Dubai’s Drydocks World, which operates a ship overhaul company, is seeking protection from creditors at a special tribunal established to hear disputes arising from the restructuring of debts at state-owned Dubai World and its subsidiaries.
The company filed for protection under Decree 57, which grants protection from creditor claims, on 1 April. The previous day, the firm said that it had “secured the necessary level of support from its syndicated facility lenders” on plans to restructure $2.2bn of debt put in place in 2008.
It is the first time that a company in Dubai has used the legislation that was introduced in 2009 to ensure that a minority of creditors could not prevent the government from forcing through the $25bn restructuring of Dubai World. It will enable Drydocks to force through a restructuring on minority creditors as long as two-thirds by value agree to the new terms offered.
A total of 76 per cent of Drydocks’ creditors by value, and over half by number, have agreed to the new terms offered as part of the restructuring in lock-up agreements, according to lawyers representing the firm. Other creditors have yet to respond to the proposals. In February, Monarch Capital, a US hedge fund, won a case in a UK Court against Drydocks World for defaulting on its debts. However, its options for using that judgement to obstruct the restructuring process are limited now the protection under Decree 57 has been granted.
Few details are available of the restructuring plan, but a sale of a stake in its business in Singapore to help reduce the debt is stipulated in the lock-up agreements that creditors signed. That agreement will expire on 31 September, by which point Drydocks has to have completed the sale.
Drydocks has also committed to repaying creditors in full, according to chairman Khamis Juma Buamim. He would not comment on what interest rate would be offered to creditors as part of the deal, but confirmed that Drydocks would pay off the debt over five years.