The Dubai World debt deal

Dubai World

A few weeks ago, it was announced that Dubai World's creditors would respond to a proposal to restructure US$24.8 billion in debt. It appears the day of the 'Dubai World Debt Deal' has finally come.

In a statement from both Dubai World and its creditors, the two groups have finally agreed in principle to a restructuring of the loans. The statement also mentioned 'headline economic terms' that have been agreed to, in order to pay back 60 percent of the money lent (US$14.4 billion) to the committee. Dubai World will pay US$4.4 billion in five years and the remaining US$10 billion in eight years.

The deal has yet to be approved by banks from outside the negotiating committee, which comprises Emirates NBD, Abu Dhabi Commercial Bank, Royal Bank of Scotland Group, HSBC Holdings, Lloyds Banking Group, Standard Chartered and Bank of Tokyo- Mitsubishi.

The restructuring proposal

As part of the deal, the restructuring proposal of Dubai World debt offers repayment over a five or eight-year period, which in turn allows banks to opt for an option of a higher payment in kind coupon (PIK), a higher government shortfall guarantee, or get a higher cash and PIK coupon.

In a statement, Dubai World and its creditors stated, "Since Dubai World presented its restructuring proposal...the company and the committee have been engaged in constructive discussions.

"Following these discussions, the proposal has been refined to provide options that better accommodate the needs of our large and diverse lending group."

Speaking to Arabian Business, Aidan Birkett, chief restructuring officer of Dubai World said, "We are pleased that we have received unanimous support in principle of the CoCom on the headline economic terms to our restructuring proposal.

"This is an important milestone and reflects our efforts to achieve the best possible solution for all stakeholders.

"The proposal puts the company on a sound financial footing and reflects the continued support of the Government of Dubai and its lenders. It offers the company the ability to maximise the value of its assets over the medium to long term."

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