Dubai World wants to extend $10.3 debt repayment to 2022

The Royal Bank of Scotland is now among the banks that are considering the new proposals. Oli Scarff / Getty Images

Dubai World is trying to win over its smaller creditors to a plan that would involve the repayment of US$10.3 billion of debt extended until 2022.

Many of the biggest creditors appear to have given a positive response to the proposals, which would also involve early repayment of a smaller tranche of debt, some $4.4bn, and a higher rate of interest on the remainder. But people familiar with the situation said a formal deal is still some way off.

One person familiar with the negotiations, who did not want to be named, said: “No deal has been signed, but we have taken steps in the right direction and it’s all looking positive.”

One banker, who also requested anonymity because of the sensitive stage of the negotiations, said: “No deal has been done yet. Some proposals are under discussion and those discussions are proceeding positively. But there are a lot of banks and a lot of procedure involved.”

DW, whose request for a debt “standstill” on $25bn of borrowings in 2009 spooked UAE and world markets, has asked creditors to extend the bulk of its outstanding debt for four years beyond the original repayment date of 2018.

In exchange, DW is offering to pay a higher rate of interest than the average of 2.4 per cent agreed in a 2010 restructuring; and to repay early a smaller tranche of debt, some $4.4bn, which matures in September next year. “It looks like a fair compromise,” said the person.

The banks – led by a five member co-ordinating committee (cocom) – appear to have been won over by the new proposals, and by the improving economic and financial background in the emirate.

One of the biggest lenders – Britain’s Royal Bank of Scotland – had been considering selling its debt of more than $500m in the secondary market. But it is believed this has not happened, and RBS is now among the banks that are considering the new proposals, although it is no longer on the cocom.

The position of Lloyds, which earlier this year tried and failed to sell more than $500m of debt in the “distressed” market, is uncertain. One French bank, with about $50m exposure, is also believed to have reservations about the proposals.

RBS in London declined to comment, as did a DW spokesman in Dubai.

The banks on the cocom are HSBC, Emirates NBD, Abu Dhabi Commercial Bank, Standard Chartered and Bank of Tokyo Mitsubishi. All declined to comment.

If DW gets approval from banks representing 66 per cent of the total debt, it can invoke the provisions of the Dubai’s Decree 57 legislation, which puts pressure on any holdout banks by threatening bankruptcy procedures.

If the deal is agreed, DW will have to find the cash to repay the 2015 tranche in a hurry. Although its has raised as much as $1bn from asset sales over the past couple of years, it would still have to consider other arrangements to meet the repayment.

Its biggest asset is the 80 per cent stake it owns in DP World, the global ports operator, which is quoted on Dubai and London stock markets with a market capitalisation of $16.2bn.

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