Settlement of Dubai World debts drawing closer

The indebted conglomerate draws closer to proposing a deal with its creditors to restructure US$26 billion of debt.

Sheikh Ahmed bin Saeed Al Maktoum, the chairman of Dubai's Supreme Fiscal Committee, said yesterday that the Emirate's government is "always behind Dubai World" as the indebted conglomerate draws closer to proposing a deal with its creditors to restructure US$26 billion (Dh95.49bn) of debt. Sheikh Ahmed, speaking in New Delhi, said that Dubai World was seeking to separate "good" businesses from underperforming assets as part of its restructuring plan.

"What we try to do is trying to separate the bad business from the good business. There's a lot of good business like the port business, free zone, dry dock," he said. Dubai World has isolated its Nakheel and Limitless property units from the rest of the group as part of the plan to restructure its debt. The first formal proposals are expected to be put to creditors within a week, according to people close to the negotiations.

Nakheel and Limitless used loans to finance property projects such as the palm tree-shaped islands off the emirate's coast, which they struggled to refinance amid the credit crisis. Dubai World said in November it would seek to delay repaying all loans until May, sparking a slump in developing-nation stocks and doubling the cost to protect against a default by Dubai. The emirate's benchmark Dubai Financial Market General Index, down 19.6 per cent since the November announcement, rose 1.5 per cent to 1,683.89 on Thursday. Credit default swaps linked to Dubai declined by nine basis points to 471.3 basis points, prices provided by CMA DataVision show. And Nakheel's 2.75 per cent $750 million sukuk due in January gained 0.12 cent to 61.62 cents on the dollar yesterday, according to Citigroup prices.

Dubai World will ask banks for permission to delay loan repayments when it presents a plan this month, according to three bankers familiar with the negotiations. The company will present a restructuring proposal to its creditors after its advisers complete valuing the company's assets. The company may propose to its creditors other than the Nakheel holders a cut of 20 per cent in face value, a 10-year extension on maturities and a government repayment guarantee, JPMorgan Chase said in a research note sent to investors last Monday. Nakheel has two outstanding Islamic bonds, a Dh3.6bn floating-rate note due May 13 and the $750m sukuk maturing in January of next year.

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