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Dubai World calls for debt restructuring talks

Dubai, July 11, 2010

Troubled state conglomerate Dubai World has invited creditors to a July 22 meeting to offer details on its multi-billion dollar debt restructuring, the first session to include all lenders since December 2009.

Three sources from among the group's 80 creditors told Reuters they had received the invitation via the coordinating committee of seven banks that hold 60 percent of Dubai World's $14.4 billion in bank debt.

The flagship state conglomerate, which shocked investors in November with news it could not pay its debts, will try to secure wider backing from the meeting for the outline restructuring deal struck with a coordinating committee of lenders in May.

The May deal allows banks to get their money back in two tranches with five and eight-year maturities. Ahead of the crisis the debt was mostly due by the end of 2011.

The broader meeting is more than three weeks behind schedule after creditors were told to expect it in June.

Before the financial crisis struck the region, Dubai World for years expanded aggressively, mostly on borrowed money, until liquidity dried up and the value of its real estate assets plummeted.

Dubai World's problems opened a window on some broader debt problems facing the Gulf emirate, hit hard by a region-wide real estate slump after years of expansion at breakneck speed through ambitious real estate projects including man-made holiday islands in the shape of palms.

Last week, the lossmaking main unit of Dubai Holding, which groups the personal business empire of the emirate's ruler Sheikh Mohammed bin Rashid al-Maktoum, said it would not be repaying a loan that had fallen due.

Dubai World requires support from lenders representing two thirds of its debt for the May deal to go through, but is hoping to gain full backing in order to avoid court proceedings and a possible delay to the restructuring process.

'We expect some banks to be grumpy and to complain about the pricing, but then again a majority will likely agree as the alternative of letting the deal collapse is moving into unchartered territory,' said one of the sources.

In addition, Dubai World will organise workshops in Hong Kong, London and Dubai to allow bankers to ask the group's legal and financial advisers questions about the terms of the debt proposal.

Banks unhappy with the deal can file a claim with a special tribunal set up for the purpose, but legal experts have said they may be reluctant to pursue legal action in the absence of any precedents.

After the meeting Dubai World's creditors will present the details to their own respective risk committees and approve or reject the deal within three to four weeks, said a second source.

A third source said a finalised deal could take a very long time. 'The process could take several more months after this meeting. There won't be any resolution yet. The purpose is giving information,' the source said. Dubai World declined to comment.-Reuters




Tags: Dubai World | Talks | debt restructuring |

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