Dubai World gets approval for $24.9-bn debt plan
Dubai World received approval from creditors to alter the terms on $24.9 billion of debt, nine months after the state-owned holding company’s proposal to delay repaying loans sent emerging market stocks tumbling.
“This overwhelming support means that the company is well positioned to close the restructuring in the coming weeks,” Dubai World said in an e-mailed statement today. “The proposal puts the company on a sound financial footing, enabling it to realise value for the benefit of all stakeholders.” The formal agreement represents about “99 per cent of creditors by number,” and more than “99 per cent by value,” according to the statement.
Dubai World and its main creditor banks agreed in May to restructure $14.4 billion of bank loans and $8.9 billion of government liabilities to resolve a crisis that roiled global markets last year. The company said banks would be paid $4.4 billion in five years and another $10 billion over eight years at below-market interest rates supported by assets sales.
“This outcome is a success for Dubai World and ultimately for the government as it got a restructuring deal which is less favourable to banks,” said Andre Andrijanovs, an emerging market credit analyst at Exotix Ltd in London. “I would expect Dubai World would be gradually wound down as it liquidates its assets but not until all of the holding company’s creditors are repaid.”
A Dubai Department of Finance spokeswoman today declined to name the creditor who opposed the debt restructuring proposal.
Credit-default swaps tied to Dubai government debt narrowed 2 basis points to 459.6 in London today from the highest close this year of 627.4 on February 12, according to CMA prices.
Dubai support
The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
The agreement today also “marks the support of the creditors to the separation,” of real estate developer Nakheel PJSC from Dubai World, Sheikh Ahmad Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee, said.
Nakheel, the builder of palm tree-shaped islands off Dubai’s coast, said on July 14 a group of creditors unanimously supported a plan on altering the terms on $10.5 billion of loans and unpaid bills. The company expects to pay 40 per cent of the money owed to trade creditors in cash and 60 per cent through a tradeable sukuk, Nakheel said.