Creditor claims 'could delay Dubai debt deal'
Dubai, April 8, 2010
Dubai's special tribunal, set up to hear cases against indebted state firm Dubai World, could throw efforts to restructure $26 billion in debt into disarray if just one creditor files a claim, legal experts say.
Dubai World is lobbying banks to sign up for the proposal, but even if the required supermajority of 66.66 percent of creditors endorses the plan, a claim at the tribunal could halt the restructuring plans and keep lenders locked in, they said.
"If a creditor was to go to the tribunal, a standstill would be put in place," said Philip Abbott, partner at Simmons & Simmons.
Abbott's comments come one day after the tribunal unveiled its first claim, which will be closely watched by creditors to see how the panel proceeds. The case was filed against Dubai World subsidiary Limitless by a former employee on April 5.
But because the case was filed against Limitless, which was excluded from the Dubai World restructuring, and because it was filed by a former employee and not a lender, it is more of a warning shot than an actual threat to the majority of lenders.
Dubai World rattled global markets in late November when it said it would delay repayment of $26 billion in debt linked to Dubai World and its property units Limitless and Nakheel.
Dubai set up a special tribunal in December made up of three international judges to oversee the restructuring of Dubai World debt and settle any disputes that could arise.
Dubai World needs approval from the supermajority of creditors such as banks, unsecured banks, sukuk holders and trade creditors in order to proceed with the restructuring.
Abbott said that overall market perception of the deal has been positive, with big name creditors such as HSBC voicing their support of the debt offer. But an approval will not make much of a difference if creditors decide to take grievances to the special tribunal at the Dubai International Financial Center.
The tribunal would force Dubai World to halt any restructuring plans until the matter is resolved in court, forcing banks to prolong the resolution. Nor can the tribunal be expected to favour lenders over borrowers, said one attorney at a major law firm, who requested anonymity due to the sensitivity of the matter.
"The tribunal is not necessarily a creditor-friendly process either," he said. "It will seek to be fair to the bulk of creditors so if there are one or two outliers, the tribunal is going to take that into consideration." - Reuters