Dubai World ‘wins’ $23.5

DUBAI: Dubai World won support for its $23.5 billion restructuring plan from leading lenders Thursday, giving some relief to the heavily indebted Arab sheikdom whose credit crisis sparked fears across the globe.

The state-owned company, which sits at the heart of Dubai’s more than $100 billion debt pile, said a coordinating committee representing about 60 percent of its lenders had signed off on the proposal. It says it needs the backing of all its financial creditors before the plan takes effect.

Dubai’s government outlined its long-awaited restructuring plan in late March, but the deal still needed approval from a broad array of international and local banks owed money by the company.

The seven banks on the coordinating committee were negotiating on behalf of Dubai World’s 73 financiers, raising the likelihood that other creditors would throw their support behind the plan, said Aidan Birkett, Dubai World’s chief restructuring officer.

“I’m confident we’ll get there. These guys are representative of the total lender group,” Birkett told The Associated Press. “We’ve got a very fair deal.”

Dubai World’s acute credit problems sent markets into a tailspin last November, reminding investors that the world’s financial system remains exposed to immense amounts of debt that might not be repaid.

It also raised new questions about the lack of transparency and extent of government support for lavish spending projects in the oil-rich Persian Gulf. Unlike neighboring Abu Dhabi, which hosts the capital of the seven-state United Arab Emirates federation, Dubai generates little cash from oil.

The committee’s international members are Bank of Tokyo-Mitsubishi UFJ, HSBC Holdings PLC, Lloyds Banking Group PLC, Royal Bank of Scotland Group PLC and Standard Chartered PLC. Local lenders Emirates NBD and Abu Dhabi Commercial Bank are also part of the group.

Birkett said they have offered “unanimous support in principle” for the plan.

“If you can get the buy-in from creditors, that sends the message that Dubai is still solvent,” said Saud Masud, head of Middle East research at Swiss bank UBS. “This is a vote of confidence that the economics are still intact and there’s a way to move through this crisis.”

Dubai World, the emirate’s chief engine for growth, has interests in a broad range of businesses, including seaports, real estate and retail. It includes property developer Nakheel, which is responsible for building man-made islands in the shape of palm trees and a map of the world off the city-state’s Persian Gulf coast.

The company said it wouldcarry about $14.4 billion in bank debt if the restructuring plan goes ahead.

Some $4.4 billion worth of the debt is scheduled to be repaid within five years. The remaining $10 billion will have an eight-year repayment period.

As part of the proposal, Dubai’s government – the full owner of the conglomerate – agreed to offer as equity an $8.9 billion claim in the company, while also pumping in up to $1.5 billion in new funds.

Dubai World said Thursday the fundamentals of its plan have not changed from what was put on the table in March.

The company reiterated that “no additional financial support” would be forthcoming from Dubai’s government.

“The government of Dubai welcomes this important milestone, which is the result of considerable efforts from a large number of stakeholders who all share a common interest in Dubai’s future,” said Sheik Ahmed bin Saeed al-Maktoum, a top aide of Dubai’s hereditary ruler who chairs the emirate’s supreme fiscal committee.

Still, serious debt challenges remain for the city-state.

The International Monetary Fund estimates the emirate of Dubai is shouldering as much as $109 billion in debt.

“The one thing the region needs is for financing to come back,” said UBS’s Masud. “Dubai World is just one small step toward that.”

But Reuters quoted some analysts as saying that the Dubai’s deal would do little to kick-start lending in the emirate’s battered property market, or alleviate the main concern of chronic over supply.

Dubai World said on Thursday it had reached a deal in principal to restructure its debt with core bank creditors, in a widely expected agreement.

“It [the Dubai World deal] adds a little bit of comfort but there is still a crisis of confidence in terms of real estate,” said Chet Riley, an analyst at Nomura in Dubai.

“It comes back to whether banks will start to take comfort in their loan books and comfort in real estate and start lending again to end-users and project finance. I can’t see it being a catalyst for that,” he added.

“From a capital perspective, overall, this deal is good in terms of sentiment,” said an investment banker at a major international bank. “But will we see banks lending more again? That’s mostly a question of demand, it is a two-way street. How many people in this environment are willing to take on a new mortgage?” – Agencies