x Abu Dhabi, UAEMonday 24 July 2017

Dubai World tables debt plan

Dubai World has tabled proposals to representatives of its 97 bank creditors to restructure US$26 billion (Dh95.5bn) of debt owed by the conglomerate.

Aidan Birkett, the chief restructuring officer of Dubai World, held a meeting with the company's seven largest creditors in Dubai.
Aidan Birkett, the chief restructuring officer of Dubai World, held a meeting with the company's seven largest creditors in Dubai.

Dubai World has tabled proposals to representatives of its 97 bank creditors to restructure US$26 billion (Dh95.5bn) of debt owed by the conglomerate. Aidan Birkett, the company's chief restructuring officer, yesterday met members of the creditors' co-ordinating committee (Cocom) in a Dubai hotel to present the first formal plan for restructuring, four months after he was appointed.

The meeting lasted four hours. A document Mr Birkett presented to the creditors ran to many pages and was said by people familiar with the process to be "immensely complicated". In a surprise development, it emerged that Lady Shriti Vadera, a former British business minister and close adviser to Gordon Brown, the prime minister, had been invited by the Government of Dubai to monitor the restructuring proposals. UK banks form the biggest creditor bloc, with at least $5bn of liabilities, and British contractors are also waiting for payment of overdue bills.

Lady Vadera is believed to have made several trips to Dubai in recent weeks but did not attend yesterday's meeting, according to sources close to the Dubai Government who requested anonymity. The Dubai Department of Finance is advised by the US investment bank Moelis and Co. A spokesman for Dubai World declined to comment in detail on the proposals. They are believed to include an offer to issue new debt to replace existing liabilities, with options to repay principle amounts over as much as eight years at below-market interest rates.

UAE markets held their breath before details of the offer. The Dubai Financial Market fell 0.4 per cent, after a gain of 11 per cent this month. The Abu Dhabi Securities Exchange General Index rose by 0.4 per cent. Debt markets were generally positive, with the cost of insuring Dubai sovereign debt down 3.4 per cent, its lowest since the middle of January, and the Nakheel 2010 sukuk, due for redemption in May, trading ahead at 65.25 cents in the dollar.

A detailed statement is expected from Dubai World once bankers have digested the proposals, probably later today. The Dubai Department of Finance is also expected to comment on the proposals, which have been monitored by the governments of Dubai and Abu Dhabi since Dubai World announced last November that it was to seek restructuring. Bankers began to assemble at the Al Murooj Rotana yesterday afternoon in the hotel's Al Yasat ballroom, in a specially prepared conference room seating about 60 people. Mr Birkett declined to answer questions about the specific proposals he would make to creditors. The session began behind closed doors at 3pm. Media representatives were later asked to leave the ballroom area. Mr Birkett left the meeting at 7pm.

The meeting was attended by representatives of the seven biggest creditors of Dubai World. Four are British banks: HSBC; Royal Bank of Scotland (which is chairing the Cocom); Lloyds; and Standard Chartered. Also represented on the Cocom are Bank of Tokyo Mitsubishi, Emirates NBD and Abu Dhabi Commercial Bank. Also present at the meeting were representatives of Rothschild, the investment bank advising Dubai World on the restructuring, as well as lawyers and accountants. The Cocom is being advised by the accounting firm KPMG.

Speculation has intensified over recent days that Dubai World might be able to avoid specific plans for an immediate "haircut" - unilateral reduction in the repayment of principal sums - in favour of an offer to extend loan repayment periods at lower interest rates. The calculation for the creditors centres on how much of a discount the new terms will represent, in terms of forgone future interest revenue. Also affecting the calculations is the extent of any further financial assistance from Abu Dhabi, which has already contributed to a $20bn loan for Dubai.

Another factor in the financial mathematics is how much Dubai World might realise from asset disposals. It has said it would consider offers for assets at realistic prices. @Email:fkane@thenational.ae