All 90 creditors of Dubai World approve restructuring deal

Dubai World has received approval by all 90 creditors of a debt restructuring agreement it announced in September after a financially-troubled US fund finally gave its consent to the deal, the semi-official daily Alittihad reported Thursday.

The paper quoted an unnamed DW spokesman as saying the deal had been endorsed by the US-based Aurelius Capital Management, the only creditor that had not voted the September 9 restructuring agreement.

“DW has now received approval of all 90 creditors of its restructuring plan, which will be launched within the next few weeks,” the spokesman said.

“This approval will guarantee a quick and flexible restructuring process especially as all creditors agreed to follow one path for the debt settlement by agreeing on DW’s offer…it will also place DW on a sound financial base that will enable it to implement the restructuring plan and focus on raising the value of its property and investment assets,” the spokesman added.

On September 9, the government-owned DW said it had reached an agreement with more than 99 per cent of its creditors to restructure the $24.9-billion debt. The distressed Aurelius Capital Management was the only creditor that had refrained from supporting the deal at the time.

According to Saudi American Bank Group (SAMBA), DW has assured the lenders it could raise $19.4 billion from the sale of its assets if they agree on a restructuring period of up to eight years.

SAMBA said a landmark debt restructuring had a positive impact in the country as it boosted share prices and cut the cost of insuring Dubai’s sovereign debt.

Commenting on the deal, Moody’s Investor Service said it believed DW would be able to make interest repayment on time as part of the agreement.

“The conclusion of the DW’s restructuring saga is a credit positive development for the UAE banking system and puts an end to the uncertainty that the threat of liquidation had created,” Moody’s said.

“Had an agreement not been achieved, the potential liquidation of Dubai World could have seriously increased the impairment costs that banks would have incurred, throwing confidence in the UAE banking system into havoc.”

According to the DW announcement, the amount of restructured debt is estimated at $24.9 billion, of which $14.4 billion is owed to creditor banks and the remaining balance to the Dubai government. 

Moody’s said DW’s ability to make principal repayments in five years and eight years would largely depend on expected revenues from future asset sales.

It added that a refinancing risk could occur in five years and eight years, depending on the level of Dubai World’s future revenues and assuming no additional external support.

It noted the DW announcement mentions that bank creditors have also agreed to the separation of Nakheel’s assets from its parent DW and that discussions about restructuring Nakheel’s liabilities with its creditors are progressing.

“The conclusion of Dubai World’s debt restructuring programme, therefore, opens the door to the debt restructuring of Nakheel, a successful conclusion of which would be another positive step towards resolving the outstanding debt issues of Dubai government-owned entities,” Moody’s said.

The $14.4 billion restructuring is expected to convert all outstanding bank debt into two tranches of five-year and eight-year maturities in 3:7 proportion.

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