Dubai: Drydocks World - Dubai yesterday said it has filed notifications with the Dubai World Tribunal under the government's Decree No. 57 of 2009 to ensure restructuring of its $2.2 billion (Dh8.07 billion) debt, following opposition to the plan by some lenders.
The company said a small minority has yet to confirm its support for the company's debt restructuring although the company has received approvals from the significant majority of its syndicated lender group.
Consequently, the group said, it has taken this step to ensure it has the best possible chance of successfully implementing its voluntary restructuring proposal during the third quarter of 2012.
With this step, Drydocks has become the first Dubai World company to use the tribunal to pursue its debt proposals, which involve a five-year moratorium on repayments. [The special court has so far only handled smaller claims and not faced a restructuring disagreement.]
Hoping to complete the restructuring by July, the company has been in discussions with lenders since late 2011. The notifications come following the announcement by the ship building and repair company that it had asked its impaired financial creditors to formally consider its voluntary restructuring proposal on March 8, 2012.
"We take this step to protect the interests of the vast majority of the group's syndicated lenders, the clients, suppliers and wider stakeholders who continue to support the business throughout its restructuring, and who will continue to support it for years to come," said Khamis Juma Bu Amim, Chairman of Drydocks World and Maritime World, adding that Decree 57 filing enables the group to implement its restructuring proposals and will leave it in a strong position to continue to develop and implement its strategic plans.
He added that the company's syndicated facility lenders will be asked to "sign up to the lock-up agreement" and hence formally confirm their support for the proposals, adding that at least two more creditors are likely to sign up in the next couple of days.
"Decree 57 provides the Group and its supportive stakeholders, clients and suppliers with its opportunity to finally close the chapter on the last few years dominated by its restructuring and to look forward to a long and fulfilling future for all of the Group's stakeholders," he said, adding that this process has "no impact on the ongoing operations" of Drydocks World - Dubai, its clients, suppliers or employees.
The Dubai World's shipbuilding unit, which is in negotiations to restructure a $2.2 billion loan facility, said on March 28 it was "extremely confident" of securing the necessary support from its syndicate of lenders by April 2 to successfully implement its restructuring, and that it was one step nearer to signing a lock-up agreement intended to formally secure its lenders' support.
But since it couldn't secure the full support of its lenders, it is now seeking the legal backing of a special Dubai tribunal to prevail over opposition by some lenders.
According Bu Amim, Drydocks World has the support of 75 per cent of its creditors for the debt proposal. Under the Decree 57 procedures, however, debt restructuring can be approved with the support of only two thirds of creditor banks.
"The company has significant financial resources to meet all of its liabilities," said Mark Hyde, head of insolvency and restructuring at Clifford Chance, adding that the company is "far from being bankrupt". The legal adviser to Drydocks World also said he is "reasonably certain" about the outcome of the ruling as 75 per cent of creditors have signalled support.
Asked if the company would seek Dubai government support for repaying the debt, Bu Amim said that the company has a strong cash flow of $318 million and is comfortable in meeting all obligations today as well as in the future. "We don't need the Dubai support fund … why should we when we can pay it ourselves," he told reporters at a conference yesterday.
Drydocks, which has operations in Singapore, Indonesia and Dubai, has also filed proceedings in Singapore in order to push through the debt plan. The company's debts result from the $2.2 billion loan it took in 2008 to fund expansion in Southeast Asia.
According to the company's chairman, Drydocks is making $30 million to $35 million a month from its repair business. With business thriving in Dubai, the company said it made a profit of $116 million in 2011, with a 15 per cent rise forecast this year.
The Drydocks World - Dubai operations exceeded its budget in 2011, the actual unaudited EBITDA for the year to December 2011 being 65 per cent above expectations, the company said in a statement.
Dubai world support for filing
Supporting the move, a Dubai World spokesperson, said in a statement it notes and supports the filing by Dubai Drydocks World LLC (together with Drydocks World LLC) under Decree 57. "This is a pragmatic and sensible decision that protects the majority of its creditors from a minority who had not agreed to its restructuring proposals," said the spokesperson, adding that filing ensures all DDW stakeholders can benefit from the implementation of these proposals.