Dubai: A Dubai Goverment statement issued by Shaikh Ahmad Bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee, states that the proposals put forward by Dubai World and Nakheel for the restructuring of their liabilities would put both companies on a sound financial footing and allow them to realise the full potential of their underlying businesses.
"Going forward, this would ensure Dubai World and Nakheel are key contributors to the strong economic future of the emirate of Dubai and the wider UAE," Shaikh Ahmad said.
Following a comprehensive analysis of the circumstances facing each company, the proposals have been developed in the interest of all stakeholders, including customers, contractors, employees and creditors.
Dubai World and Nakheel will also present revised business plans, which take into account the current business environment and reflect the new direction being given to both companies, he said.
The Government of Dubai, acting through the Dubai Financial Support Fund (DFSF), will support these proposals with significant financial resources, including a commitment to provide up to $9.5 billion (Dh34.8 billion) in new funding over the period of the business plan. This will be funded by $5.7 billion remaining from the loan availed by the Government of Abu Dhabi and from internal Dubai Government resources.
The Government of Dubai is taking decisive action to address the challenges related to the global economic downturn and to build the foundation for a strong balanced future growth. This period has demonstrated the unity and shared purpose of the UAE.
Government actions
Elaborating the government's response to the situation, the statement says, the Dubai Government had intervened in the interest of the wider economy to protect all stakeholders and start rebuilding the financial strength of the companies.
The DFSF provided significant financial support for Dubai World and Nakheel, including funds to meet ongoing interest and working capital requirements, and payment of the Nakheel sukuk due last December.
The Dubai Government appointed a chief restructuring officer in November 2009 to lead the restructuring process. To help protect all stakeholders and provide an orderly process, in December 2009, the Government also announced a Tribunal framework based on internationally accepted standards of transparency and creditor protection.
Taken together, these important actions have provided the opportunity to assess and develop comprehensive restructuring plans.
Dubai World restructuring proposal
Dubai World has been in discussion with lenders and will present a proposal to all its creditors for the restructuring of their loans. In this proposal the Dubai Government is offering to recapitalise Dubai World by turning the Dubai Government's $8.9 billion claim into equity and a commitment to fund up to $1.5 billion in new funds.
Within Dubai World, there are strong businesses that are important components for the future economic growth and prosperity of Dubai and the UAE. This restructuring will allow Dubai World to focus on its core holdings and to manage and realise its full value from its assets.
Nakheel Restructuring Proposal
Bank creditors will be asked to restructure their debt at commercial rates. Trade creditors will be offered a significant cash payment shortly and a tradable security. Assuming sufficient support for the proposal, the 2010 and 2011 Nakheel sukuk will be paid as they fall due.
In this proposal the Dubai Government is offering to inject approximately $8 billion in new funds, which will have a significant direct impact on the construction and real estate sectors and the wider economy, and to recapitalise Nakheel by turning the Dubai Government's $1.2 billion claim into equity.
Nakheel is an important part of the Dubai economy. The Nakheel business plan allows work to continue as soon as possible and puts Nakheel on a sound footing. The Government, as shareholder, will work closely with Nakheel so that any future projects are carefully planned and evaluated.
Next Steps
Dubai World and Nakheel will discuss these proposals in detail with their creditors. The restructuring process is expected to take several months to implement.
