Rating agency welcomes Dubai World accord on restructuring
Dubai World's agreement with creditors deals a positive development for UAE banks
Dubai: Dubai World's agreement with almost all of its creditors to restructure $14.4 billion (Dh52.8 billion) of bank debt is a positive credit development for the UAE banking system, while refinancing risk in five years or eight years' time will depend on the company's future revenues, Moody's Investors Service said on Monday.
"The conclusion of the Dubai World's debt restructuring saga is a credit-positive development for the UAE banking system and puts an end to the uncertainty that the threat of a liquidation had created," analyst John Tofarides said in an e-mailed note.
Refinancing risk
Banks in the UAE may not need to take further provisions during the lifetime of the loans as Moody's expects Dubai World to be able to honour the interest payments, Tofarides said. But Dubai World's ability to make principal repayments in five years and eight years could pose a refinancing risk as it "appears to largely depend on expected revenues from future asset sales", he added.
"A refinancing risk could occur in five years and eight years, depending on the level of Dubai World's future revenues and assuming no additional external support," Tofarides said.
The government-owned conglomerate on Friday said it won support from 99 per cent of its creditors to restructure more than $24.9 billion of debt, including $14.4 billion of bank debt. The company said the agreement means it is "well positioned" to close its debt restructuring deal "in the coming weeks".
Lone exception
US-based distressed debt fund Aurelius Capital Management is the only creditor to have not signed on to Dubai World's $24.9 billion (Dh91.4 billion) restructuring deal, the Financial Times said yesterday citing people close to the talks.
The company, which bought $5 million of debt in the secondary market, could still approve the deal, people close to the matter told the paper. But by missing the September 9 deadline to vote on the deal, Aurelius Capital will not receive the incentive fees paid to creditors that signed up in time.
