DUBAI: State conglomerate Dubai World has invited holders of $14.4 billion of its troubled debt to their first full-scale meeting since December last year to sell them a restructuring deal.
Under the deal, already agreed by main lenders, banks will be repaid in full, but will have to wait between five and eight years to get back money that was due by next year. The interest rate will be as low as 1 percent depending on which option creditors choose.
Dubai World requires support from lenders representing two thirds of $14.4 billion of debt owed to the banks. Seven core banks, which represent 60 percent of Dubai World’s debt, have already agreed to the deal.
The core banks are HSBC, Standard Chartered, Lloyds Banking Group, RBS, Bank of Tokyo Mitsubishi, as well as local banks Emirates NBD and Abu Dhabi Commercial Bank. Dozens more banks hold the rest of the debt.
Once presented with the full details of the restructuring plan, the deal will be reviewed by banks’ risk and credit committees before a decision to agree or reject the plan is reached.
Banks will also have an option to attend workshops organized in London, Hong Kong and Dubai to ask advisers and legal representatives any further questions about the restructuring.
Analysts and bankers have said a majority of the remaining banks are likely to approve the deal in order to avoid legal proceedings.
Dubai World has said it may use a special tribunal set up for the purpose of the restructuring to force the deal through.
Banks unwilling to agree to the terms of the restructuring plan will be able to seek recourse through the special tribunal.
The plan could be stalled if even one creditor files a claim with the tribunal set up in December. Legal experts said a single case could force Dubai World to enter a standstill until the litigation was resolved, delaying the process.
In turn, Dubai World could itself file for bankruptcy with the tribunal if it fails to get sufficient support for the plan.
Another option is that lead banks could take on the debt of the smaller banks to avoid delaying agreement, experts said.
The restructuring process, including asset sales, will take several years. An agreement on the debt plan is first required, a process which is expected to take several months.
Dubai World has said asset sales are an option but is waiting for market conditions to improve.
The company’s plan to sell Inchcape Shipping Services (ISS) fell apart in June, halted by a US investigation.
The collapse of the sale, which at one point had been expected to fetch as much as $800 million, was seen as a blow to the group’s disposal plans.
