Dubai World may get more aid from support fund

The Dubai Financial Support Fund, a vehicle set up in 2009 to help the emirate's government holdings weather the financial crisis, is considering increasing its financial backing for Dubai World as part of a revised debt plan offered to the conglomerate's creditors, people familiar with the plan said. 

Dubai World shook global markets in 2009 and plunged the emirate into a period of fiscal distress when it requested a standstill on close to $US25 billion in debt. The company reached a debt agreement in 2011 but has since this year engaged in discussions again with its lenders to try to postpone the repayment of $US10.3 billion in debt that was scheduled for 2018, the largest repayment it faced and the one that was always considered the most difficult to achieve. 

In an effort to try convincing creditors to accept extending the $US10.3 billion repayment, Dubai World's advisers led by Blackstone are offering an early repayment of a separate $US4.4 billion tranche of debt that is due next year. The conglomerate proposed that the 2018 repayment should be postponed by four years and will be done according to an amortization structure, which means lenders will be repaid in cash gradually during the years preceding the 2022 deadline. 

The DFSF, which was set up with the financial support from Abu Dhabi, had already backed Dubai World with a $US1 billion backstop facility which now would be raised to $US1.45 billion as part of the plan, said the people familiar with the matter. 

"The good things [about this revised offer] are the early repayment of tranche A and the amortization of tranche B," said one creditor who has access to the deal terms. "We're obviously also happy with the extra government support," the creditor said, adding that the extension of the repayment and the pricing are seen as negative. Dubai World is also offering shares in ports operator DP World as collateral which was described by one creditor as "a second-ranking pledge which adds some additional comfort." 

Dubai World needs support from lenders holding at least 67 per cent of the company's debt after which it can use a legal option called Decree 57 to cram down any renegade creditors if needed. 

"I believe the deal will go through as there is a large number of regional banks who have shown willingness to accept it," said one creditor. 

Another creditor, however, said he expected a "tug of war" over the deal's final details with lenders hoping to obtain better commercial terms than those on the table now. Two lenders said they expect a meeting to take place in October when the revised debt plan will be subject to a vote.