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Fri 3 Oct 2014 01:10 AM

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Dubai World has over 60% creditor assent for restructuring

State-owned conglomerate has been in talks with lenders to extend the maturity of the largest single repayment

Dubai World has over 60% creditor assent for restructuring
Mohammed al-Shaibani, the chief executive of sovereign fund Investment Corp of Dubai.

Dubai World has secured agreement from more than 60 percent of its creditors to reschedule its debt repayments, a top government executive told Reuters, putting it close to the two-thirds assent needed to change the existing terms.

Dubai borrowed heavily during a boom period in the middle of the last decade, but then the global financial crisis and a local real estate crash in 2008 precipitated a number of restructurings at state-linked companies. These included Dubai World.

The state-owned conglomerate has been in talks with lenders to extend the maturity of the largest single repayment under a $25 billion debt restructuring agreement struck in 2011, with a series of incentives offered in exchange.

No formal deadline for reaching a deal has been disclosed, with sources telling Reuters last month that DubaiWorld was holding talks with certain banks to get as close to the level of support needed to agree changes to the original plan as possible before putting it to the full bank group.

The head of the emirate's Supreme Fiscal Committee said on Wednesday that Dubai World's largest creditors had agreed to a new deal without being drawn on details.

However, on Thursday, Mohammed al-Shaibani, chief executive of sovereign fund Investment Corp of Dubai (ICD), confirmed in an interview with Reuters that it was close to the level needed to amend the original deal.

He also disclosed for the first time that Dubai World was looking to extend its 2018 maturity for "about three to four years". He made the remarks in an interview on the sidelines of an investment event.

"We think it's strategic for us to work with our friends the banks to give a little bit more time to see things beyond 2020, which is something that is very beneficial for both parties as these companies are going to grow and be sizeable," he said.

Once Dubai World reaches the 67 percent level, it is able to enforce the agreement on the other creditors under a cramdown mechanism - a way in debt restructurings to prevent minority creditors from holding up a deal agreed by most parties.

ICD, which holds stakes in some of the emirate's most well-known brands including Emirates airline, was unlikely to purchase further assets from other Dubai state-owned entities.

ICD acquired the Atlantis resort, which sits on a palm tree-shaped island in the Gulf, from a unit of Dubai World in December, the most high-profile example of the 'asset shuffle' tactic Dubai has been using to support indebted firms.

"With every strategy, we look at it but we have enough holding in Dubai," Shaibani said.

The recovery of Dubai's economy, aided by booming tourism and logistics industries and a recovery in property and real estate prices from significant slumps, has boosted sentiment in the emirate, emphasised by the massively-oversubscribed initial share sale from Emaar Malls Group last month.

However, some have cautioned against the exuberance, in particular in the property market where Dubai posted the highest growth in prices globally in 2013.

Both the International Monetary Fund and the United Arab Emirates' central bank have issued warnings in recent months, and price growth is starting to show signs of moderating.

"Nobody wants to go through the same experience without really having everything in check - I'm sure we will be more careful," Shaibani said when asked if there were parallels between now and 2008, when Dubai was on the cusp of its bust.

"We are older, wiser, smarter."

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