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Tue 9 Mar 2010 01:00 PM

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JPMorgan sees 20% haircut on Dubai World debt

State-owned holding company may also offer 10-year extension on maturities - JPM Chase.

JPMorgan sees 20% haircut on Dubai World debt
NAKHEEL BONDS: The forecast excludes Nakheel bonds. (Getty Images)

Dubai World, the state-owned holding company restructuring $26bn in debt, may offer creditors a 20 percent haircut and a 10-year extension on maturities, JPMorgan Chase said, according to a Bloomberg report on Tuesday.The forecast excludes Nakheel bonds, which the New York-based bank said may be repaid at face value over a longer maturity, according to a report dated March 8.

JPMorgan maintained its “neutral” recommendation on Nakheel’s Islamic bonds due this year and next, saying the securities “look expensive” at current levels, assuming the restructuring stretches out maturities.

Dubai World will ask banks for permission to delay loan repayments when it presents a plan this month, said three bankers familiar with the negotiations, according to a Reuters report this week.

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.

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