Dubai World mulls 4 modes to clear off $59 billion debt

Options are being considered by Deloitte for beleaguered company

One of the options being considered by advisers to the conglomerate, is the on-schedule (December 14) repayment of the US$4 billion payment of a sukuk (Islamic bonds) from Nakheel(real estate arm), the National said.

Dubai World seeking an extension to repay its multi-billion debt till May 2010 has sent world stocks on a tailspin and has raised alarms in the financial world.

“If Dubai World pays back the sukuk (the islamic bonds), it would solve a problem for the company and its bondholders, and leave open the option of rescheduling bank debt and other liabilities, including bills owed to international contractors,” the daily said.

Standstill proposal

The other options being considered include a scheme to offer bond holders 80 per cent redemption of the value of their holdings, with a similar offer being made to bankers.

Alternatively, Dubai World may move forward with the plan to seek a general “debt holiday” under the terms of last week’s standstill proposal, by which payments would be frozen until May 30 next year with a view to negotiating a rescheduling of all its debts. Lastly, Dubai World might embark on a general liquidation of assets in response to legal action by creditors. “But this is thought to be a remote possibility, as it is likely to impair the value of Dubai World assets, leaving everyone worse off,” the report said.

“The options are still being considered by Aidan Birkett of Deloitte, the new chief restructuring officer of Dubai World,” the National said. Deloitte was appointed to oversee its reorganisation, along with the investment bank Rothschild and the US corporate specialists AlixPartners.

On November 25, Dubai World sought a freeze on billions of dollars in debt repayments to bondholders and creditors. The report further said that creditors of Dubai World should be prepared to take a share of the pain as creditors have done in other markets where conditions have deteriorated. HSBC, the global banking giant with the biggest exposure to Dubai on November 28 gave the Emirate a clear show of support.

The bank has $15.9 billion outstanding in loans and advances in the UAE, equivalent to 1.7 per cent of worldwide loans. This is outweighed by US$19.3 billion of deposits in the Emirates.