Dubai World Loans May Have Lost 56% in Value, JPMorgan Says - Bloomberg.com

Dubai World’s creditor banks may have lost as much as 56 percent of the value of the loans they made to the state-owned holding company after it altered the terms on $14.4 billion of debt, and lenders may have to aside 10 percent of these loans to cover losses, analysts said.

Dubai World’s loans have a fair value of 44 cents to 46 cents to the dollar after the restructuring proposal, JPMorgan Chase & Co. said in a research report e-mailed today. The company’s $4.4 billion of Group A debt has a fair value of 58 cents to 61 cents, and $10 billion of Group B debt a fair value of 36 cents to 41 cents, it said.

“The steep discounts from face value mostly reflect the below-market cash interest of 1 to 2 percent being proposed by Dubai World on both tranches,” London-based analyst Zafar Nazim wrote in the report. He estimated the “appropriate yield” for Dubai World bank debt at 14 percent to 17 percent.