Dubai

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 pile, people aware of the matter say.

Government-owned Dubai World, which signed a $25 billion restructuring deal in 2011, hopes to extend a $10.5b 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 will offer an early repayment of $4.5 billion 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 on 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 may cry foul at the company stepping out of repayment commitments in 2018. “There are always guys who will complain about everything,” added the banker.

Dubai World’s $2.6 billion 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-oriented economy has rebounded in the past couple of years on the back of improved trade, tourism and transportation. The emirate still has debts estimated at $120 billion 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 International, its second airport, through a $32 billion investment programme.

— Financial Times