Dubai Holding to ring-fence bond debt in restructuring

12 May 2010

Bond debt sheltered as second major Dubai restructuring begins

Dubai Holding is planning to ring-fence its bond debt as part of a restructuring of the firm’s debts, according to sources close to the situation.

The move is part of plans by the company to restructure several billion dollars of debt on the firm’s two subsidiaries Dubai International Capital (DIC) and Dubai Group. Sources say that talks between the companies and their lenders have already begun.

The plan will involve Dubai Holding Commercial Operations Group, a subsidiary of Dubai Holding, continuing to pay interest costs and the final repayment on bonds due in July 2011 and February 2012.

Selected Dubai debt obligations
IssuerMaturity dateAmount ($m)Type
Nakheel13 May 2010980sukuk
Dubai World23 June 20102100loan
Dubai International Capital27 June 20101683loan
Dubai Aerospace31 jun 201101539loan
ports Customs & Free Zone World22 March 20116800loan
Emirates Airline24 March 2011500bond
Tamweel15 May 2011235loan
Dubai World24 June 20111950loan
Ports, Customs & Free Zone World10 July 20111000loan
Dubai Aerospace23 July 20111000loan
Investment Corporation of Dubai21 August 20116000loan
Source: Standard & Poor’s

DIC is talking to its banks about restructuring loans including a $1.25bn loan due in June, and the company is understood to have a total of $2.5bn in loans that will need to be restructured. Dubai Group is thought to have several billion dollars of loan restructuring.

The restructuring plan would echo that of Dubai World, which is in the process of renegotiating $23.5bn of debt. As part of the Dubai World plan the outstanding bonds on property subsidiary Nakheel would be paid off as they become due, while bank loans are extended for five or eight years. Dubai World is approaching a final settlement with its bank creditors, and is also awaiting a response from trade creditors to its offer to repay them with 40 per cent of their outstanding bills in cash and the rest in a sukuk that will be issued once creditor approval for the deal reaches 95 per cent.

“The Dubai Holding deal is positive for bonds,” a London-based banker says. “Clearly they don’t want to take on the bond holders as those negotiations would be too troublesome.”

The total debt on Dubai Holding, which is majority-owned by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum, is estimated at around $12bn.

A Dubai-based source says, “Talks on the bank loans for Dubai Holding and its subsidiaries have been ongoing for some time.”

The most pressing loans for Dubai Holding is the $1.25bn DIC loan and a $555m loan for Dubai Holding Commercial Operations Group.

According to reports, Dubai Holding and its subsidiaries have appointed several advisers to help its restructuring including the US’ Deloitte, UK’s PricewaterhouseCoopers and The Netherlands’ KPMG accountancy firms, and US investment bank Lazard. Dubai Holding did not respond to requests to comment.

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