Dubai unveils $9.5bn debt restructuring
Dubai announced a $9.5bn restructuring proposal for troubled conglomerate Dubai World on Thursday, including a commitment to pump $8bn into Nakheel, its troubled development arm.The government, which said the plan would take several months to implement through talks with creditors, will fund the new business plan with the $5.7bn left over from the $10bn bail-out loans from Abu Dhabi last year, and the remainder from internal government resources.
A government spokesman said there were no plans to raise additional debt to fund the plan, but sales of non-core assets remained part of the group’s strategy.
“The holding company has a number of assets which were acquired with a view to be sold over time when value is good for Dubai World,” said one government adviser. “There will be no firesales.”
Dubai World will receive a $1.5bn cash injection from the government to cover working capital and interest payments, with the $8.9bn of government funding and claims turning into equity in the government-owned business, thereby subordinating the debt to other creditors.
Non-government creditors will receive 100 per cent of their claims – which the company said amounted to $14.2bn at the end of last year – through the issuance of two new tranches of debt with five and eight-year maturities.
“The banks should be happy with this,” said a government financial adviser. ”It is a very fair plan.”
One person close to the talks said the level of interest to be paid to Dubai World’s bank creditors is to remain under negotiation.
The government will inject $8bn into Nakheel, which was hit hard by over-expansion ahead of the real estate crash in 2008. The outstanding Nakheel 2010 and 2011 sukuks, or Islamic bonds, would be repaid as long as the proposal is agreed.
Nakheel said it would pay off all creditors over time and focus on completing near term projects, which would be communicated to customers.
This would “have a significant direct impact on the construction and real estate sectors, and the wider economy”, the statement said.
via FT.com / Middle East – Dubai unveils $9.5bn debt restructuring.