x Abu Dhabi, UAEMonday 22 January 2018

Dubai World hires reform consultants

The process is part of a national movement to restructure companies and shake up management for an evolving marketplace.

ABU DHABI // Dubai World, the Government-owned ports and property conglomerate, has hired AlixPartners, a restructuring consultancy based in Detroit that is advising on the General Motors (GM) bankruptcy, according to sources close to the company. The process at Dubai World is part of a national movement to restructure companies and shake up management for an evolving marketplace.

A team from AlixPartners will assist Dubai World as it deals with billions of dollars of debt due in December, and a business climate less inclined to finance the ambitious projects of Dubai World's developers, Nakheel and Limitless. "They were brought on in the last several weeks to advise on a range of issues but especially the problems at Nakheel," a source familiar with the contract said. The most pressing challenge ahead of the company is Nakheel's US$3.5 billion (Dh12.84bn) Islamic bond that is due in December.

How the company deals with this debt could affect the cost of borrowing for dozens of companies owned by the Dubai Government, said Philipp Lotter, the senior vice president of corporate finance at Moody's Investors Service. While Mr Lotter believes the Government will step in to help the company with funds raised through a $10bn bond issuance to the Central Bank, there has been no firm announcement about how the bond will be resolved.

Nakheel has said it is looking all options for dealing with the debt and would make an announcement later this year. The company is adjusting its "immediate business objectives to accommodate the current economic climate", a spokesman said. While Dubai World has declined to comment on the debt, it has quietly been looking at ways to raise funds. Last month, it emerged that DP World, a major port operator that is 77 per cent owned by Dubai World, had received an approach from a private equity group, said to be Abraaj Capital, for a "significant minority stake" in the company.

Most of the shares would come from a free float of stock traded on NASDAQ Dubai, but some could come from Dubai World's stake, which would generate cash for the company. Dubai World is also in need of some business plan restructuring, analysts said. There could be more lay-offs at some of the subsidiaries that are losing money, and consolidations. Last month, Dubai World merged the property division of Dubai Multi Commodities Centre (DMCC), which is the master developer of Jumeirah Lake Towers, with Nakheel to "better accommodate market conditions and optimise resources and expertise", a DMCC spokesman said.

AlixPartners has become a major player in restructuring since the global financial crisis started. Apart from the contract to guide GM through its Chapter 11 bankruptcy protection proceedings, which is estimated to be worth as much as $40 million so far, the company has assisted with the investigation into the $65bn fraud confessed to by Bernard Madoff and the restructuring of SemGroup, an oil services company that filed for bankruptcy protection last year. Tim Yost, a spokesman for AlixPartners, declined to comment yesterday.