Dubai sets up panel for Dubai World debt settlement

The setting up of the tribunal, to be established in the Dubai International Financial Centre, a tax-free business park for financial service firms, is part of a new insolvency code used in the emirate.

The move came hours after the government announced it would repay USD 4.1 billion to holders of the Islamic bonds (sukuk) of Nakheel, property developing unit of Dubai World, which matured yesterday, following a USD 10 billion support from Abu Dhabi.

Anthony Evans, Chief Justice of DIFC Courts, has been appointed the chairman of the tribunal while Michael Hwang and John Chadwick will be members. The tribunal shall not comprise more than five members, the statement said.

Dubai World announced on November 25 it would seek a standstill agreement with all creditors and extend all loan maturities to at least May 30, 2010.

Reports here said the conglomerate met six main creditors, including Royal Bank of Scotland Group Plc, on December 7.

Ratings agency Standard & Poor's, meanwhile, said the Dubai government’s intention to strengthen the laws governing the Dubai World restructuring is an opportunity to demonstrate the workings of its legal system in dealing with such events.

S&P, however, believes uncertainty would remain as to Dubai's general ability and willingness to provide timely extraordinary support to government-related entities (GREs), as well as transparency and predictability of such support.

Also, "we view the intervention of Abu Dhabi as an indication that it stands ready to safeguard the stability of the UAE economy and financial system," it said.

But John Sfakianakis, Chief Economist BSF - Credit Agricole Group, said Abu Dhabi has and will attach political conditions to its financial rescue, including possibly seeking strategic equity stakes in Dubai assets and reining in Dubai's independence in foreign policy, customs, as well as greater banking regulation on Dubai-based banks.

Abu Dhabi has pledged to provide USD 10 billion to Dubai to finance Dubai World and its subsidiaries.

Sfakianakis said with mountains of debt to be restructured by Dubai in the medium term, Abu Dhabi's bailout, while easing immediate investor worries about sovereign support for struggling Dubai companies, only scratches the surface in terms of the emirate's debt troubles.

Dubai World said a number of advisers have been appointed to assist the Group with the restructuring process.

Aidan Birkett of Deloitte has been appointed as Chief Restructuring Officer. Rothschild and Clifford Chance continue to act as financial and legal advisers respectively for the restructuring.

Stressing transparency, it said, "Dubai World is committed to regular, direct and  timely communications which it believes will yield the best outcome for all stakeholders."

One of the main creditors, Standard Chartered Bank welcomed the announcement from the Dubai government that it would satisfy the series of upcoming obligations on Dubai World, including the Nakheel 2009 Sukuk (Islamic bonds).

Peter Sands, Group Chief Executive, said the announcement and the bailout by Abu Dhabi highlighted the "true strength of the UAE Federation" and would boost global and regional confidence in the country.