Dubai Group creditors study extension on $6bn debt proposal

Creditors to Dubai Group are considering an extension of the deadline for them to approve new proposals to restructure $6bn of debts.

Creditors to Dubai Group, the financial arm of the Dubai Holding conglomerate, are considering an extension of the deadline for them to approve new proposals to restructure US$6 billion (Dh22.03bn) of debts.

A person familiar with the situation, who asked not to be named because of confidentiality agreements between creditor banks and Dubai Group, said some creditors have sought another month to study the proposals, after an initial deadline expired at the end of last month.

It was not known how many of the 35 creditors were seeking the extension, but it was believed that some had already agreed to it. If an extension was agreed, it would give Dubai Group and its creditors breathing space to consider a plan to pay creditors 18.5 cents for each dollar of debt owed.

That proposal was agreed by four banks - including Royal Bank of Scotland and Standard Bank of South Africa - in a deal that would bring a halt to enforceable legal arbitration proceedings in London.

This week, it was reported that about 20 of Dubai Group's 35 creditor banks had declined an offer to settle on the same terms as RBS and Standard. The alternative would be to wait 12 years for full settlement.

A representative of Dubai Holding said the conglomerate would not comment on the situation because of agreements that the creditors and debtor would issue only joint statements in the event of a deal.

However, a person familiar with the matter said: "The recent reports are only partly correct. The deadline to reach an agreement can be extended by a month.

"Some banks have already agreed to it [the extension proposal], while others are thinking about it. Things are changing by the minute. Discussions are still taking place."

The deal with the four banks, which also include Commerzbank of Germany and Commercial International Bank of Egypt, is seen by some creditors as preferable to waiting 12 years for full repayment with sub-commercial rates of interest, believed to be in the range of 1 to 2.5 per cent, depending on the kind of debt held by creditors.

One adviser to Dubai Group, who also requested anonymity, said: "You can view it as a positive development that some creditors want to stay in for the long term. It preserves cash within Dubai Holding, and that's important for the company at the moment."

Other assets within the holding company include Jumeirah, the hotels and leisure chain, Tecom, the business parks developer, and a property business.

It also owns Dubai International Capital, the private equity company that has successfully restructured its debts.

Dubai Group, which owns stakes in banks and financial companies in the Middle East, North Africa, Europe and Asia, was badly hit by the global financial crisis, and has been in restructuring talks with creditors for the past two years.

RBS, which with Emirates NBD had been representing partially secured and unsecured creditors, quit that role last summer and initiated legal action in the London arbitration courts to get its debts repaid.

Some creditor banks have already written off large chunks of Dubai Group debts.

Emirates NBD said recently it had written off 54 per cent, or some $683m, of debt to cover for losses as a result of the restructuring.

Ben Franz-Marwick, Emirates NBD's investor relations director, said recently that restructuring proposals were "near final" and that a deal would probably be agreed in the next few months.

Neither RBS, Emirates NBD nor any other creditor was willing to comment on the proposal to extend the deadline for another month.