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Dubai World could raise interest to creditors

Dubai, May 20, 2010

Dubai World can slightly increase the cash coupon offered to banks as part of a debt plan announced on Thursday, depending on which option creditors choose, the company's chief restructuring officer said.

Aidan Birkett, CRO at state-owned Dubai World, told Reuters the company was aiming for a 'totally consensual agreement' with the banks.

Dubai has stood firm on the terms of its proposal to the seven-bank committee, though creditors, particularly local lenders, have angled for a better deal. Although the fundamental terms are unchanged, allowing for a slight increase in the cash coupon proposed could help appease some banks.

'There's no additional cash support coming from the government. We will be increasing the coupon slightly to take account of the (options) in the proposal,' Birkett said in an interview.

When asked to clarify that the cash coupon would be increased depending on the options that banks choose, Birkett said, 'correct'.

Seven banks, which together hold 60 per cent of Dubai World's $14.4 billion in bank debt have signed on to the terms of the proposal, a statement from the company said on Thursday, offering a cash coupon as well as payment in kind (PIK) option.

The proposal offers full repayment over a five- or eight-year period and allows lenders to take on additional options, depending on whether they are local or foreign lenders and on the currency of their loans.

Birkett said the PIK entails a 'promise to pay' at the end of the process.

'The interest will accrue and it will be redeemed at the end of the eight-year period,' Birkett said.

Dubai World's announcement in November shocked global markets and sparked fears about the glitzy emirate's ability to refinance its considerable debt burden. Ninety-seven banks make up the company's syndicate lenders.

'We want a totally consensual deal. We will have a bank meeting with the other members of the banking syndicate probably towards the middle to the end of June, and we will put our proposals to them for consideration,' Birkett said.

'We can always resort to decree 57 if we have to, if outlying banks don't want to sign up, and the majority of the banks will encourage us to resort to that to get a consensual deal.'

An agreement with all creditors could take several weeks and even months after the detailed term sheet has been presented to the banks.

Decree 57 created a special tribunal for Dubai World to oversee the restructuring process and handle any cases that might arise from any claimant related to Dubai World's debt problems.

Dubai World has so far not gone down the road of selling any of the high-profile assets held by its investment company Istithmar World or other units, to fund the restructuring, but Birkett said asset sales were part of the overall strategy.

'What we will be doing is realising asset values steadily over time to redeem that debt. We're in the process of selling ISS (Inchcape Shipping Services). We have a programme ... and there will be progressively other asset sales.

'We want to be perceived as a seller of strength as we go forward,' he said. – Reuters




Tags: Dubai World | interest | ISS | CRO | creditors | Decree 57 |

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