x Abu Dhabi, UAEMonday 22 January 2018

HSBC to back Dubai World plan

HSBC is ready to agree to Dubai World's debt restructuring proposals, the bank's regional chairman says.

HSBC is ready to agree to Dubai World's debt restructuring proposals, the bank's regional chairman said yesterday, sending the strongest signal yet of a positive response from the conglomerate's international lenders. The 97 creditor banks of Dubai World are expected to discuss the proposals in the coming weeks under the leadership of a seven-member co-ordinating committee (CoCom), which is overseeing the restructuring.

"Yes, we would sign today if they put it in front of [us]," said Stuart Gulliver , who also oversees the British bank's global wholesale banking. His comments yesterday marked the first official reaction by a creditor bank after Dubai tabled its US$24.8 billion (Dh91.08bn) restructuring proposal last Wednesday and helped to lift the Dubai Financial Market General Index by 0.95 per cent yesterday. He stressed that HSBC was speaking as a major private creditor and not as a member of CoCom.

The offer, which includes an injection of about $9bn into the conglomerate, mainly consists of repaying creditor banks in five to eight years while fully repaying Nakheel bonds, the property developer, as they fall due. "It is a very reasonable proposal. It is a positive step forward, and we are supportive of the action taken by the Dubai Government. We are very, very close to having a completely satisfactory outcome," Mr Gulliver said.

He also said the bank knew the exact conditions attached to the rollover of each loan. Each creditor bank can choose the new maturities when rolling over the existing loans and knows exactly what commercial terms will be attached to it. "This is a general proposal, we do know the interest rates, we are comfortable with the terms. Now each bank will go back and agree to the terms to sign the document."

A banker with another creditor bank that also sits on the CoCom, who wished to remain anonymous, said the proposal mentioned "some aspects about interest rates", but declined to go into detail. Dubai World last week offered to roll over the full amount lent by each of its creditor banks, who were owed an overall $14.2bn at the end of last year, for between five and eight years, but did not spell out the interest rates publicly.

Mr Gulliver is accompanying Stephen Green, the bank's group chairman, on a visit to the region. Mr Gulliver also said his bank "understands why bond-holders have a slightly different treatment". Some bankers have privately argued that trade and financial creditors of Nakheel were being offered more favourable terms than the lenders to Dubai World. Their dissatisfaction relates mainly to the fact that Nakheel bondholders will be repaid in full, while lenders to Nakheel are offered rates based on Eibor-Libor, according to a statement by Nakheel.

HSBC said it remained upbeat about Dubai's potential as a financial service centre. Mr Gulliver said the emirate had a 20 to 30-year head start in infrastructure. "Dubai remains the pre-eminent financial service centre in the region. In our sense it is unlikely for anybody else to do something that competes." After a year of seeing its loan book decline by a quarter to $13.8bn, Mr Green said the bank had once again started to grow its lending in the region.

Asked whether the bank was planning to scale down its lending in the region following high non-performing loans last year, Mr Green said: "[HSBC has] no changes in plans, this is an economy with a very strong future." Last year, the bank was hard hit by non-performing loans (NPL) in the UAE. Its non-performing loans are estimated to have reached $1.7bn, which would correspond to a 12.2 per cent NPL ratio. "I clearly would be concerned if that [NPL figure] would become the new norm," Mr Green said.