HSBC Holdings Plc (HSBA) and BNP Paribas SA (BNP) are among banks extending a $1.5 billion so-called profit participating loan to Dubai-based Drydocks World LLC as it restructures debt, a person with knowledge of the talks said.
The 15-year loan, part of a $2.25 billion debt restructuring for the Middle East’s biggest shipyard, will pay creditors profit or cash from asset sales, said the person, who asked not to be identified because details are private. Dubai World-controlled Drydocks also agreed on a new $800 million five-year term loan paying a market interest rate, he said.
A special court in Dubai sanctioned the debt restructuring on Aug. 28 after creditors approved the plan, without providing the terms of the deal. The Dubai World Tribunal, set up in 2009 to handle claims against Dubai World and its subsidiaries, approved the restructuring after 97.8 percent of Drydocks’s creditors agreed. The tribunal can enforce a restructuring proposal if at least two-thirds of the creditors agree.
A Dubai-based spokeswoman for Drydocks, who asked not to be identified because of company policy, declined to comment. A spokesman for HSBC in Dubai and a spokeswoman for BNP Paribas in Manama, Bahrain, both of whom also asked not to be identified because of company policy, also declined to comment.
Drydocks’ other lenders include DBS Group Holdings Ltd., Emirates NBD PJSC (EMIRATES), ING Groep NV (INGA), Lloyds TSB Bank Plc, Mashreqbank PSC (MASQ) and Standard Chartered Plc. (STAN) The original loan includes a $1.29 billion facility, a S$553 million ($443 million) portion and a 1.9 billion-dirham ($517 million) syndicated facility, according to tribunal documents.
The profit participating loan will be retired earlier than 15 years if Drydocks’ business performance exceeds expectations or if it receives proceeds from asset disposals, such as a stake in its Southeast Asian business, the person said.
The restructuring plan also includes the setting up of a new holding company, based in the tax-free Dubai International Financial Center, to hold the profit participating loan, the person said. That company will sit between Drydocks World and Drydocks World-Dubai LLC so that the facility won’t be a direct liability of Drydocks World-Dubai, the person said.
BNP rose 1.1 percent in Paris to 35.23 euros and has gained about 16 percent this year. HSBC gained 0.7 percent to 551 pence at the close of trading yesterday in London.
Creditors agreed on $800 million as the appropriate level of debt for Drydocks World Dubai given its business plan. Banks will not need to take impairment provisions since the loan pricing is market-determined, the person said. Jebel Ali Free Zone FZE, a Dubai-based business park operator also controlled by Dubai World, is paying interest of 3.75 percent to 4.75 percent above the benchmark rate on a new 4.4 billion dirham Islamic loan it got in June to repay a bond.
Drydocks World borrowed $2.2 billion to finance two acquisitions in Singapore in 2008 to gain ships and Asian shipbuilding sites. The company borrowed $1.7 billion for three years at 170 basis points, or 1.7 percentage points, over the London interbank offered rate, according to data compiled by Bloomberg. It borrowed another $500 million for five years at 190 basis points over Libor, the data shows.
Drydocks World, which carries out ship repairs, vessel conversions, ship building and offshore construction as well as owns vessels, said in June it had signed a joint venture agreement for its Southeast Asian business with Malaysia’s Kuok Group, without disclosing the size or value of the stake sale.
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