DUBAI: State-owned conglomerate Dubai World reached a formal deal to restructure almost $25 billion of liabilities, partly easing recently heightened concerns over the Gulf emirate’s debt woes.
While Dubai World’s agreement with most of its creditors is seen as a positive step for Dubai, the announcement on Friday came just days after a unit of Dubai Holding, the conglomerate owned by Dubai’s ruler, said it will delay repayment on a $555 million loan, the second time it has failed to meet a repayment deadline.
Other related entities such as property group Limitless are also yet to reach a resolution on their debt restructuring. Limitless has asked its lenders to roll over a $1.2 billion Islamic loan for six months from the end of September, following an initial extension earlier this year, people close to the negotiations said.
Dubai World’s restructuring agreement, reached at the earliest possible date, is one of the first major milestones to resolve the debt headache which has plagued the Emirate since last year.
"Most players had expected this outcome and that the restructuring would be completed by October or November," said Andre Andrijanovs, credit analyst at Exotix in London.
"It is a surprise that it has happened so quickly and that an agreement was reached this week, and that be will a positive momentum for Dubai … There are other situations though that need resolving such as Dubai Holding."
Fair proposal
Dubai World reached an agreement with over 99 percent of its creditors by value to restructure around $24.9 billion of liabilities, the Dubai government said. Dubai World said in a separate statement it was well positioned to close the restructuring in coming weeks.
"The agreement formalizes a strong consensus about a fair and balanced restructuring proposal and is a key step to putting Dubai World on a sound and stable financial footing," Sheikh Ahmad Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee said in the statement on Friday.
The government of Dubai remains a supportive and committed shareholder, the statement added.
Dubai World’s target date for completion, assuming consensual agreement reached with creditors, was Oct. 1, according to a restructuring proposal presented to creditors on July 22 and obtained by Reuters in August.
Concerns had mounted about the overall debt burden of Dubai’s state-linked companies after Dubai announced a standstill on repaying $26 billion in debt as it restructured Dubai World. It unveiled a $9.5 billion rescue plan for the firm in March.
"Any resolution is positive and we had news on Dubai Holding last week," said Abdul Kadir Hussain, chief executive of Mashreq Capital in Dubai. "There is progress on all of these which will deem positive for the debt position in Dubai."
Separate talks
In Friday’s statement the government also said it continued to focus on property developer Nakheel and was pleased with progress made by the company in discussions with its creditors.
Nakheel, a unit of Dubai World which overstretched itself building islands in the shape of palms and other ambitious real estate, is holding separate restructuring talks.
Under the restructuring of its parent company, the developer would be placed directly in the hands of the government.
Dubai World plans to sell its prized assets over a period of eight years to generate as much as $19.4 billion to pay off creditors, according to the restructuring proposal document obtained by Reuters.
It said in the document asset disposals over an eight-year period will help generate up to a maximum of $19.4 billion, while similar sales based on current prices would be worth a maximum of $10.4 billion.
The document also showed Nakheel has $10.9 billion of bank debt and will receive key assets from Dubai World after separation.
