Dubai World to meet creditors

Dubai: Dubai World has invited creditors to a July 22 meeting to offer details on its debt restructuring, the first session to include all lenders since December 2009.

Three sources from among the group's 80 creditors told Reuters they had received the invitation via the coordinating committee of seven banks that hold 60 per cent of Dubai World's $14.4 billion (Dh52.8 billion) in bank debt.

Dubai World is said it will try to secure wider backing from the meeting for the outline restructuring deal struck with a coordinating committee of lenders in May.

The May deal allows banks to get their money back in two tranches with five and eight-year maturities.

Dubai World's restructuring opened a window on some broader debt issues.

Dubai World requires support from lenders representing two thirds of its debt for the May deal to go through, but is hoping to gain full backing in order to avoid a possible delay to the restructuring process.

"We expect some banks to be grumpy and to complain about the pricing, but then again a majority will likely agree as the alternative of letting the deal collapse is moving into unchartered territory," said one of the sources.

In addition, Dubai World will organise workshops in Hong Kong, London and Dubai to allow bankers to ask the group's legal and financial advisers questions about the terms of the debt proposal.

Banks unhappy with the deal can file a claim with a special tribunal set up for the purpose, but legal experts have said they may be reluctant to pursue legal action in the absence of any precedents.

Deal could take time

After the meeting Dubai World's creditors will present the details to their own respective risk committees and approve or reject the deal within three to four weeks, said a second source.

A third source said a finalised deal could take "a very long time."

"The process could take several more months after this meeting. There won't be any resolution yet. The purpose is giving information," the source said.

Dubai World declined to comment.

HSBC, Royal Bank of Scotland, Standard Chartered, Lloyds Banking Group, Bank of Tokyo Mitsubishi and local lenders Emirates NBD and Abu Dhabi Commercial Bank hold $8.64 billion in Dubai World debt. Of the debt being restructured, banks hold $14.4 billion and the government holds the rest.

Dubai's government said in March that it plans to repay Dubai World's creditors 100 per cent of the principal amount due but through extended tenor periods.

Under the terms presented in May the first portion, or tranche, of $4.4 billion will be paid in five years, with 1 per cent annual interest in cash but no shortfall government guarantee. The second tranche of $10 billion will be paid over eight years, with 1 per cent interest plus varying payment-in-kind interest and shortfall guarantees. Lenders will have to choose between three options, depending on their exposure and on their priorities in regard to the shortfall guarantee and payment in kind.