Dubai Group $10bn debt restructuring back on track

15 January 2013

Four banks stop legal action on Dubai Group debt, removing an obstacle to agreeing a broader deal

Investment firm Dubai Group is planning to move quickly on completing a $10bn debt restructuring once an offer to buyout creditors at less than 20 per cent of the value of their loans to the firm expires in late January.

The main obstacle to the restructuring had been four banks that launched a lawsuit against the company in September over Dubai Group’s default on its debts. Those four banks, which were part of an unsecured $1.5bn syndicated loan, have now accepted an offer to be bought out at 18.5 cents for every dollar owed and dropped the lawsuit.

Dubai Group, which is part of Dubai Holding, owned by the emirate’s ruler Sheikh Mohammed bin Rashid al-Maktoum, has also offered the same proposal to the rest of its unsecured creditors who have until late-January to accept. With most other creditors agreeing to a previous proposal to restructure the firm’s debts over a five- and 12-year period, a final deal is expected to be agreed soon after the January deadline.

“Most had already agreed to what was on the table last year and had credit approval for that restructuring plan, but it couldn’t move forward without everyone on board,” says one source involved in the restructuring. “Once this offer has passed and the other banks are out of the way, it will really just be a documentation issue.”

No other banks are expected to agree to the immediate buyout offer, believing that they are better off waiting to be paid back from the proceeds asset sales in a few years’ time, according to sources involved in the deal.

If Dubai Group does manage to quickly wrap up its restructuring, it will be the end of a saga that has been going on since 2010, when it first entered talks to restructure $6bn of bank debt and $4bn of intercompany loans. It will also mark the end of one of the emirates largest ongoing debt negotiations, after it managed to restructure $25bn of debt associated with Dubai World and Nakheel in 2010, and repay or refinance several large maturities during 2012.

Dubai Group could not be reached to comment.

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