DUBAI UNVEILED a long-awaited debt-restructuring plan yesterday, pledging to inject $9.5 billion (€7.15 billion) into troubled conglomerate Dubai World, most of which will go to its developer, Nakheel, and spur the emirate’s economy.
The state support includes $3.8 billion from the Dubai government over the next three years and the remaining $5.7 billion from a $10 billion loan granted by neighbouring Abu Dhabi.
Dubai’s reputation as the Gulf’s financial and commercial hub has taken a battering since it surprised financial markets in November by asking to restructure $26 billion in debts. Yesterday’s plan was broadly welcomed as domestic stock markets rose and the cost of insuring against a default fell.
“There’s no such thing as a magic wand, but this should help a lot,” said Simon Cooper, regional chief executive of HSBC, a creditor to Dubai World that sits on the co-ordinating committee of banks negotiating with the conglomerate.
“This lets people look forward, not backward. Dubai World’s problems have caused some paralysis, and once it’s behind us we will see a pick-up.”
The proposals would extend maturities on bank loans and inject cash into the businesses, in the hope that the holding company could be transformed into a cash-generating enterprise within five to eight years.
Nakheel’s 2010 and 2011 bonds will be paid in full, as long as the proposals are adopted by a majority of the stakeholders.
Basic questions dog the plan, such as how cash-strapped Dubai will raise the $3.8 billion needed to fund its plan. And then there is the rate of interest on bonds to repay creditors.
“The plan is lacking in detail and there is still some uncertainty,” Goldman Sachs analyst Ahmet Akarli said in a note. “It is not exactly clear, for instance, how the Dubai government will fund its direct contribution to the restructuring operations.”
Aidan Birkett, Dubai World’s chief restructuring officer, hopes to finalise the plan within a few months. – (Copyright The Financial Times Limited 2010/Reuters)
