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29 March 2024

Dubai World plans to raise $19.4bn in asset sales

Dubai World plans to sell stake in Atlantis Hotel and other investment assets. (FILE)

Published
By Reuters

Dubai World plans to sell its assets over a period of eight years to generate as much as $19.4 billion to pay off creditors, according to a restructuring document obtained by Reuters on Wednesday.

The conglomerate told creditors at a July 22 meeting in Dubai that its capital structure was inappropriate and needed "urgent" restructuring, according to the document handed out at the meeting.

Dubai World, the conglomerate with investments in global luxury hotels to theme parks, said in the document asset disposals over an eight-year period will help generate up to a maximum of $19.4 billion, while similar sales based on current prices would be worth a maximum of $10.4 billion.

The company's plans involve repayment over five to eight years, with interest of between 1 per cent and 3.5 per cent.

Dubai World's document showed the company proposed to dispose of its "investment assets", including its stakes in luxury retailer Barney's, Dubai-based Atlantis Hotel, and MGM Resorts International, over a period of five years.

Dubai World's private equity arm, Istithmar which owns most of the overseas assets, is expected to raise up to $4.5 billion over a five year period.

It has identified ports operator DP World, Jebel Ali Free Zone and Dubai Maritime City (DMC) and Dry Docks World as its "strategic assets" which may generate up to $11.8 billion when put on sale over a period of eight years. 

It projected mid-point disposal proceeds of $17.6 billion.

Port operator DP World revenue for 2010 is projected at $3.1 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) at $1.1 billion, parent company's restructuring document showed.

Dubai World does not see any DP World dividend payments until 2016 when a dividend of $182 million is projected, the document stated.

"DW (Dubai World) lender recoveries (will be) significantly enhanced if DW is given time to rebuild and realize value over a five to eight year horizon," the document said.

NEW MANAGING DIRECTOR

Also, in a sign of the deep overhaul Dubai World will appoint a new managing director and chief financial officer, the document showed.

However, Aidan Birkett, the officer-in-charge of its restructuring will remain in place until December.

NAKHEEL SEPARATION

Meanwhile, Nakheel has $10.9 billion of bank debt and will receive key assets from parent company Dubai World for its business plan after separation, a restructuring document showed on Wednesday.

The developer has $5.1 billion of trade creditor claims and $9.2 billion of customer liablities, the document obtained by Reuters showed.

The government will also pump $7.3 billion of new equity and equitise a further $5.3 billion of claims to recapitalise Nakheel, it said.

"Certain assets and businesses required for Nakheel's business plan will be transferred from Dubai World Group to Nakheel," the document said.

Assets to be transferred are Nakheel Harbour & Tower land, land at its Waterfront development which forms the security for the 2011 sukuk, Dubai World's 50 per cent stake in its Al Mamzar joint venture, Dubai World's 99 per cent stake in Nakheel Leisure, Coastal Communities Distribution and Retailcorp Entertainment, according to the document.

Nakheel said on Tuesday it has repaid approximately Dh2.5 billion ($681 million) to contractors in July.

Under a restructuring proposal issued by Dubai World in March, Nakheel creditors would receive repayment through a mix of 40 per cent cash and 60 per cent tradeable security in the form of an Islamic bond.

The 40 per cent is equivalent to Dh4 billion, a company spokesman told Reuters in July.