x Abu Dhabi, UAEWednesday 17 January 2018

Be ready for more twists to complex Dubai World saga

We in the media with our daily, even hourly, deadlines, our need to simplify things into headline-speak sometimes forget this simple fact: corporate restructurings are hugely complicated affairs.

A friend of mine who's been involved in the Dubai World situation for a few months describes his experience as a bit like an episode of Lost, the semi-surreal American TV series about the survivors of a plane crash on a Pacific island: "You sit there in room for a few hours, listening to very smart people addressing very complex problems. But just when you're getting your head around it all, another character arrives on the scene, you've never seen him before, you don't know who he is or how he's involved in the action, and he says something that seems to contradict all you've previously heard. You have to start trying to understand it all over again."

Apart from being an amusing analogy, there is also an essential truth in that observation that has sometimes been overlooked in media coverage of Dubai World: the restructuring of the emirate's former flagship conglomerate is an incredibly complex affair involving a cast of thousands, with huge sums of money at stake and the potential for external actions or agencies to significantly influence the outcome on any given day.

We in the media with our daily, even hourly, deadlines, our need to simplify things into headline-speak, and our natural inclination to inject a bit of drama into the proceedings, sometimes forget this simple fact: corporate restructurings are hugely complicated affairs, and analyses of them do not always fit conveniently into the 500-word news story format - or even, ahem, the 750-word comment column format.

Dubai World is perhaps more complicated than most. There are 96 banks involved, representing tens of different nationalities from across the globe. Each individual bank, from the biggest international to the smallest regional, has its own agenda and its own priorities in looking after stakeholder interests. Take the Royal Bank of Scotland (RBS), for example, the British bank that chairs the co-ordinating committee and that is probably - although official figures have not been disclosed - the biggest creditor. RBS has maybe US$2 billion (Dh7.34bn) at stake, a not insignificant amount even for a bank of that size. It has a duty to get the best deal for its shareholders - especially when the biggest of those is the British government.

The tug of differing interests and priorities is powerful. The group itself employs thousands of people in the UAE, all of whom have to be looked after in a final restructuring, and who make up a significant portion of Dubai's consumer sector. It also has contractors, suppliers and customers whose interests have to be taken into account, not least because they make up a big chunk of the Dubai economy.

Then there are the advisers. The small army of investment banks, accountants, lawyers and public relations people have their own agendas, set back in head office from a global perspective. Sure they want to do the best by their client, but their executives also want to prove to their bosses back in London or New York that they can cut it on such a high-profile and complicated process. Last, but certainly not least, there are the interests of governments to be taken into account. The Government of Dubai, of course, is involved up to the hilt. Dubai World was the standard-bearer for the emirate's dynamic growth during the boom years, and is so tied in to its infrastructure that its fate is of crucial interest to the Dubai Government.

But a keen eye is also being kept on the proceedings in Abu Dhabi. This is not just because the capital has put something in the region of $10bn into Dubai World over the past year, including the timely intervention to pay the $4bn sukuk, or Islamic bond, last December. Abu Dhabi is increasingly conscious of the knock-on effect for its own big corporates from Dubai World's problems. With all these divergent actors involved, the action at Dubai World is not going to be simple, or short-lived. Some kind of restructuring proposal is expected from the conglomerate by the end of this month, but nobody expects that to be accepted immediately. It will more likely be the opening shot in a long, drawn out process of proposal, counter-offer and compromise. That process could take years, rather than months.

But the whole drama could be brought to an early close by another intervention like that of the Government of Abu Dhabi last December. The capital rewrote the entire script in a single day when it paid off the sukuk for Nakheel. Who is to say there will not be a similarly unexpected twist in the plot this time? @Email:fkane@thenational.ae