Bank lenders in talks with indebted Dubai World ahead of critical creditors’ meeting

Dubai World’s six biggest lending banks have begun talks with the ailing state-owned group before a crunch creditors’ meeting that is scheduled for December 21.

Four British-listed banks — HSBC, Royal Bank of Scotland, Lloyds Banking Group and Standard Chartered — and two local lenders — Emirates National Bank of Dubai and Abu Dhabi Commercial Bank — met NM Rothschild and Deloitte, Dubai World’s advisers, in the Group and SGulf State yesterday.

The banks tried to ascertain whether Dubai World would make interest payments due on the bonds of Nakheel, its property subsidiary, next Monday. Last night Dubai World’s intentions remained unclear.

The company said last week that it had asked creditors to restructure almost half its $59 billion (£36 billion) total liabilities, adding that it planned a six-month suspension of all debt repayments. The announcement sparked panic in stock markets around the world as nervous investors worried about a second wave of financial collapses.
The leading banks, which are forming a steering committee to represent all 90 of Dubai World’s bank lenders, also asked for detailed financial information to help them to revalue the company in the event of a default. A source close to the banks said that they will have created the steering committee and formally appointed KPMG as its adviser by Thursday. The accountancy firm has been advising the banks informally for several weeks.

The banks are expected to start formulating their negotiating stance this weekend, ahead of the formal meeting of all Dubai World’s creditors this month in the Gulf State.

Informed sources said that the banks were likely to be far less aggressive than a rival group of bondholders advised by Ashurst, the London-based law firm, because the bank lenders have significant operations in the Gulf and are reluctant to damage relations with Dubai or Abu Dhabi, its oil-rich backer.

The bondholder group advised by Ashurst, which is led by QVT, the American hedge fund, is less concerned about repeat business and has asked legal advisers to assess whether it has a potential claim over Dubai World’s trophy overseas assets, such as P&O, the ferry company. Ashurst declined to comment but it is understood that by yesterday the QVT-led group accounted for about 40 per cent of the holders of Nahkeel’s bonds by value.

Insiders close to the talks said that yesterday’s meeting had been exploratory but would establish the likely direction of future negotiations. The most immediate concern, however, is a $4 billion Islamic bond held by Nakheel, which is due for repayment on December 14. With the Nakheel bond only days away from default, further talks are scheduled this week between Dubai World and its banks and bondholders.

Earlier, a senior Dubai government finance official conceded that Dubai World was prepared to sell some of its key overseas assets as part of the restructuring. The holding company had previously sought to confine the restructuring to its real estate groups, Nakheel and Limitless World, but the comments by Abdulrahman al-Saleh, director-general of Dubai’s Department of Finance, has fuelled speculation that trophy assets such as the QE2 cruise liner and the group’s stake in Canada’s Cirque du Soleil could be sold in an effort to balance the books.

Mr al-Saleh emphasised that the Government itself would not sell any assets to bail out Dubai World.

Bargain-hunters look to cash in

Overseas property investors are “rubber-necking” in Dubai’s downtrodden housing market, trawling websites for evidence of the collapse hitting property prices and the chance to bag a bargain (Rebecca O’Connor writes).

Rightmove Overseas, the international division of the British property website, recorded a 176 per cent rise in the number of searches for bricks and mortar in the emirate in the seven days after Dubai World’s request for a standstill on debt repayments, compared with the previous week. The surge in interest took the monthly increase in searches in Dubai to 45 per cent between October and November, becoming the fourth-most popular country for people interested in property prices.

Housing prices have risen dramatically in Dubai in the past — doubling in the four years to the end of 2008. However, they sank by 47 per cent in the year to September, according to Knight Frank, the estate agency, and are forecast to fall by a further 30 per cent. There are hopes that they could bottom out next year.