Monday 22 February 2010

Dubai World debt: to pay or not to pay?



Further developments in the Dubai World restructuring saga.
The Dubai government is no longer seeking preferred creditor status, according to Reuters. If true, that removes a key sticking point in the $22bn debt work-out discussions.
From Reuters.
“The government wants to show it’s handling this in the most equitable way, everyone gets a fair shot,” a source familiar with the matter said on Monday. “We are going to put forward a plan that shares the recoveries with the lenders.”
That is a concession from the government,” a source familiar with the matter said. “We haven’t let go of our want but we will continue to fund on an unsecured basis,” the source said, adding: “We’re not going to do this forever.”
All of which is rather different to the noises coming out of Dubai earlier this month. Its beleaguered conglomerate Dubai World was reportedly considering offering bank creditors 60 per cent of their money back over seven years, backed by a government guarantee but with no interest paid.
What seems clear here is that the negotiations are going to be played out in the press with the market having to decide what’s bluff and what’s not.
To wit, Reuters is also reporting that Dubai is unlikely to repay Nakheel’s 2011 $980m sukuk:
“It is very unlikely that the bond will be paid off,” the source. “Incredibly unlikely.” The person, who spoke on condition of anonymity, said all options are on the table for the issue which comes due May 13.
That includes offering new paper for existing debt or, if needed, administration.
And here’s the price action in that bond on Monday.


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