Dubai Made Progress in Debt Talks, U.K. Minister Says (Update3)
March 10, 2010, 5:56 PM EST(Updates Nakheel bond prices in fourth paragraph.)
By Henry Meyer
March 10 (Bloomberg) -- Dubai World, the state-owned holding company seeking to renegotiate terms on $26 billion of debt, made “some progress” in talks with creditors, U.K. Trade Minister Mervyn Davies said.
“There are signs of some progress being made from what I hear from the banks and therefore I am hopeful that this progress can continue,” said Davies, a former chairman of Standard Chartered Plc, one of Dubai World’s largest foreign lenders. He was speaking in Dubai today before meetings with the emirate’s officials tomorrow, including Sheikh Ahmed Bin Saeed al-Maktoum, chairman of Dubai Supreme Fiscal Committee.
Dubai World’s debt restructuring hurt confidence and tested U.K. banks’ resolve in the short-term, said Davies. Royal Bank of Scotland Group Plc, HSBC Holdings Plc, Lloyds Banking Group Plc and Standard Chartered are among Dubai World’s biggest creditors. Dubai World’s Chief Restructuring Officer Aidan Birkett held talks with HSBC in London earlier this week to outline debt proposals, the Abu Dhabi-based The National reported, without citing anyone.
Nakheel PJSC bonds, part of parent Dubai World’s restructuring, advanced the most in almost three months. The developer’s $750 million sukuk, or Islamic bond, maturing in January added 5.25 cents to 61.5 cents on the dollar at 4:45 p.m. New York time, according to Citigroup Inc. prices. Credit default swaps linked to Dubai fell 9 basis points, or 0.09 percentage points, to 480 basis points, according to prices provided by CMA DataVision in London.
U.A.E. Ministers
Dubai World will ask banks for permission to delay loan payments when it presents a plan this month, said three bankers familiar with the negotiations March 8. The company will present a restructuring proposal to its creditors after its advisers complete valuing its assets, a person close to the Dubai government said Feb. 17.
Dubai World may offer creditors a 20 percent haircut, a 10- year extension on maturities and a government repayment guarantee for creditors, JPMorgan Chase &Co. said in a note dated March 8.
United Arab Emirates Economy Minister Sultan bin Saeed al- Mansouri said yesterday he’s confident Dubai World will reach an accord with creditors, while Finance Minister Sheikh Hamdan Bin Rashid Al Maktoum said the country stands by Dubai. The Abu Dhabi government, the U.A.E.’s central bank and two Abu Dhabi- owned banks lent $20 billion last year to Dubai’s financial support fund to help repay debts.
Long View
Dubai World and its Nakheel and Limitless LLC property units used loans to finance real estate projects such as palm tree-shaped islands off the emirate’s coast, which they struggled to refinance amid the credit crisis. Dubai World said in November it would seek to delay repaying all loans until May, sparking the biggest plunge in developing-nation stocks and a doubling of the cost to protect against a default by Dubai.
Davies said the U.K. banks will take a long view of their activities in the U.A.E., which along with the rest of the oil- rich Gulf they see as an important growth area.
“Strategically, when you look at HSBC, Barclays, Standard Chartered, they’ve been here a long time and they’re here for the long term,” he said. “These are very committed players to the region. This is a region of huge economic power.”
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a country fail to repay debt. A drop in the contracts signals an improvement in perceptions of credit quality.
--Editors: Claudia Maedler, Shaji Mathew, Laura Zelenko
To contact the reporter on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net
To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net
