A sunnier world

20 May 2010 By Una Galani Follow @ugalani

The troubled holding firm has revised its $23.5 bln debt plan. Dubai isn’t putting in more money, but will allow lenders to choose security today or cash later. With holders of 60 pct of bank debt on board, Dubai is close to the threshold it needs to force through the deal.

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Dubai World has agreed terms in principle to restructure $23.5 billion in debt with lenders representing approximately 60 percent of the exposure.

Under the terms of the proposal, an update of terms outlined in March, the government will put in no new financial aid. It has divided the $14.4 billion owed to bank lenders into two tranches. Each lender will receive a portion of each tranche.

The first tranche of $4.4 billion offers a fiveyear maturity and 1 percent annual cash interest.

The second tranche, which covers approximately $10 billion, offers an eightyear maturity and a 1 percent annual cash interest rate.

In addition, the second tranche gives lenders the option of choosing greater security and a lower paymentinkind interest rate, or a higher interest rate and less security.

The shortfall guarantee offered by the government of Dubai will apply to a maximum of $4 billion of debt.

The Dubai government will, as previously outlined, convert $8.9 billion of loans into equity. The proposal also includes $200 million of related party claims, including advisory fees.

A consensual restructuring requires 100 percent approval of the lending group. But the proposal could be cleared through a court process with 67 percent approval.

The coordinating committee which has agreed the deal is comprised of seven banks, including Royal Bank of Scotland, HSBC and Standard Chartered.

Dubai World press release