Dubai World plans new asset sales to repay $4.4bn debt due next year

Among other Dubai World assets include a stake in Cirque du Soleil. Luke MacGregor / Reuters

Dubai World, the government conglomerate, is planning new asset sales as it seeks to repay about US$4.4 billion of debts due next year as part of its overall $25bn restructuring.

The new disposals follow the company’s early repayment of about $284.5 million to creditors under the terms of the 2010 deal with banks to settle Dubai World’s debt problems. When Dubai World announced in November that it was looking for a standstill deal with its lenders, it triggered the financial crisis from which the emirate is now emerging.

A source close to the company said assets that could come under the hammer included investments made by Dubai World and its subsidiary, Istithmar World, before the financial crisis.

The Dubai World portfolio includes financial investments, industrial holdings and real estate. With global asset prices recovering, it could be worth billions of dollars.

There is also speculation in Dubai financial circles that Dubai World could sell down more of the 80 per cent stake it retains in DP World, the global ports operator listed on the Nasdaq Dubai market and the London Stock Exchange.

The stake in DP World on its own is worth $12bn, but the Dubai Government is thought to be unlikely to want to sell or float all of the shares.

“DW could raise enough to cover its 2015 debt commitments and still retain majority control of DP World,” said one banker who asked to remain unnamed, as the issue was not yet in the public domain.

A spokesman for DP World declined to comment on the speculation but pointed to the recent strength in the company shares, which have risen nearly 40 per cent in the past year on Dubai’s economic recovery.

“The early repayment of some of DW’s liabilities is a sign that the company is wiling and able to meet its obligations. It’s a small amount compared to the total, but significant,” the banker said. It is believed the payment was made last week.

Martin Kohlhase, a vice-president and senior analyst at Moody’s Investors Service in Dubai, said: “If there is such a clause, it’s a safeguard for creditors and will ensure that any proceeds from asset disposals will be used for debt reduction.”

The payment was triggered by one of the clauses in the 2010 agreement with 97 bank creditors that resolved Dubai World’s debt problems. Under that deal, any funds realised from disposals above a level of $300m were to be disbursed to creditors. The $284.5m disbursal is the first such payment.

The balance of the first tranche of debt is due for repayment in full by May next year.

Dubai World also has a further $10bn of debt scheduled for repayment in 2018. The balance of the $25bn total is owed by the property developer Nakheel, which was owned by Dubai World in 2010 but subsequently spun off. Nakheel also has begun early repayment of its debts.

The payment to creditors follows a series of disposals by Dubai World that have boosted the company’s cash pot. The Fontainebleau hotel in Miami, the Atlantis resort on the Palm Jumeirah in Dubai and the logistics firm Gazeley were all sold for undisclosed amounts.

Other assets in the Dubai World portfolio that could be earmarked for disposal include the Inchcape Shipping Services business, about which it has already held talks with potential buyers. There are also New York hotel assets and stakes in Cirque du Soleil, the Turnberry golf business and the American financial firm Perella Weinberg Partners.

A Dubai World spokesman declined to comment.

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