Time is money: deal reached on Dubai World debt restructuring

Published October 2nd, 2014 - 12:46 GMT

Dubai World’s biggest creditors have agreed on a deal to renegotiate its debt repayment schedule, Shaikh Ahmed bin Saeed Al Maktoum confirmed to reporters on the sidelines of the second Africa Global Business Forum 2014 in Dubai on Wednesday.

Responding to a question if the biggest creditors have agreed on the plan, the chairman of Dubai’s Supreme Fiscal Committee replied: “I would say so.”

Shaikh Ahmed, who is also Chairman of Dubai Civil Aviation and Chief Executive of Emirates airline and Group, ruled out any flotations of Dubai’s state-owned companies, including Emirates airline and air travel service provider dnata. They are not being considered, he added.

Last month, Reuters revealed that agreement had been secured with the creditor committee of banks, including HSBC and Emirates NBD. Under the new deal, the repayment date of the biggest chunk of debt under Dubai World’s $25 billion restructuring would be extended, in exchange for a series of incentives, including shares in global ports firm DP World as collateral.

It was reported that Dubai World is also offering to return cash throughout the loan’s lifespan, more assets as collateral, a higher interest rate and an early repayment of a first tranche of debt due next year. In addition, the Dubai government will make extra funds available to Dubai World.

In return, the company wants creditors to grant it more time to meet a second, larger repayment currently due in 2018. So in total, around $15 billion of the original renegotiated amount is outstanding after small repayments and the shift of property developer Nakheel to direct government ownership.

Dubai World, under the revised plan, will repay the $4.4 billion tranche due in May 2015 early — likely in December or January depending on the progress of negotiations — in exchange for the $10.3 billion 2018 payment being extended until 2022. The new 2022 payment will also be augmented in a number of ways aimed at persuading creditors to grant more time, according to reports.

Property prices

At the Africa forum, Shaikh Ahmed also expressed that Dubai’s leadership is concerned that rising property prices could make the emirate too expensive and it will consider steps to limit increases.

“I hope it holds at this level as I don’t want to see high inflation, to keep Dubai as an attractive place to do business,” Shaikh Ahmed said. “The real estate market is getting expensive in certain areas. We are focused on what we can do to not see it get too expensive,” he added.

Dubai house prices, which dropped around 60 per cent from a peak of 2008 during the global financial crises, recovered nearly 35 per cent last year and more in some areas.


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