Dubai World is working on a plan to issue new tranches of debt to creditors in its proposals to restructure US$26 billion (Dh95.49bn) in loans, say bankers close to the situation.
The plans, which are still to be finalised, were informally put to representatives of the creditors' co-ordinating committee last week and are due to be discussed today with the Dubai authorities.
They would offer creditors the flexibility to select a repayment proposal according to their strategic and accounting priorities.
"What they [Dubai World] came back with was not as bad as most banks had anticipated. Under this plan they would refinance several different tranches. Some would come with zero interest and some with reduced interest rates," said one banker present at the informal meeting last week.
None of the proposed new tranches involves an immediate "haircut", a reduction in principal, but all, because of the absence or reduction of interest payments, would mean that the banks forgo future interest income. Under the proposals, Dubai World would offer different repayment terms and interest rate levels to creditors according to the tranche of debt.
Among the possible scenarios are: repayment in full over five years but with no interest paid in that period; repayment over seven years with interest at about 2 per cent; repayment over a minimum of eight years with interest paid at close to the one-year London interbank offer rate (Libor).
It is possible other variations on this three-point structure could be adapted according to creditors' appetite for different classes of debt.
The proposals require the approval of the governments of Dubai, which is financing Dubai World on an operational basis via the Dubai Financial Support Fund (DFSF), and Abu Dhabi, which is funding the DFSF.
It is uncertain whether there will be a government guarantee of the debts under the new proposals.
Advisers to Dubai World believe the new proposals would meet the needs of different categories of creditors among the 97 banks that are creditors of the conglomerate.
The co-ordinating committee is dominated by the big British banks owed as much as $5bn, but their interests may diverge from those of the regional banks which also have a big exposure, and the rest of the creditors, comprising small to medium-sized banks from across the world.
"This is indicative of what the final proposal may look like. It is a plausible solution," said a person familiar with the talks.
"The company is flagging a series of proposals with a smaller group now. In the end, they have to finalise it with those who are funding it and fine-tune it according to the availability of government support. Dubai World is constantly kicking around proposals as they are devising the final one."
However, the proposals are unlikely to lead to an instant solution to Dubai World's problems. Some creditors will insist on a repayment of their principle loans on schedule.
Others would be unhappy at the prospect of taking a significant loss, over a number of years, by agreeing to interest rates lower than normal commercial rates.
A standard corporate loan in the UAE now carriers an interest rate of about 5 per cent.
If they get the go-ahead from Dubai and Abu Dhabi, the proposals are likely to be formally scheduled by the end of the month on the accelerated timetable set by Dubai World, which previously set the end of next month to reach agreement with its creditors.
The DFSF has agreed to fund Dubai World's interest payments and operational costs until then.
If no deal is agreed with creditors, Dubai World has the option of starting bankruptcy procedures in the special court set up by the Dubai International Financial Centre (DIFC).
Recovery of assets via the DIFC Courts would be expensive, drawn out and uncertain, according to legal experts.
It is believed the value of Dubai World's assets, currently being assessed by a team under the conglomerate's chief restructuring officer Aidan Birkett, could be less than 50 cents on the dollar in a bankruptcy situation.
"Receiving 100 per cent of the principal and zero per cent interest is better than taking a 30 to 40 per cent haircut. On this basis, the banks involved will not have to incur a loss other than the time value of money which is not insignificant but may be better than the alternative," said Jawad Ali, the managing partner of the Middle East offices of the law firm of King and Spalding.
Pointing to restructuring cases involving sovereign debt such as Argentina, Mr Ali said there were many precedents where large global banks accepted the rescheduling of loans at zero interest from government entities.
A spokesman for Dubai World declined to comment on the progress of the negotiations, as did a spokeswoman for DFSF.
uharnischfeger@thenational.ae
fkane@thenational.aea
The biog
Alwyn Stephen says much of his success is a result of taking an educated chance on business decisions.
His advice to anyone starting out in business is to have no fear as life is about taking on challenges.
“If you have the ambition and dream of something, follow that dream, be positive, determined and set goals.
"Nothing and no-one can stop you from succeeding with the right work application, and a little bit of luck along the way.”
Mr Stephen sells his luxury fragrances at selected perfumeries around the UAE, including the House of Niche Boutique in Al Seef.
He relaxes by spending time with his family at home, and enjoying his wife’s India cooking.
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
The biog
Age: 19
Profession: medical student at UAE university
Favourite book: The Ocean at The End of The Lane by Neil Gaiman
Role model: Parents, followed by Fazza (Shiekh Hamdan bin Mohammed)
Favourite poet: Edger Allen Poe
More Expo 2020 Dubai pavilions:
Dubai World Cup prize money
Group 1 (Purebred Arabian) 2000m Dubai Kahayla Classic - $750,000
Group 2 1,600m(Dirt) Godolphin Mile - $750,000
Group 2 3,200m (Turf) Dubai Gold Cup – $750,000
Group 1 1,200m (Turf) Al Quoz Sprint – $1,000,000
Group 2 1,900m(Dirt) UAE Derby – $750,000
Group 1 1,200m (Dirt) Dubai Golden Shaheen – $1,500,000
Group 1 1,800m (Turf) Dubai Turf – $4,000,000
Group 1 2,410m (Turf) Dubai Sheema Classic – $5,000,000
Group 1 2,000m (Dirt) Dubai World Cup– $12,000,000
Email sent to Uber team from chief executive Dara Khosrowshahi
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle East
Five years ago, Uber launched in the Middle East. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close. Today’s news is a testament to the incredible business our team has worked so hard to build.
It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Uber on,
Dara
Match info
Uefa Champions League Group B
Tottenham Hotspur 1 (Eriksen 80')
Inter Milan 0
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.