This article is provided to FT.com readers by Debtwire—the most informed news service available for financial professionals in fixed income markets across the world. www.debtwire.com
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Dubai World is likely to ask its lenders for a standstill agreement within the next fortnight, two sources close to the situation told Debtwire. The investment vehicle’s standstill request is likely to run to end-April and interest will be paid throughout, they added.
Restructuring advisor Deloitte is working on business plans for the various Dubai World companies to be covered by the request, the two sources continued. Those plans will then be reviewed by lender advisor KPMG. Amortisation payments falling due during the standstill period may be rescheduled. The idea is to get legal changes in place and issue a plan for lenders in April, one of the sources said, adding that no repayment plans have been determined or outlined to lenders yet.
Dubai World met with creditors on 21 December to provide an update on the development of the group’s restructuring plans, as reported. Dubai World advisers Deloitte, Rothschild and Clifford Chance also attended the meeting. A week earlier, the Dubai government announced the creation of a new legal framework intended to govern any future formal reorganization and restructuring of Dubai World and any of its subsidiaries.
Rothschild and Deloitte are working on a Dubai World restructuring plan, while AlixPartners is undertaking valuation work, looking at the relative merits of building out and exploring how such moves could be financed, said the second source close to the situation. US advisory firm Moelis is advising the Dubai Government, the same source added.
The next major event will be the formal appointment of a Dubai World creditor committee, said a source familiar with the situation, adding the standstill request should be communicated through the committee rather than via another bank meeting. The committee is likely to comprise Abu Dhabi Commercial Bank, Emirates NBD, LloydsTSB, HSBC, Royal Bank of Scotland and Standard Chartered, as reported.
“As long as a standstill is successfully implemented, Dubai World has assurances that the Government of Dubai, through the DFSF [Dubai Financial Support Fund], will provide financial support to cover working capital and interest expenses to ensure the continuity of key projects,” said Dubai World in a statement following its 21 December creditor talks.
Lenders knew before that meeting started that Dubai World was not in a position to make a standstill request at the time, said the second source close to the situation.
Standstill scope
Dubai World announced at the end of November 2009 that it planned to seek a six-month standstill applying to companies with debts of around USD 26bn. The list of businesses that would be excluded from the debt restructuring included Infinity World Holding, Istithmar World and Ports & Free Zone World, which includes DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone.
Dubai World later added that Drydocks World and its subsidiaries would also remain outside the process. The shipbuilding and repair company had been engaged in “constructive dialogue” with its lenders for several months and had sufficient financial capacity to service its debt, Dubai World said.
That means the standstill will apply to real estate developers Nakheel and Limitless, in addition to Dubai World’s own HoldCo debt.
Nakheel’s debt became the primary focus following Dubai World’s November announcement because its USD 8bn debt burden included a USD 3.52bn sukuk due on 14 December. Thanks to a last-minute USD 10bn loan from the Abu Dhabi government to the Dubai Financial Support Fund, Nakheel eventually managed to cover the scheduled redemption and around USD 600m of associated payments, as reported.
“Nakheel was a special case and that bond was a particular problem,” said the second source close to the situation. “It had the benefit of a guarantee from Dubai World, there was no framework in place to restructure the sukuk, [and a] bunch of other facilities would have also been affected, so on balance it was worthwhile repaying in full.”
Bank creditors owed USD 10bn-USD 11bn directly from Dubai World will likely be the focus of restructuring talks. The debt is split between a USD 5.5bn syndicated loan and several bilateral lines, sources previously told Debtwire. None of the four tranches that make up that USD 5.5bn syndicated loan mature before mid-2010, but there is a risk that the bilateral facilities could trigger a cross-default.
Dubai World’s USD 5.5bn facility is split between a USD 2.1bn two-year term loan, a USD 1.95bn three-year term loan, USD 1bn of five-year debt and a USD 450m three-year revolver. The bookrunners were Bank of Tokyo-Mitsubishi UFJ, Calyon, Emirates Bank, HSBC, ING, LloydsTSB, Mashreqbank, RBS and SMBC. The deal refinanced a USD 5bn one-year bridge facility used to fund Dubai World’s investment in MGM Mirage, conducted through a special purpose vehicle called Infinity World Holding.
DP World, the Dubai World ports business excluded from the restructuring, has already made interest or profit payments totaling more than USD 100m this month. The company said on 4 January that it had paid the USD 59.9m coupon on a USD 1.75bn bond due 2037 for the period from July 2009 to 31 December 2009. It also distributed profit for the same period on its USD 1.5bn sukuk due 2017. The profit rate on the sukuk is 6.25% and the amount distributed was USD 46.875m.
DP World also announced yesterday morning (6 January) that it will seek a “premium listing” on the London Stock Exchange while maintaining its existing primary listing on Nasdaq Dubai. The company plans to seek admission in the second quarter of 2010, it said in a statement.
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