Dubai World creditors wait for February hearing

20 January 2015

Emirates NBD reclassifies Dubai World debt and improves bad loan ratio

Creditors are preparing for the next tribunal hearing for the restructuring of the $14.5bn-worth of debt owed by the Dubai conglomerate Dubai World, which is scheduled for 15 February.

Earlier this month, 73 per cent of Dubai World’s creditors agreed to a new debt restructuring, which would involve the early repayment of $2.9bn due this September, and the extension of the $10bn due in September 2018 to 2022.

Creditors are expecting to vote on the new proposal on 17 March at the Dubai World Tribunal and the restructuring process could be concluded by May.

The Dubai World Tribunal was set up in 2009 after the conglomerate stalled on its debt repayments to banks at the height of the global financial crisis and the collapse of Dubai’s property market.

A Decree 57 was introduced then, which ensured Dubai World only need to get approximately 66 per cent of creditors to agree to any material change to amendments to the original loan documentation.

Typically under the terms of the contract, 100 per cent of creditors would have to approve changes.

The proposed restructuring is likely to feature improved terms such as the pricing.

“The original restructuring agreement in 2009 was completed fairly quickly through force of circumstances and on terms that were not particularly attractive to either the creditors or Dubai World,” says Mark Hyde, partner at Clifford Chance, representing Dubai World at the tribunal in January.

“What happened earlier this year was that the company decided against the background of Expo 2020 and various other factors, they would like to extend the maturity of facility from 2018 to 2022,” Hyde tells MEED. 

The Dubai-based bank Emirates NBD, which had one of the biggest exposures to Dubai World debt announced improved 2014 profits on 18 January, and said it has improved its bad loan ratio by reclassifying its Dubai World debt as performing.

Follow Rebecca Spong on Twitter: @Rebecca_MEED 

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