors believed to have given approval.

The conglomerate had been shuffling some its assets ahead of the planned $4.4 billion repayment this year. In November, it sold Economic Zones World, which owns the Jebel Ali Free Zone, to DP World for $2.6billion.

Other assets divested include warehouse developer Gazeley, which was sold to Brookfield Asset Management, The Fontainebleau hotel in Miami, and the Atlantis Resort on the Palm Jumeirah, which was sold to ICD. Last month, Istithmar World sold its retail unit, Retailcorp, to Marka for $60 million.

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