Dubai World in talks to extend term of $10.5bn loan
The Atlantis Hotel was one of the assets sold by Dubai World's investment arm Dubai World is in talks with creditors to extend a $10.5bn debt maturity due in 2018, sparking divided reactions among lenders over whether to take such a deal when the emirate’s economy has recovered so strongly. The government conglomerate was at the heart of Dubai’s debt crisis in 2009, agreeing a restructuring of $25bn of loans in 2010. Last week, it proposed an early repayment on the $4.1bn maturity due in September 2015 if creditors agreed to extend the 2018 maturity to 2022, people aware of the matter say.
Despite the Dubai stock market’s steep correction over the past few weeks, the underlying economy has rebounded on strong trade and tourism flows thanks to the emirate’s haven status. Some lenders, taking a tough line as negotiations start, are calling for repayment rather than an extension to the landmark restructuring that laid the foundations for Dubai’s recovery. “Dubai keeps saying how well it is doing, but they don’t seem willing to repay,” said a banker at one leading creditor. Dubai World declined to comment. Banks such as HSBC, Standard Chartered and Lloyds are major lenders among the more than 100 creditors to Dubai World. Blackstone and Clifford Chance are representing the conglomerate in the talks. Other lenders are welcoming the early tabling of what they described as a “reasonable” proposal. Dubai’s head-in-the-sand approach in 2009 sparked a debt crisis that required $20bn in bailout loans from its richer neighbour Abu Dhabi to prevent a default. “It’s refreshing to see Dubai come to the table early like this,” said a banker at another creditor. State owned enterprises have been repaying debts when they can, but the emirate has also borrowed more and is still sitting on a $130bn debt pile. An official close to Dubai World said the company would continue to negotiate with lenders over details of the proposal. Dubai World said it had sufficient cash to repay the $4.1bn due in September 2015 after selling assets held by its investment arm, Istithmar. Investment Corporation of Dubai, the state holding company, has bought some Istithmar assets, such as the Atlantis hotel on the emirate’s Palm island. The government is reluctant to consider selling shares in Dubai World’s prized assets, such as fast-growing ports operator, DP World. “This is about optimising where we are, not restructuring,” said the official. “If the banks go for it, great, if they don’t, we can wait.”