Dubai Holding's private equity arm is expected to seek a fresh extension on the repayment of a US$1.25 billion (Dh4.59bn) loan when a debt restructuring deadline expires tomorrow, according to a source close to the negotiations.
Dubai International Capital (DIC) had previously sought and received two extensions on the loan to buy time for restructuring talks to progress. The second, which delayed repayment until the end of this month, was agreed on in September. DIC is looking to restructure repayment on total debts of $2.6bn.
Those talks are part of a broader shake-up at Dubai Holding, which has total debts of more than $9bn and numerous divisions that are looking at repayment extensions.
Top Government officials said yesterday they were confident that negotiations would end positively for the conglomerate, which is owned by Sheikh Mohammed bin Rashid, the Vice President of the UAE and Ruler of Dubai.
"It is no secret that we are currently looking at Dubai Holding, which is facing challenges in some of its assets and international investments," said Sheikh Ahmed bin Saeed Al Maktoum, the chairman of the Dubai Supreme Fiscal Committee. "At the same time Dubai Holding has some very good assets and investments, like Jumeirah [the hotel operator that owns the Burj al Arab] and TECOM [an economic free zone operator], that are integral to the company and continue to support it."
Sheikh Ahmed's comments came at an unprecedented update on Dubai's economy yesterday that the Government plans to repeat every three months as part of a drive towards openness.
Dubai Holding owns a web of stakes in companies both in the UAE and abroad through a local business arm and a financial investment arm. Dubai Holding Commercial Operations Group owns Jumeirah Group, TECOM and the developer Dubai Properties Group. Dubai Holding Investment Group, the company's financial arm, owns part of Noor Islamic Bank and Dubai Bank, as well as property in the US and Europe.
DIC owns several big companies in Europe, including Mauser in Germany and the UK's budget hotel chain Travelodge.
"We are holding discussions with banks and creditors to repay all debts," Ahmed Humaid al Tayer, the governor of the Dubai International Financial Centre, said yesterday. "There is a capital flow to help us repay our commitments."
Sources told The Nationallast month that DIC and its creditors were still a long way from reaching a final agreement, with creditors asking for interest rates of 2 to 4 per cent on the restructured debt.
Creditors are also asking for asset-sale tests as part of the restructuring, which would give lenders the right to declare default if DIC is unable to raise money from sales in its portfolio as envisioned.
However, a Government spokeswoman said yesterday that the DIC negotiations were "progressing well". And Sheikh Ahmed said Dubai Holding's challenges "are in no way of the magnitude seen at Dubai World".
"They are being addressed seriously and with diligence," he said. "We are very confident that similar results to those seen at Dubai World will be achieved here, too."
Dubai World, a Government-owned conglomerate that counts among its assets the property developer Nakheel and the ports operator DP World, recently reached an agreement with creditors to restructure $24.9bn of debt. The debt pact, in which loans were bundled up and extended into new five and eight-year loans, came about 10 months after Dubai World announced it was seeking a standstill on debt repayments.
The IMF has highlighted an improvement in transparency as an important priority for the Government to bolster market confidence.
"It's definitely a positive move and an important step in the right direction," said Monica Malik, the chief economist at EFG-Hermes in Dubai. "It will help to improve investor sentiment, but what will be important is the degree of information given for investors and the degree of progress in restructuring and everything else."
The forum was also one of the first times that high-ranking government officials said they had learnt lessons from Dubai World's debt problems and the economic slowdown. Back to basics is now the mantra. Trade, transport and tourism are likely to play an increasingly important role, rather than large-scale property developments and glitzy financial investments.