State-owned holding company Dubai World is in talks to renegotiate $26 billion of debt and asking its banks for approval to defer loan payments. The banks are hoping to avoid a haircut – taking less money than they are owed. Dubai’s government also might provide a guarantee to the banks that are owned money. Dubai World and its Nakheel PJSC and Limitless LLC property units used the loans to finance development of palm tree-shaped islands off the emirate’s coast. When the financial crisis hit in 2008, Dubai World ran into difficulty refinancing its real estate loans.
Saud Masud, Dubai-based head of Middle Eastern research at UBS AG, said “The proposal will be a meaningful one. I would highly doubt that what they come out with will be accepted and everyone moves on.” Meanwhile, Dubai World advisors Deloitte LLP and Moelis & Co. have asked the Dubai Financial Support Fund for help funding their interest payments on the loans. Dubai World is relying heavily on asset sales to finance the payments.
Dubai World plans to consult with the government of Abu Dhabi and the United Arab Emirate’s central bank, which was one of three institutions that lent Dubai $20 billion last year to support the state-owned firms during the credit crisis. The once ambitious Dubai World’s development plans leave the holding company owing money to more than 90 banks.
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