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Hedge fund wins $45.5m claim against Dubai Drydocks World

London Court'S ruling likely to slow restructuring efforts

The Dubai Drydocks, the shipbuilding unit of Dubai World
Image Credit: Oliver Clarke/Gulf News Archives
The Dubai Drydocks, the shipbuilding unit of Dubai World. Dubai World's shipbuilding unit filed for insolvency protection, using a special law set up after the emirate's debt crisis, to force holdout creditors to sign on to its $2.2 billion restructuring proposal, two sources said on Monday, April 2, 2012

Dubai Monarch Alternative Capital, a New York based hedge fund, said Wednesday that it won a $45.5 million (Dh167.09 million) legal claim against Dubai Drydocks World for defaulting on a financial obligation.

Last October, Monarch, an investment firm with $4.5 billion of assets, sued Dubai Drydocks for $45.5 million in London's High Court. The hedge fund said in an emailed statement that the court ordered the Dubai firm to pay the entire sum claimed plus Monarch's legal costs.

"We are pleased with the judgement and fully confident in our position," a Monarch spokesperson said.

Analysts said the judgement is a setback to the shipbuilder's efforts to restructure its $2.2 billion debt obligations and it could delay an acceptable solution to all parties involved.

"With the support of its wider stakeholders, significant progress has been made over recent months in all aspects of the restructuring," said Khamis Juma Bu Amim, Chairman of Drydocks World said this month.

Despite the legal action, Dubai Drydocks expects Monarch to accept the restructuring proposal it has put forward to its lenders.

Major terms

Dubai Drydocks World said last week that it has already outlined the major terms of its debt restructuring to its coordinating bank group. It formally launched its restructuring proposal at a meeting of all its lenders in Dubai on March 8.

The company has been in dialogue with its core group of lenders since late 2011 and it hopes to complete the restructuring by next July. Dubai World unit took much longer than expected to complete the debt restructuring due to objections from some hedge funds including Monarch while Dubai government support was not forthcoming to the company. The syndicated facility, taken out to finance acquisitions in Singapore in October 2008, comprised a $1.7 billion three-year loan and a five-year $500 million loan.

Bookrunners for the 15-lender syndicated facility were BNP Paribas, HSBC, Mashreq, Standard Chartered and Lloyd TSB Bank among others.

Legal experts said yesterday that the court order in favour of Monarch could embolden banks to turn tough in their negotiations and at least a few in the lending group could contemplate legal action to recover their money. But a banker close to the negotiations said this new development is unlikely to impact the debt restructuring talks

The shipbuilding unit of Dubai World is not regarded as a strategic asset by Dubai, meaning it has had to negotiate its own debt solution with lenders without the support of the government.

Drydocks World is one of the many companies in Dubai seeking to restructure debt. While Jebel Ali Free Zone and DIFC Investments are facing debt maturities this year, Dubai Group is seeking to restructure $10 billion.