Dubai World reaches agreement over debt - company

Dubai's embattled group Dubai World, whose default fears had rocked global markets, yesterday said it reached agreement "in principle" with most of its bank lenders to restructure some $23.5 billion in debt. The agreement still needs the backing of other lenders but appears to give the heavily-indebted Dubai some breathing space in dealing with the obligations of its state firms.

"Dubai World is pleased to announce that headline economic terms have been agreed in principle with the Coordinating Committee" representing 60 per cent of the group's bank lenders, the company said in a statement.

According to the agreement, the company will divide $14.4 billion of debt into two tranches, maturing in five and eight years respectively, while the government will convert $8.9 billion of aid to the company into equity.

The first tranche of debt will be valued at $4.4 billion, while the second will be worth $10 billion, it said.

It also said that the government was committing up to $500 million of Selling, General and Administrative expenses, in addition to an interest facility of up to $1.0 billion.

The government will maintain 100 per cent ownership of the company, it added.

"We are pleased that we have received unanimous support in principle of the CoCom on the headline economic terms to our restructuring proposal," said the chief restructuring officer of Dubai World, Aidan Birkett.

"This is an important milestone and reflects our efforts to achieve the best possible solution for all stakeholders," he added.

The company said, however, that the proposal requires the agreement of the remainder of Dubai World's financial creditors.

The government of Dubai and Dubai World had tabled this offer to bank lenders in March after three months of negotiations.

At the time, the government offered to inject $9.5 billion into the Dubai World group and its most-troubled subsidiary, property giant developer, Nakheel.

But the offer also stipulated that Nakheel will become a separate entity, owned fully by the government.

Sheikh Ahmad bin Saeed al-Maktoum, a brother of the ruler of Dubai and head of the emirate's Supreme Fiscal Committee, welcomed the agreement.

"The government of Dubai welcomes this important milestone, which is the result of considerable efforts from a large number of stakeholders who all share a common interest in Dubai's future," he said in a statement. He said that a "final proposal reflecting these terms will now be submitted by the Coordinating Committee to all of Dubai World's lending banks."

Dubai World's lenders include four British banks - HSBC, Lloyds, RBS and Standard Chartered, which are believed to have an exposure exceeding $5 billion.