Dubai tables debt restructuring for state firms

23 March 2010

Dubai World and Nakheel creditors are yet to agree to proposals

The government of Dubai has announced its proposals for the restructuring of the debt of its Dubai World conglomerate and a separate restructuring of property subsidiary Nakheel, although creditors are yet to agree to the proposals.

Under the terms of a plan presented to creditors on 24 March, Dubai would put an additional $9.5bn into the two businesses, leaving the government on an equal footing with other creditors.

The money will be split between $1.5bn in new funds for Dubai World and $8bn in new funds injected into Nakheel. Under the terms of the plan, Nakheel bonds due in May 2010 totalling $980m and in January 2011 of $750m will be repaid as they become due.

The new funds will be made up of the $5.7bn remaining from previously announced loans from the government of Abu Dhabi, and from “internal Dubai government resources”, the government said in a 25 March statement.

Under the proposals for the Dubai World restructuring, the government wants to recapitalise the company and its own $8.9bn claim will be put on an equal footing with other creditors. Details of the terms that lenders will be asked to accept have not been announced.

“Bank creditors will be asked to restructure their debt at commercial rates,” the government said of the Nakheel restructuring. “Trade creditors will be offered a significant cash payment shortly and a tradeable security.”

The Nakheel cash injection would have “a significant impact on the construction and real estate sectors and the wider economy” of Dubai.

A banker close to the talks says that the proposals were discussed at a meeting on 24 March between Dubai World, its advisers, and a committee of its largest creditors.

Creditors are yet to agree to the proposals.

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