Dubai Holding Commercial Operations Group (DHCOG), a subsidiary of Dubai Holding, has breached the covenants on a $1bn loan as a result of a sharp reversal of its profitability in 2009, which left the company reporting a AED23.6bn ($6.4bn) loss.

The loan is a $1bn facility provided by the UK’s Standard Chartered, Royal Bank of Scotland and the US’ Citigroup that is $555m drawn.

The banks are understood to have been informed about the covenant breach, which related to two out of three covenants on the loans, in early April. According to DHCOG “the bankers have subsequently waived all rights in relation to the breach.”

Following the waiver the facility is considered to no longer be in breach of its covenants.

Accountancy firm PricewaterhouseCoopers (PwC), which also acts as auditor for DHCOG, is currently working with the banks to arrange an extension for the $555m loan, which matures in July.

The breach arose because of a AED22.5bn impairment charge on the value of DHCOG’s assets, coupled with its AED1bn loss before impairment, compared to a AED19bn profit in 2008.

The news illustrates that debt problems at Dubai’s state-owned firms are far from over, despite the progress made on a deal to restructure Dubai World’s $23.5bn debt.

In late May it emerged that Dubai International Capital (DIC) was asking banks for a three month extension on a $1.25bn loan that is due to mature on 27 June. The company is being advised by Lazard on the negotiations with its lenders, and a six member co-ordinating committee was been appointed in late April. The co-ordinating committee, which includes the UK’s HSBC, Royal Bank of Scotland, and Lloyds TSB, with the local Emirates NBD, Noor Islamic Bank and Mashreqbank, is expected to meet the wider lending group involved in the loan in mid-June to discuss the proposals, according to a source close to the talks.

Drydocks World, a subsidiary of Dubai World, has also revealed that it is restructuring a $1.7bn loan that matures in November 2011.