x Abu Dhabi, UAEFriday 28 July 2017

Fourth bank joins bid for Dubai Group repayments

The list of international banks seeking funds from Dubai Group in a London arbitration has increased to four.

Many of Dubai's government-related companies, collectively known as Dubai Inc, have had to rely on creditors' willingness to refinance debts coming due this year. Reuters
Many of Dubai's government-related companies, collectively known as Dubai Inc, have had to rely on creditors' willingness to refinance debts coming due this year. Reuters

The list of international banks seeking funds from Dubai Group in a London arbitration has increased to four as an Egyptian lender joined institutions seeking to resolve an impasse over the company's US$10 billion (Dh36.72bn) debt restructuring.

The Egyptian bank joins Royal Bank of Scotland, Germany's Commerzbank and South Africa's Standard Bank in a legal action to recover funds they are owed by Dubai Group.

The arbitration comes after a two-year impasse in debt restructuring talks with Dubai Group and the European and South African banks walked away in July.

"Despite the banks' goodwill and numerous possible long-term concessions offered by the banks, no viable solution has been reached," the first three banks said yesterday.

"In the circumstances, Commerzbank, RBS and Standard Bank were unfortunately left with no alternative but to pursue the legal recourse available under the facility documentation. "We do, however, want to make clear our preference was always to conclude an agreement without formal legal proceedings and we therefore remain open to such an outcome if an acceptable commercial resolution is forthcoming."

Dubai Group is owned by Dubai Holding, the personal investment company of Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.

"We believe that we can reach a consensual agreement with our creditors," a Dubai Group spokesperson said, citing the fact that a number of the company's 35 lending banks had signed up to an agreement.

"Despite four banks being against the agreement, we continue to believe that this deal is in the best interests of all parties."

Dubai Group borrowed heavily in the years before the global financial crisis to fund investments across Europe and the Middle East.

Many of the company's investments have fallen in value as a result of the global economic crisis.

Having hired hundreds of staff from top investment banks while the local economy was growing, Dubai Group's workforce has dwindled from a peak of 300 in 2008 to just over two dozen today.

The company's restructuring has been hindered by the competing interests of secured and unsecured creditors.

It is understood the four banks seeking arbitration with Dubai Group are among the unsecured group of creditors.

Dubai Group has attempted to sell assets where it can.

The company has begun talks to sell a 45 per cent stake in a joint venture with the cement maker Lafarge, Reuters reported yesterday, citing people familiar with the matter.

ghunter@thenational.ae