Dubai World has been held responsible for the collapse of Dubai’s finances for a long time.
Now Dubai World warned that lenders, aside from the government’s own support fund, would face a “significantly” worse deal if its debt restructuring plan fails and it is forced to seek liquidation, according to the debt restructuring plan outlined to bankers.
The document also said the repayment of an initial $4.4-billion (Dh16.1-billion), five-year debt tranche would be financed by its Istithmar World portfolio and its Infinity investment — two segments that were ring-fenced from the conglomerate’s debt proposal agreed by a core group of bankers in May.
Infinity is currently involved in a joint venture with MGM Resorts International. Dubai World bought a 9.5-per cent stake in MGM in 2007.
The document made clear that creditors would suffer in a liquidation scenario and that they would not get to fall back on government support.
“Recoveries for all creditors except DFSF [Dubai Financial Support Fund] in a liquidation scenario would be significantly below those expected under the proposal,” the debt plan said.
Tribunal provision
The DFSF has lent billions to Dubai World as the flagship company restructures $23.5 billion in debt. The government has agreed to take a hit on its claims against the firm, leaving $14.4 billion in bank debt outstanding.
The document said Dubai World can resort to a special tribunal if it gets two-thirds support for its plan but some banks held out against it. The conglomerate, whose assets range from ports to real estate and private equity investments, said developing an alternative plan under the tribunal would be a drawn out process. “Any subsequent deal offered is likely to exclude government support, resulting in extended tenor of 10 years plus,” the document said.
Dubai World met with all its bank lenders yesterday to present its plan on the debt restructuring. The company’s plans involves repayment over five to eight years, with interest of between 1 per cent to 3.5 per cent.
The document said repayment of later-dated maturities would come from “strategic” assets.
