Dubai: State-owned conglomerate Dubai World on Friday reached a formal deal to restructure around $24.9 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 comes 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.
“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.”
Dubai World reached an agreement with over 99% of its creditors by value to restructure around $24.9 billion of liabilities, the government of Dubai said in a statement. Dubai World said in a separate statement it is well positioned to close the restructuring in “the coming weeks”.
“The agreement formalises 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 1 October, a final restructuring proposal presented to creditors on 22 July and obtained by Reuters in August, showed. Concerns about the overall debt burden of Dubai’s state-linked companies mounted 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,” he added.
In Friday’s statement the government said “it continues to focus on Nakheel and is pleased with the significant progress achieved by the company to date in discussions with its creditors.”
Troubled Dubai property developer 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.