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Middle East
Dubai World moves to restructure debt
From the Financial Times of Thu, 27 Nov 2014 12:06:18 GMT
An Emirates Airlines' airplane flies past a minaret 29 December 2006 in the emirate of Dubai. The company vice chairman said he believes that the airline will have too little rather than too much capacity even after its 121 billion Dirhams spent -although the airbus A380 will arrive at Emirates hangars two years late, the airline is optimistic about its expansion plans for 2007. AFP PHOTO/KARIM SAHIB©AFP

Dubai will next week present proposals to extend restructured loans at one of its largest conglomerates, taking advantage of the revived economy to manage its debt mountain, people aware of the matter say.

Government-owned Dubai World, which signed a $25bn restructuring deal in 2011, hopes to extend a $10.5bn maturity scheduled for 2018 as the emirate considers large-scale infrastructure investment in the aviation sector ahead of its planned hosting of the World Expo in 2020.

The company, which declined to comment, will present this “restructuring of a restructuring” to creditors at meetings in London on December 1 and in Dubai on December 8.

Dubai World, the company at the heart of the emirate’s debt crisis five years ago, will offer an early repayment of $4.5bn due in 2015 while extending the 2018 tranche until to 2022. Extra fees and better interest rates will be offered on the extended maturity in a bid to assuage creditor concerns.

A committee of main lenders, including Standard Chartered, HSBC, Abu Dhabi Commercial Bank and Dubai’s Emirates NBD, have agreed main terms of the package.

But the company needs to persuade dozens of other creditors to sign up to a restructuring of the 2018 maturity. The extension talks, which opened in April, have been protracted as some banks sought higher fees and better interest rates for the extension.

Bankers say most lenders are likely to react positively to the new deal, focusing on the potential of the emirate’s revived economic prospects. “The final deal is fair and equitable,” said one senior banker.

But some lenders, burnt by their exposure to Dubai during its debt crisis, may cry foul at the company wriggling out of repayment commitments in 2018. “There are always guys who will complain about everything,” added the banker.

Dubai World’s $2.6bn sale of the Jebel Ali Free Zone logistics park to DP World, the Dubai ports operator, has freed up enough cash to repay the 2015 debt tranche early.

The company wants to secure the approval of lenders holding three-quarters of the loan value for the proposal to fall in line with UK law. But Dubai World can push still push through the deal with only two-thirds’ approval at the Dubai World Tribunal, a legal body set up after the conglomerate’s debt crisis.

Dubai’s services-orientedeconomy has rebounded in the past couple of years on the back of improved trade, tourism and transportation The emirate still has debts estimated at $120bn but economists are now more comfortable that these can be serviced.

As Dubai looks to its next phase of development, it will have to borrow more from banks and capital markets for part of its funding needs for large-scale infrastructure projects.

The emirate wants to capitalise on its role as a global aviation hub by expanding Al Maktoum, its second airport, through a $32bn investment programme.

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