State-owned Dubai World has struck a deal with a co-ordinating committee (co-com) of banks in the restructuring of around $23.5bn of financial debt.

After a final series of talks that began on 18 May and were concluded 19 May, the seven-member co-com finalised the agreement that will bring a resolution to the debt problem that has crippled the emirates economy.

The co-com represents around 60 per cent of the $23.5bn debt, and will now be expected to begin presenting the proposal to Dubai World’s larger group of 97 creditors. However, while the agreement represents some of the headline economic terms, further negotiations between the co-com and Dubai World to finalise the exact details of the restructuring are expected.

A source close to Dubai World says that a meeting between the co-com and the rest of the financial creditors is expected to be held in June.

If the proposal is accepted it will see the creditors swap into either a $4.4bn loan with a five-year tenor, or an eight-year loan that will total $10bn. The remainder of the debt is Dubai government-owned and will be converted into equity.

The $4.4bn debt will pay one per cent interest rate, with the $10bn loan having three interest options including the option for a shortfall guarantee if Dubai World cannot afford to repay or refinance the loan.

A Dubai World spokesman said the deal, “is a very important step and has come much faster than many had expected.”

The debt includes some Nakheel debt that was held at the Dubai World level, but the property developer is still pursuing its own restructuring process, including plans to restructure over $3bn owed to trade creditors.