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Dubai World signs final debt restructuring deal

Agreement comes after year-long efforts to reach a compromise that ensures Dubai World meeting all its financial commitments

Image Credit: EPA
An aerial view of the Palm Jumeirah
Gulf News

Dubai: Dubai World has signed the final agreement on its debt restructuring plans with all 80 creditors, signifying an end to approximately 12 months of negotiations.

"We appreciate the cooperation of all the bodies for the completion of the restructuring agreement," Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation and Chairman and CEO of Emirates airline and Group, announced in a statement released by the Dubai Government Media Office and the Dubai World board of directors.

"We are very optimistic in Dubai World's capability to overcome the repercussions of the global financial crisis and all its challenges," he said.

The deal to restructure its nearly $25 billion debt has been divided into two phases. In the first phase, $4.4 billion will be paid over five years and in the second phase $10.3 billion will be paid over eight years at a fixed interest rate of 2.4 per cent. The amount includes debt held by the banks while the remaining debt is held by the Dubai government.

"The announcement has been largely expected since September but now it's been finalised there is more confidence that the restructuring plans of other entities will happen. There are other similar structured entities with the similar creditors. One detail we didn't know before was the exact interest rate. Now that it has been announced it gives you a blue print for future restructuring plans," Joe Kawkabani, managing director of equities asset management at Algebra Capital told Gulf News.

Dubai World's main lenders include Royal Bank of Scotland Group, HSBC Holdings, Lloyds Banking Group, Standard Chartered, Bank of Tokyo-Mitsubishi UFJ, Abu Dhabi Commercial Bank and Emirates NBD who, according to Dubai World have offered their full support to the restructuring plan.

"Standard Chartered welcomes the agreement and we remain confident about the prospects of the UAE, which is the largest business for us in the region," a spokesperson from Standard Chartered said.

Ensuring fairness

Mohammad Al Shaibani, director general of the Dubai Ruler's Court and a Dubai World board member, said the terms of the deal were set up to ensure fairness. The conglomerate will now continue with its operations and focus on its development and growth goals in the next phase.

"We are determined to take this organisation to a new phase of growth to help it continue its role along other prominent Dubai organisations in consolidating a strong and highly developed economic base that takes into account the highest standards of integrity and transparency," said Shaikh Ahmad.

The statement added that the value of Dubai World assets in various parts of Dubai World have recorded very good growth in the past few months. DP World which published its results today has announced a 35 per cent profit in 2010.

State-owned Dubai World shocked the financial world when it first announced in November 2009 that it would delay payments on its debt worth $23.8 billion. This was followed by the formation of a three-member Supreme Committee chaired by Shaikh Ahmad to oversee the company and its restructuriong plans.