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Dubai World debt

Dubai World debt, Nakheel, bond repayment, default, standstill, restructure, Dubai Government, Dubai Holding, Abu Dhabi bailout.

Dubai World is a Dubai Government owned company which in November 2009 revealed that it had a large amount of debt and was seeking a standstill from its creditors, prompting substantial loss of investor confidence in Dubai, a substantial drop in the Dubai stock market, and a sharp increase in the number of stories in the foreign press criticising Dubai.

• Dubai World is not a Dubai Government entity, it is owned by the Dubai Government. A subtle distinction that was not clear to many lenders when they assumed Dubai Government backing of bonds and loans extended to Dubai Government owned companies (it didn't).
• Ratings agencies Fitch, Moody's, and Standard & Poor's all downgraded Dubai World (and other Dubai Government owned companies) after it become clear that the Dubai Government would not guarantee financial backing of debts. A bit like closing the barn door after the horse has bolted, which seems to be standard operating procedure for ratings agencies.
• As of mid 2010, Dubai World reportedly has $23.5 billion in debt, of which $14.4 billion is owed to creditor banks, and the other $9.1 billion is owed to the Dubai Government.
• Another figure for total debt reported is $39.9 billion (Reuters 01 Oct 2010).

Dubai debt repayment timeline and history

• 27 October 2010 - Reuters reported that Dubai World had "secured support from all its creditors for a $25 billion debt restructuring plan, a spokesman said on Wednesday," which should mean DW does not have to go through the special tribunal established to hear creditor claims. Aurelius Capital Management in the US was reportedly the only holdout from the 09 September 2010 deadline, with $5 million worth of debt. The Financial Times (UK) reported that Deutsche Bank had bought the Aurelius debt.
• 11 September 2010 - Al Bayan, an Arabic newspaper, reported that Ahmed Humaid Al Tayer, member of the Supreme Committee for the Supervision of Dubai World, said "The repayment process will begin with the payment of interest rates, and then loan installments, which will also depend on the nature of each loan as some of the loans are consolidated credits, while some are bilateral and some are bonds," (Reuters 11 September 2010).
• 10 September 2010 - Dubai World announces that they have received approval "from over 99% by value and approximately 99% by number of its creditor banks" to restructure the $25 billion of outstanding debt (press release 10 September 2010). The agreement sounds like a decent bit of light at the end of the Dubai World debt tunnel, although it's still a way off in the distance.
• 29 August 2010 - Al Ittihad newspaper reports that Dubai World is trying to get agreement of all creditors for the debt restructuring finalised between 21 September and 21 November 2010.
• 27 August 2010 - contradictory reports appearing about the proposed sale of Dubai World assets, reported by Reuters on 25 August 2010. Some headlines from popular sources included:
  • Dubai World sale of crown jewels seen as last option - Reuters 27 August 2010, commenting that it seems an unlikely scenario that DW would sell its best assets, and is more likely just talk to appease their creditors.
  • Strategic assets to be protected - Gulf News (GN) headline 27 August 2010, presenting (as usual) a show of solidarity with anything to do with the Dubai Government. GN wrote A Dubai World spokesperson told Gulf News the port operator will continue to be ringfenced, but then said DP World chief executive Mohammad Sharaf declined to comment to Gulf News on the possibility of company sale or the revenue projections, referring to the previous report from Reuters. Mr Sharaf's no comment will no doubt lead to further press and analyst speculation on the likelihood of assets being sold.
  • Dubai World mulls sale of prize assets to pay debts - The National headline 25 August 2010, demonstrating that The National really is an Abu Dhabi based newspaper without any (or much) loyalty to Dubai. The story was mostly a repeat of the Reuters report.
  • DW ups commitment with asset sales plan - Khaleej Times 26 August 2010, a slightly more positive sounding headline, but was then plainly contradicted by the GN headline the next day.
  • Dubai World could sell DP World and other 'crown jewel' assets - The Telegraph (UK) 26 August 2010. Not too bad really for a British tabloid newspaper.
  • Dubai World plans to raise $19.4bn in asset sales - Emirates Business 24-7 on 25 August 2010. EB chickened out and just repeated the Reuters newswire story. No opinion or analysis found. Perhaps we're being unfair expecting that the UAE business newspaper would have had a comment to make (or maybe EB is no longer a business paper since it was renamed?).
• 25 August 2010 - Reuters reports that Dubai World is planning, or considering, the sale of assets to raise money to repay outstanding debt, including its subsidiary DP World which was ringfenced from creditors. Report was based on a copy of document presented to creditors at the 22 July 2010 meeting at Dubai Atlantis hotel, seen by Reuters.
  • Present value of Dubai World debt is $39.9 billion (substantially higher than previously reported figures of about $25 bn). Not clear if this includes debt owed to the Dubai Government, which might not have to be repaid.
  • Some debt apparently not included in the above figure. Reuters said The total debt figure of $39.9 billion did not include $11 billion of Istithmar's non-recourse asset level debt and $2 billion of Infinity debt.
  • Assets, if sold now, would generate an estimated maximum of $10.4 billion.
  • Assets, if sold in 5-8 years time, estimated to generate $19.4 billion, including stakes in Barney's and MGM Resorts International that could realise $7.6 billion, and strategic assets Jebel Ali Free Zone, Dubai Maritime City (DMC), and Dry Docks World that could realise $11.8 billion.
• 22 July 2010 - a meeting between Dubai World and its creditors at the Dubai Atlantis Hotel on Jumeirah Palm (unknown if Dubai World execs used the Jumeirah monorail to help boost Nakheel revenues a little) ended without agreement on a debt restructuring, and it appears that any agreement could be some months away. A Dubai World statement issued after the meeting said "As is customary at this stage of the process, this was an informational session and no resolution was sought in the meeting. Creditor banks will now have the opportunity to review the information provided before responding to the proposal. The company expects to complete the restructuring over the coming months."
• 22 July 2010 - Reuters reported that banks which did not accept Dubai World's debt restructuring terms might be taken to a special tribunal established to resolve disputes between Dubai World and its creditors. Dubai World needs 2/3 of the lenders to accept the deal before it can take others to the tribunal. So far lenders representing 60% of the debt have accepted the restructuring terms reportedly.
• 22 July 2010 - Reuters reports that an initial $4.4 billion tranche of the outstanding debt could be repaid by issuing a 5-year debt financed by assets of Istithmar World, and investment in Infinity, according to a Debt Plan document seen by Reuters. The document reportedly also said "Recoveries for all creditors except DFSF in a liquidation scenario would be significantly below those expected under the proposal," apparently trying to, er, give encouragement to the Dubai World creditors. Interest rates on offer are 1%-3.5%, with repayment periods of 5-8 years. The alternative being reported is a 10 year repayment period with no Dubai Government support for the debts of Dubai World.
• 20 May 2010 - press release statement from Sheikh Ahmed Bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee, says "Dubai World has today announced that headline economic terms for its restructuring have been agreed in principle with the Coordinating Committee, accounting for a majority of the Company's financial creditors, and the Government of Dubai. A final proposal reflecting these terms will now be submitted by the Coordinating Committee to all of Dubai World's lending banks." Actual terms of the deal were not released with the statement.
• 20 May 2010 - Reuters reports that Dubai World has offered payment terms core banks representing 60% of its $23.5 billion outstanding debt, in two tranches. The first for $4.4 billion to be repaid over 5 years at 1% interest with no payment-in-kind (PIK) at the end. The second for $10 billion to be paid over 8 years at 1% interest with 1.5-2.5% payment-in-kind (PIK) at the end of the loan. Creditor banks are apparently unimpressed, and non-core creditors still have to approve the terms.
• March 2010 - Dubai Government offers a rescue plan worth $9.5 billion with the help of Abu Dhabi bailout funds.
• November 2009 - Dubai World asks creditors for a standstill arrangement on debt repayment while it looks under the sofa for 100 billion one dirham coins.

List of banks and debts owed by Dubai World (incomplete)

Total of 73 banks (or more?) are owed money by Dubai World. Largest lenders representing about 60% of the debt include:

• Abu Dhabi Commercial Bank PJSC (ADCB), UAE - US$1.79 billion (AED 6.57 bn) (July 2010). Financial accounts for 2010 showed that ADCB set wrote off AED 1.06 billion ($287m) in 2010 for loans to Dubai World.
• Bank of Tokyo Mitsubishi
• Emirates NBD PJSC, UAE
• HSBC Holdings PLC
• Lloyds Banking Group PLC
• Royal Bank of Scotland Group PLC - US$1.6 billion (FT estimate 17 November 2010)
• Standard Chartered PLC

Other lenders include:

• Alubaf Arab International Bank BSC, Bahrain

Nakheel

• May 2010 - $980 million Sukuk (Islamic bond) paid back in full and on time.

Last update Friday 04-Mar-2011. Page development 1H 2T 3D 4L 5C.

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