By Arif Sharif
UPDATE 2: Will ask banks to roll over loans when it presents proposal to creditors.
Dubai World, the state-owned holding company in talks to renegotiate about $26bn of debt, will ask banks for permission to delay loan repayments when it presents a plan this month, said three bankers familiar with the negotiations.
Banks may be able to avoid a so-called haircut, where they receive less money than they’re owed, if they wait to be repaid, said two of the bankers, who declined to be identified because the talks are private. The banks may also receive a guarantee from Dubai’s government, one of the bankers said.
Dubai World and its Nakheel and Limitless property units used loans to finance real estate projects such as palm tree-shaped islands off the emirate’s coast, which they struggled to refinance amid the credit crisis. Dubai World said in November it would seek to delay repaying all loans until May, sparking the biggest plunge in developing-nation stocks.
“The proposal will be a meaningful one,” said Saud Masud, Dubai-based head of Middle Eastern research at UBS AG. “I would highly doubt that what they come out with will be accepted and everyone moves on.”
The emirate’s benchmark Dubai Financial Market General Index rose 1.7 percent to 1,649.14 on Monday. Credit default swaps linked to Dubai fell 20 basis points to 487 basis points, prices provided by CMA DataVision in London show. Nakheel’s 2.75 percent $750 million sukuk bond maturing in January gained 2 percent to 51.25 cents on the dollar. It closed at 50.25 cents on the dollar on March 5.
Deloitte and Moelis & Co., Dubai World’s advisers, are asking the Dubai Financial Support Fund for more money to fund interest payments on the loans in the meantime, the bankers said. Dubai World will primarily rely on asset sales to finance the payments, bankers said. Spokesmen for Dubai World and the Dubai Financial Support Fund declined to comment.
Dubai World will approach lenders for the first time this week with a plan to restructure its debt, the Financial Times reported Monday. The company has asked creditors to meetings in London from Monday, the FT said.
Dubai World will present a restructuring proposal to its creditors after its advisers complete valuing the company’s assets, a person close to the Dubai government said February 17. The final proposal will be made after consultations with the Abu Dhabi government and the United Arab Emirates’ central bank, which along with two Abu Dhabi-owned banks lent $20bn last year to Dubai’s financial support fund to help state-owned companies during the credit crisis, he said.
Nakheel’s $1.73bn of bonds may be swapped for new securities, the person said. Under another option, banks seeking early repayment would get less than those that wait, he said.
More than 90 banks are owed money by Dubai World. Seven of its biggest creditors, HSBC Holdings, Royal Bank of Scotland Group, Lloyds Banking Group, Standard Chartered, Bank of Tokyo-Mitsubishi, Emirates NBD and Abu Dhabi Commercial Bank, are negotiating with Dubai World on behalf of the lenders, according to bankers.