Q+A – What can creditors expect from Dubai World meeting

DUBAI (BestGrowthStock) – State conglomerate Dubai World (DBWLD.UL: ) will meet creditors for an all-bank meeting on July 22 to present the final details of a $23.5 billion (15.6 billion pound) restructuring plan, sources said.

Creditors will then ponder the plan but the vast majority are expected to approve the debt deal. Banks which are not supportive will be able to seek legal action under a special tribunal set up for Dubai World related cases.

Dubai World has already got support for the plan from the seven banks which together hold 60 percent of the bank debt. Technically, the company needs to secure agreement from banks for a total of 67 percent of debt, but has said it will aim to get unanimous support.

WHY IS DUBAI WORLD HOLDING A MEETING WITH CREDITORS?

Dubai World said in May it would hold an all-bank meeting with its creditors to present the details of its restructuring plan, covering some $14.4 billion in bank debt.

The conglomerate’s largest exposed lenders have already agreed in principle to the debt deal. These seven banks, four UK lenders, two regional and one Japanese, together hold about 60 percent of the total.

WHAT WILL CREDITOR BANKS DO POST MEETING?

Once presented with the full details of the restructuring plan, the deal will be reviewed by banks’ risk and credit committees before a decision to agree or reject to the plan.

Banks will also have an option to attend workshops organised in London, Hong Kong and Dubai to ask advisors and legal representatives any further questions about the restructuring.

A final agreement could take several weeks or longer.

WILL BANKS APPROVE DUBAI WORLD’S DEBT PLAN?

The probability that remaining banks – which together hold just 40 percent of Dubai World bank debt – approve the deal is higher since the seven most exposed banks are already on board.

Dubai World has said it is aiming for a consensual agreement, but if it is taking too long for all the outlying banks to come on board, there may be reason to approach the special tribunal so as not to hold up the process.

“We expect some banks to be grumpy and to complain about the pricing, but then again a majority will likely agree as the alternative of letting the deal collapse is moving into unchartered territory,” one source told Reuters.

WHAT HAPPENS IF THE REMAINING BANKS DON’T AGREE?

Banks which cannot agree to the terms of the restructuring plan will be able to seek recourse to the special tribunal.

The plan could be stalled if even one creditor files a claim with the tribunal set up in December. Legal experts said a single case would force Dubai World to enter a standstill until the litigation was resolved, prolonging the process.

In turn, Dubai World could itself file for bankruptcy with the tribunal if it fails to get bank support for the plan.

It is unlikely that the special tribunal will be asked to rule in favour of the plan with only a slim two thirds majority, but the scenario is more likely if only a few banks are left holding up the process.

Another option is that lead banks could take on the debt of the smaller banks to avoid delaying agreement, experts said.

HOW LONG WILL THE PROCESS TAKE?

The restructuring process will be ongoing over several years, as the debt deal foresees creditors repaid over five and eight year maturities, and asset sales are part of the plan.

An agreement on the debt plan is first required, and this could take several more weeks or months. If a claim is filed with the special tribunal, this would also delay the process.

WHEN WILL DUBAI WORLD SELL ASSETS?

Dubai World has so far not gone down the road of selling any of the high-profile assets held by its investment company Istithmar World or other units, to fund the restructuring, but has said asset sales were part of the overall strategy.

The company’s plan to sell Inchcape Shipping Services (ISS) fell apart in June, halted by a U.S. investigation. [ID:nLDE65G27Z] The collapse of the sale, which at one point had been expected to raise as much as $800 million, is a blow.

A fire sale of assets has been ruled out, and the 5 to 8 year period to repay debts has given the company more time to reassess valuations and sell under better market conditions.

Dubai World could give some indication of asset sale programme to creditors at the July 22 meeting.

(Reporting by Rachna Uppal and Nicolas Parasie; Editing by Dinesh Nair and Hans Peters)

Q+A – What can creditors expect from Dubai World meeting