x Abu Dhabi, UAEWednesday 26 July 2017

Middle East 'will face more debt refinancing'

One of the Middle East's top corporate restructuring experts has warned that the region, and especially Dubai, faces another round of debt refinancing in the near future.

Ian Schneider of PwC warns that the Middle East will face more debt refinancing. ANTONIE ROBERTSON / The National
Ian Schneider of PwC warns that the Middle East will face more debt refinancing. ANTONIE ROBERTSON / The National

One of the top corporate restructuring experts in the Middle East has warned that the region, and especially Dubai, faces another round of debt refinancing in the near future.

Ian Schneider, the head of Middle East restructuring for the global accounting firm PwC, told The National: "A lot of the deals done back in 2009-2010 will have to be restructured again. "They were done in a very uncertain environment, and at least enabled the corporate position to be solidified and stabilised. But in the different circumstances we face today, many of those deals will have to be revisited."

In 2010, Dubai World won agreement from creditors to restructure US$25 billion (Dh91.83bn) of debts owed by the group and its property arm Nakheel. The deal set the tone for further debt restructuring at Dubai government related companies, some of which are ongoing.

Dubai faces having to repay about $40bn in debt maturities over the next two years in government and government-related corporations.

In some cases, asset values have not recovered sufficiently to allow debtors to repay loans through previously agreed asset disposal programmes.

"Despite an improvement in the overall operating environment in Dubai, especially in the core sectors of trade, retail, tourism and transport, Moody's believes that Dubai-based banks continue to face persistent asset quality pressures, which emerged at the start of the crisis four years ago," analysts at the ratings agency wrote in a report, released in December.

The government of Dubai, witnessing an impressive economic recovery and high forecast GDP growth rates, has expressed confidence that it can meet its demanding debt repayment schedule.

Last year, Mr Schneider advised Drydocks World on a $2.2bn groundbreaking restructuring that for the first time used the provisions of Decree 57, the bankruptcy arrangements put in place at the time of the Dubai World deal.

He is also advising on the ongoing restructurings of the Abu Dhabi based conglomerate Al Jaber and the Sharjah fuel company Fal Oil.

"A lot of the first round of restructuring will have to be restructured again, but at least now people in the region are more experienced at it. Family businesses, for example, have begun to recognise the need for restructuring advice and expertise," he said.

Nakheel said in its third-quarter results in October that it had paid back trade creditors Dh9.4bn since it reached its restructuring agreement and the company added that it had amicably reduced long-term customer liabilities by Dh7.2bn through "various consolation and swap schemes".

In August, Nakheel said it had completed an interest and profit payment of about Dh211m to some of its lenders.

Restructuring agreements have been reached recently by a number of corporations in the region.

In December, Dana Gas said it had agreed a deal with its creditors for $1bn of debt.

fkane@thenational.ae