Drydocks World creditors anticipate debt restructuring plans

Recent talks with creditors have left them convinced that the company will seek to change the terms of its agreement to repay some $800 million of bank loans in the summer of 2017.

Drydocks World is reportedly close to appointing a specialist restructuring adviser to handle the negotiations with creditors. Wam

Bank creditors to Drydocks World (DDW), Dubai’s maritime engineering business, are expecting to receive proposals from the government-owned company to restructure some of the US$2.3 billion debt it refinanced in 2012.

Recent talks with creditors have left them convinced that the company, owned by the Dubai World conglomerate, will seek to change the terms of its agreement to repay some $800 million of bank loans in the summer of 2017.

“We’re fully expecting a second round of restructuring, but there have been no formal proposals yet,” said one banking executive, speaking on condition of anonymity.

A spokesman for DDW declined to comment on the possibility of a new round of restructuring.

A source close to the company, who asked not to be named, said that a new deal on the $800m of debt would be a sensible option for the company to consider, given the global environment of lower interest rates than when the previous deal was hammered out, and the emirate’s improved economic prospects.

There was no immediate financial pressure on DDW as it has resources to meet the current repayment terms in 2017, the source said. A further tranche of debt, some $1.5bn repayable in 2027, is not currently under consideration.

Another reason for seeking to renegotiate is the example of Dubai World, which successfully restructured terms of $15bn of bank loans earlier this year.

It is also believed DDW is close to appointing a specialist restructuring adviser to handle the negotiations with creditors.

The spokesman declined to comment on the identity of the adviser. Blackstone, the US investment bank which was involved in the last Dubai World “debt optimisation” process, is not believed to have been chosen for the DDW mandate.

“It would make a big difference if they appoint a restructurer. It would show they are serious about the proposals and the whole process could get off to an orderly start,” the creditor said.

When DDW restructured in 2012, it was the first Dubai company to make use of the provisions of bankruptcy laws – Decree 57 – introduced to deal with parent Dubai World’s much bigger restructuring in 2010. It is not known if Decree 57 provisions would be used this time around.

The 2012 restructuring also involved DDW bringing in a Singaporean partner for its troublesome business in Indonesia. Borrowing to set up an operation in South East Asia before the financial crisis of 2009 was the main reason DDW was forced to seek a deal with creditors back then.

At a recent meeting, creditors were reassured that business in the UAE was good, but there were ongoing challenges in South East Asia. “Operations here are going very well, but it’s South East Asia that’s the problem,” said the creditor.

The trading update was positive on business at DDW’s main site at Port Rashid. Some industry analysts have speculated that DWD’s lucrative business in constructing and fitting out oil rigs would be hit by the fall in the oil price.

In February, DDW said that it had already achieved 93 per cent of its target revenue for 2015.

Any new negotiations will be held under the chairmanship of Abdulrahman Al Saleh, who was appointed to head DDW in May, replacing Khamis Buamim, the executive credited with putting the previous restructuring in place. Mr Buamim has remained with DDW as the head of the South East Asia business, now controlled by a local partner, the Kuok Group.

Mr Al Saleh has a reputation for expertise in financial restructuring. He is the director general of the Dubai Department of Finance and the chairman of the government’s Financial Support Fund, which played a crucial role in seeing the emirate through the 2010 financial crisis.

Standard Chartered, Mashreq and HSBC were among the main creditors involved in the 2012 deal, in addition to DBS bank of Singapore.

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