Dubai World to get a huge cash boost

The Dubai Government is pledging billions of dollars of new funding for the heavily indebted conglomerate Dubai World and its property development subsidiary, Nakheel ,as part of the restructuring of the $26 billion of loans owed to bankers. A statement from Sheikh Ahmed Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee, promised to support the restructuring with "significant financial resources", including a commitment to supply up to $9.5 billion in new cash for Dubai World. The offer of new money is dependent on Dubai World creditors agreeing to "revised business plans" from the conglomerate and Nakheel. Details of these have not yet emerged, but a statement from Dubai World is expected later today. The new money will be partly found from the $5.7bn Dubai has left of the $20bn it borrowed from the Central Bank of Abu Dhabi over the past year. Significantly, the balance, some $3.8bn, will be provided "from internal Dubai Government resources", Sheikh Ahmed said. At group level, the recapitalisation of Dubai World will come about partly through a debt-for-equity swap involving the "equitisation" of existing Dubai government support for Dubai World, and $1.5bn in new funds. No details of the new equity arrangements were immediately available, although Department of Finance sources said a full briefing would be provided later today. At Nakheel, the developer responsible for the Palm and World offshore projects, Sheikh Ahmed said "bank creditors will be asked to restructure their debt at commercial rates", although no details were supplied. He added that trade creditors would shortly be offered a "significant cash payment", and a "tradeable security" in settlement of their bills. Reuters reported that government sources explained the creditors bills would be settled in full via a 40 per cent repayment in cash and 60 per cent in the form of a new instrument collateralised on its assets. Sheikh Ahmed also promised that the Nakheel sukuks, or Islamic bonds, falling due this year and next, totalling $1.73bn, would be paid "assuming sufficient support for the proposal". As part of the Nakheel proposal, the Government is offering to put in $8 billion of new funds, and to equitise its $1.2 billion claim. Sheikh Ahmed said: "The Government of Dubai is taking decisive action to address the challenges related to the global economic crisis and to build the foundation for a strong balanced future growth. This period has demonstrated the unity and shared purpose of the UAE." On Nakheel, he commented: "It is an important part of the Dubai economy. The Nakheel business plan allows work to continue as soon as possible and puts Nakheel on a sound footing. The Government, as shareholder, will work closely with Nakheel so that any future projects are carefully planned and evaluated." Dubai World and Nakheel will discuss these proposals in detail with their creditors. The restructuring process is expected to take several months to implement. fkane@thenational.ae