Dubai World, the state-owned company at the center of the emirate’s 2009 financial crisis, reached a deal with its main creditors to extend the repayment of $10.3 billion of debt, two people with knowledge of the matter said.
The group, which owns the world’s third-largest ports operator, agreed with its creditor committee to repay in 2022, four years later than previously agreed on, the people said, asking not to be identified because the information is private. Dubai World also agreed to repay $4.4 billion of loans due Sept. 2015 early if all creditors approve the deal, the people said.
Dubai’s accelerating economy is prompting companies to renegotiate loan terms and seek new deals as interest rates decline. Dubai World signed the debt deal with about 80 creditors to restructure about $14.7 billion in March 2011.
HSBC Holdings Plc (HSBA), Standard Chartered Plc (STAN), Bank of Tokyo Mitsubishi UFJ Ltd., Emirates NBD PJSC and Abu Dhabi Commercial Bank PJSC constitute the creditor committee. Dubai World agreed to increase the interest rate it pays on the loans from the average 2.4 percent agreed to in 2011. By extending the loan maturities, Dubai World may be able to retain key assets it would have to sell to meet debt repayments, the people said.
The cost to insure Dubai’s five-year debt from default fell 2 basis points to 156.9 at 1 p.m. local time, the lowest in more than a month, according to prices compiled by CMA. The yield on the government’s 2021 bond fell 1 basis point to 3.53 percent, according to data compiled by Bloomberg.
Dubai World plans to present the new plan to other creditors next month, the people said. It needs the consent of at least 67 percent of the creditors to complete the deal. Extending the loan maturities will obviate the need for Dubai World to sell key assets to meet debt repayments, they said.
Dubai, the Gulf’s trade and tourism hub, was battered by the global credit crisis which pulled down property prices by almost 60 percent from the 2008 peak. The economy is now rebounding as the real estate and tourism industries recover.
Dubai World was one of several state-controlled companies that restructured debt after asset prices slumped and credit markets froze. The company repaid $584.5 million to creditors this year after selling its Atlantis, The Palm resort in Dubai and its 50 percent stake in the Fontainebleau Miami Beach hotel.
Amlak Finance PJSC, an Islamic mortgage provider based in Dubai, agreed to a $2.7 billion debt makeover earlier this month. Dubai Group LLC, an investment company owned by the emirate’s ruler, in January reached a final agreement with lenders to extend maturities on $6 billion of debt by 12 years.
Dubai borrowed $20 billion from the neighboring emirate of Abu Dhabi in 2009 to help state-controlled companies repay debt. The emirate’s government converted $10.5 billion of loans to Dubai World into equity as part of the 2011 restructuring.
Dubai World owns ports operator DP World Ltd., business park operator Jebel Ali Free Zone and private equity company Istithmar World PJSC. It also owns a 5.3 percent stake in Las Vegas’s biggest casino operator MGM Resorts International. (MGM:US)
A representative for Dubai World declined to comment when contacted by telephone.
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