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Fri 18 Jun 2010 10:35 AM

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US probe halts sale of Dubai World's ISS - sources

US justice department probing Istithmar-owned Inchcape Shipping Service.

US probe halts sale of Dubai World's ISS - sources
DUBAI UNIT: The unit provides services to army bases and on battlefields, services ships and aircraft, and helps with military supply chains.(Getty Images - for illustrative purposes only)

A US investigation has halted the sale of Inchcape Shipping Services (ISS), the first Dubai World business put up for sale since the emirate's debt crisis began, people familiar with the matter said on Thursday.

The Department of Justice (DoJ) is probing the port and shipping agent's "government services" arm, two of the people said. Reuters could not determine the precise nature of the investigation.

The unit provides services to army bases and on battlefields, services ships and aircraft, and helps with military supply chains.

The two remaining private-equity bidders for the business, Cinven and CVC, were told earlier this week the sale had been halted, one source said. A second source said the entire auction was now likely to be called off.

The collapse of the sale, which at one point had been expected to raise as much as $800 million, is a blow to Dubai World, which is in the midst of restructuring and owes banks $14.4 billion.

ISS is owned by Dubai World's investment arm Istithmar. It had originally drawn interest from 10 or more international buyout houses, who viewed its asset-light, cash-generative business as a good way to bet on an upturn in global trade.

The U.S. investigation follows indictments against Kuwaiti logistics firm Agility, the Gulf's biggest logistics firm. US authorities have accused Agility of defrauding the US military on multibillion-dollar supply contracts.

Dubai World, ISS and Cinven declined to comment. CVC and the DoJ were not immediately available to comment. (Reuters)

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