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Thursday, December 24, 2009

Dubai World poised to press for loan extensions

by Rachna Uppal and Nicolas Parasie

DEBT TALKS: A $10bn bond from Abu Dhabi last week helped Dubai stave off default on a $4.1bn sukuk from Nakheel.
Dubai World is expected on Monday to ask key creditors for more time to pay off its loans, but leave them none the wiser concerning their prospects of being paid back in full.

Saddled with a $22bn debt and in need of restructuring, the Gulf Arab emirate's flagship company is expected to formalise a request for a payment standstill at a meeting with some 90 creditors at Dubai's World Trade Center complex.

Though important, the gathering will probably mark only an intermediate step in a lengthy process, with banking sources anticipating no detailed proposals on the terms of the potential standstill to be discussed.
Raj Madha, banking analyst at EFG Hermes said:"Providing clarity is clearly the number one priority. Obviously a standstill is not ideal. But a standstill with visibility of when payments will be received or the extent of these payments would be sufficient to call it a result."

Dubai sent shockwaves through global markets on November 25 when it requested a standstill on $26bn of debts linked to Dubai World and its two property units Nakheel and Limitless.

A $10bn bond from neighbouring Abu Dhabi last week, the third to Dubai this year, helped it stave off default on a $4.1bn Islamic bond, or sukuk, from Nakheel.

According to the National, two top Dubai officials, on a confidence building mission to Britain and the United States in recent days, told financial leaders in London that repaying all bank loans in full was discussed as a medium term possibility.

Sheikh Ahmed bin Saeed al Maktoum, head of Dubai's Supreme Fiscal Committee and the uncle of Dubai's ruler, and Mohammed al Shaibani, deputy head of the committee, met officials in London last week.

A full repayment however, seems the most unlikely of available options and bankers expect Dubai World to propose the extension of maturities for at least a year or more while paying interest.

A steering committee of Dubai World's largest lenders met the company on December 7. The committee consists of London listed Standard Chartered , HSBC , Lloyds and Royal Bank of Scotland, local lenders Emirates NBD and Abu Dhabi Commercial Bank.

Several bankers said that Lenders will take Dubai World's requests back to their credit committees, which are expected to agree the standstill request early in the New Year.

Speculations continue to mount over which assets Dubai Inc, the network of government owned companies, is willing to sell to help pay off its debt obligations.

Dubai holding's owner said that the luxury hotelier Jumeirah Group is not for sale. The group's chairman said:"Jumeirah and Dubai Holding are part of each other and Jumeirah is not going anywhere." (Reuters)

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