Dubai World creditors face nine-year wait for their cash

 

Dubai World the firm behind spectacular property developments such as World Islands is about to announce a debt restructuring plan. Photograph: AP Creditors of Dubai World, which include RBS and Lloyds, could be forced to accept repayment delays of as much as nine years in a sign that the recession is putting pressure on lenders to take what they can out of troubled investments. Dubai World, which last year stunned financial markets by asking creditors to postpone some of its debt payments, is expected to announce a $26bn (£17.3bn) debt restructuring plan within days. The plan will be presented to a steering committee of about 10 banks, including Standard Chartered, HSBC, Lloyds and RBS, at a meeting as early as tomorrow , according to reports. Lenders may have little choice but to accept one of the biggest payment delays in history from the owner of assets including ports operator P&O, Turnberry golf course, the Barneys retail chain in New York and Cirque du Soleil. "It might be the best available proposition," said an adviser to creditors. "A lot of creditors will agree to wait some time; they've already waited for a while." Creditors are expected to demand interest payments to compensate for the delay, a position that may extend the four-month talks even further. At the peak of the market, creditors, helped by ample and cheap credit, had more bargaining power and could force companies into more advantageous debt deals. But after two years of multibillion-pound losses related to the credit crunch, creditor banks may be less aggressive at the negotiating table. "Everybody is frustrated about how long this is taking," the adviser said. Creditors usually demand assets or an equity stake in exchange for debt payments, although such a proposal has not been considered in this case because Dubai World has ringfenced attractive assets such as ports operator DP World. During the years of the credit boom, Dubai World became famous for outlandish property developments such as The Dubai World Islands, a gigantic offshore replica of the Earth, made from Arabian sand. Following any agreement with the steering committee, which also includes the Emirates NBD and Abu Dhabi Commercial Bank, Dubai World will have to persuade another 90 creditors, representing one third of the total debt, to sign the deal. Smaller creditors, such as hedge funds, could be more demanding, although some are aware that "they were very, very lucky," after being paid in full, and promptly, on a bond that matured in December. The Nakheel bond, backed by property projects, was fully paid after Abu Dhabi, Dubai's wealthy neighbour state, financed the transaction. US and London-based hedge funds had threatened legal action if the bond was not paid in time. They may be less aggressive in the future, the credit adviser said. "Most of the creditors have concluded that there's not much point in taking enforcement action," he said. "We're four months on, and nobody has taken any action."