Dubai World clinches $23.5bn debt deal

Dubai World has reached an agreement with its main creditors and the Dubai government over the restructuring of $23.5 billion of debt.

Dubai World, the real estate and investment conglomerate, has reached an agreement with its main creditors and the government of Dubai over the restructuring of $23.5 billion (Dh86.31bn) of debt. The deal has been clinched with the seven members of the co-ordinating committee representing 60 per cent of Dubai World's total bank lending over the "headline economic terms" of the restructuring proposals announced in March.

Aidan Birkett, Dubai World's chief restructuring officer, said: "We are pleased that we have received unanimous support in principle of the CoCom on the headline economic terms to our restructuring proposal. This is an important milestone and reflects our efforts to achieve the best possible solution for all stakeholders. "The proposal puts the company on a sound financial footing and reflects the continued support of the government of Dubai and its lenders. It offers the company the ability to maximise the value of its assets over the medium to long term" he added.

The co-com members are British banks, RBS, HSBC, Standard Chartered and Lloyds, with two local banks Emirates NBD and Abu Dhabi Commercial Bank, and Bank of Tokyo Mitsubishi from Japan. A statement from Dubai World said: "Post restructuring the company's financial indebtedness will be approximately $14.4bn and comprise two tranches, Tranche A of $4.4bn and tranche B of approximately $10.0bn, with five and eight year maturities respectively.

"Each lender will receive a rateable portion of both tranches and will be able to select options for its tranche B participations." The different options give creditors who have lent in dollars or dirhams different options for re-payment terms, helping to satisfy the concerns of Emirati creditors over higher costs of funding in the UAE. There are also different options for payment-in-kind arrangements and shortfall guarantees to creditors, which some creditors had regarded as important issues during the talks over the proposals.

"The final proposal has not changed in its fundamentals from the terms announced on 25 March 2010. In particular, there is no additional financial support from the Government of Dubai," the statement said. The restructuring proposal requires the agreement of the rest of Dubai World's financial creditors, which the company said it was working to achieve. [e-mail]

Martin Kohlhase, Assitant vice president, Moody's "It's an important step to improve the credit environment here in Dubai and the UAE. It's been long awaited. Still, if core banks have agreed, it doesn't mean that necessarily it's a signed deal yet. It's a step in the right direction." "We have a number of ratings under review. With regards to the Jebel Ali Free Zone, which is part of DW group, this may effect our ratings decision on them." Haissam Arabi, chief executive at Gulfmena Alternative Investments "This closes the main chapter but that doesn't mean we don't have a bumpy ride ahead. There are still issues such as Dubai Holding and other but this has been mostly discounted for. The air is not completely clear but the main chapter is," he says. "Our instant view is positive, this is good news for both sides as this has been overshadowing sentiment and affecting the market's performance. The market has been longing for this to happen." Mohieddine Kronfol, managing director at Algebra Capital "It's a largely expected but positive development. It allows us to put issue of Dubai World behind us and focus on other companies that need to get their finances in order. I think they (holdouts among local banks) will ultimately fall in line. The market has largely priced in the expectation of an agreement." Ali Khan, managing director and head of brokerage at Arqaam Capital "Any time you have progress it is positive, we should see a positive reaction (from the markets) .... I suspect a mixed session: we still need to understand how the local banks are involved and the impact of the final terms." Aris Kekedjian, CEO of GE Capital Markets, Middle East, Africa "It will help put this chapter behind us and help the market look to the future. It's what we need. There are still a lot of global concerns that trump the retail concerns. Right now the markets are more globally focused, particularly with what's happening in Europe. But its progress in the right direction." Zahed Chowdhury, Equity Sales, Almal Capital "I think this is not anything new. It hasn't changed from what was suggested three months ago." "This means relatively little for debt markets. The macro headwinds coming out of the Eurozone are more than enough to keep investors and markets focused elsewhere." "I don't think it makes a whole lot of change for anyone in Dubai in terms of opening up credit markets to either sovereign or corporate borrowers." *Reuters