This article is from the Australian Property Journal archive
THE Government-owned company, Dubai World has reached an agreement with its main lender to refinance $US23.5 billion of outstanding debt.
The Coordinating Committee, representing the company’s financial creditors, accounts for approximately 60% of the Dubai World’s lenders.
Dubai World chief restructuring officer Aidan Birkett said the deal is an important milestone and represented the best deal for lenders.
“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,” he added.
Post restructuring the company’s financial indebtedness will be approximately $US14.4 Billion and comprise two tranches, Tranche A of $US4.4 Billion and Tranche B of approximately $US10.0 Billion with five and eight year maturities respectively.
Bank lenders who have funded in USD will be able to elect between Option 1 and 2 while lenders who have funded in AED will, in addition to Option 1 and 2, be able to elect Option 3.
Option 1 has been designed to address the preferences of lenders who value an increased shortfall guarantee. The shortfall guarantee would be used if the company cannot repay or refinance Tranche B at maturity. Option 2 offers lenders a higher overall Payment-in-Kind (“PIK”) coupon for which lenders forgo the increased shortfall guarantee offered in Option 1. Option 3 is in recognition of the differential cost of funds between EIBOR and LIBOR. Lenders who extended facilities in AED which include a number of international banks and who elect this option forgo a shortfall guarantee but receive higher cash and PIK coupon.
The Government is converting $US8.9 billion of debt and claims into equity, and committing to fund up to $US500 million of SG&A expenses and an interest facility of up to $US1.0 billion whilst maintaining 100% ownership of the company. The restructuring proposal requires the agreement of the rest of Dubai World’s financial creditors.
Meanwhile the property and development arm of Dubai World, Nakheel is seeking to restructure $US10.5 billion of loans.
Earlier this month, it reached agreement with trade creditors for more than 50% worth $US1.6 billion.
But Dubai World’s debt restructuring could almost double to $US46.7 billion as current liabilities mature for the company’s subsidiaries and businesses, namely Dubai Holding LLC, Dubai Holding Commercial Operations Group LLC, Borse Dubai Ltd. and Dubai Sukuk Center Ltd. may join Dubai World in restructuring debt.
Australian Property Journal
