x Abu Dhabi, UAESaturday 20 January 2018

Creditors hold debt talks with Dubai Group

Finance arm of Dubai Holding is in discussions with creditors after reportedly missing a repayment.

Dubai Group owns a wide range of companies and assets, including Dubai Bank and Malaysia's Bank Islam through its Dubai Banking Group subsidiary.
Dubai Group owns a wide range of companies and assets, including Dubai Bank and Malaysia's Bank Islam through its Dubai Banking Group subsidiary.

Dubai Group, the finance and investment arm of Dubai Holding, has begun talks with creditors after reportedly missing a debt repayment.

The company, with a portfolio that includes hotels in the US and Europe, Borse Dubai and Noor Islamic Bank, did not disclose how much it owes.

"Dubai Group has established co-ordinating committees [CoComs] of banks to discuss its debt obligations," the company, part of the conglomerate owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, said yesterday.

"These discussions are making good progress and Dubai Group is confident of a positive outcome that is beneficial to all stakeholders. In the meantime, Dubai Group continues to service its debts."

Yesterday's statement surprised some market observers in the UAE, coming almost a year after the announcement of the restructuring of Dubai World, which shocked world markets, and just before an Islamic holiday.

"My first thought was, oh no, here we go again. But actually this looks nothing like the Dubai World scenario," said one banker, who asked to remain anonymous.

A spokeswoman for Dubai Holding said the announcement was intended to acknowledge that the company had financial issuesbut was addressing them. Discussions with bankers, aimed at trying to find out how its debts could be restructured, had gone extremely well, she said.

The spokeswoman was unable to give details of the amounts involved in the discussions, or details of membership of the CoComs.

She also declined to comment on reports that Dubai Group had missed a repayment instalment on a US$330 million (Dh1.21 billion) facility organised by Citibank that had been used to fund the purchase of a 49 per cent stake in Bank Islam Malaysia. Reuters reported that a source familiar with the matter said a repayment due last month had not been made.

Dubai Group is part of the Dubai Holding Investment Group, and owns the private equity company Dubai International Capital (DIC), which is also involved in a capital reorganisation.

It also owns or holds stakes in UAE companies including Dubai Bank, and the investment bank EFG-Hermes. Overseas, it has interests in Asian financial and property assets. Among its US property assets is the Jumeirah Essex House Hotel in New York.

Dubai Group has a $1.5bn Islamic loan facility that falls due for repayment in August next year. The arrangers consist of 24 banks, including Al Hilal Bank and First Gulf Bank of Abu Dhabi, Qatar's Al Khaliji Bank and Royal Bank of Scotland. Representatives of these are likely to be included on the CoComs.

"This announcement looks rather unusual. It's the banks that appoint the CoCom in a formal process with advisers and fees determined, rather than the company simply announcing the establishment of the CoCom," said a financial restructuring expert.

Khalid Howladar, a senior credit officer at Moody's Investors Service in Dubai, however, did not share that view. "Sometimes the CoCom emerges from a less formal and more consensual process," he said. "This is not entirely a surprise because of the extent of the debt overhang at Dubai Holding. Unlike the case last year [with Dubai World, which announced a $24.9bn restructuring], this is probably not news for investors and creditors. Disclosure is always a good thing and it just shows Dubai has learned some positive lessons from Dubai World.

"The downside is that it reminds anybody who thought all the problems were solved and we were back on the up, that there are still problems to be solved. Dubai companies still have to deal with the legacy issues of debt."

Meanwhile, DIC and Dubai Holding Commercial Operations Group, two other parts of Dubai Holding, are in talks about reorganising their capital structures and have rolled over terms until the end of this month.