x Abu Dhabi, UAEWednesday 26 July 2017

Al Jaber in bank talks over debt standstill

Al Jaber Group submits a draft standstill agreement to creditors and proposes a business plan to help it maintain access to bank credit, one of the first steps towards a restructuring.

In January, Al Jaber Group said it formed a coordinating committee, chaired by National Bank of Abu Dhabi. Ravindranath K / The National
In January, Al Jaber Group said it formed a coordinating committee, chaired by National Bank of Abu Dhabi. Ravindranath K / The National

Al Jaber Group yesterday held talks with its banks over a debt standstill agreement as the family conglomerate, based in Abu Dhabi, seeks to delay repayments as part of a wider restructuring of the group.

At a meeting in Abu Dhabi, Al Jaber Group, which has interests in property, manufacturing and aviation, submitted a draft standstill agreement and a business proposal to banks involved in its debt restructuring talks, said one person close to the company who asked not to be identified.

"We're at a very early stage," the source said. "But it's the first time all of the creditors have sat down together."

The draft standstill agreement would buy Al Jaber Group time to rebuild its business, he said, adding no resolutions were voted on at the meeting. He declined to give details on the standstill agreement or the business plan.

Al Jaber Group, a major UAE private sector company, entered talks with creditors late last year.

A standstill agreement is required for a company to delay payments on its debts, and is the first step towards reaching an agreement to restructure liabilities. If granted, it effectively provides breathing space to a company as it seeks to maintain its lines of credit from the banks.

Al Jaber Group entered talks with creditors to restructure its debts at the end of December last year.

The company has US$320 million (Dh1.17 billion) of loans maturing this year and its total debt amounts to $762m, according to data from Bloomberg News.

When the value of its assets fell after the onset of the global financial crisis, Al Jaber Group found itself unable to make its payments and asked creditors for time to sort out its issues.

In April, it said it had formed a coordinating committee, chaired by National Bank of Abu Dhabi and inclkuding HSBC, Abu Dhabi Commercial Bank, Royal Bank of Scotland and Union National Bank.

Since then, the company has sought asset sales to help pay down its debt.

Khalid Howladar, an analyst at Moody's Investors Service, said banks had an incentive to seek restructuring or rescheduling agreeements on the debt repayments, often viewed as more fruitful than seeking redress through the courts.

"When you have a corporate in trouble in the UAE or the broader GCC in general, enforcing creditors' rights on the company and liquidating the company really isn't a viable option due to the long and uncertain nature of court processes here," he said.

Banks may be loath to agree to a reduction on the principal they will eventually receive, instead preferring to lengthen repayments. They are also likely to prefer to seek an agreement directly with the company rather than through the courts.

However, banks will need to be convinced Al Jaber Group is better off as a going concern for them to be able to recover their debts, Mr Howladar added.

"If the banks agree to defer repayments, this may give the company time. If the business is viable, this will give the company the chance to recover and pay back the monies owed," he said.