Dubai Group, an investment vehicle owned by the emirate's ruler, aims to secure a final agreement with creditors on its $10 billion debt restructuring by June 6, potentially ending marathon negotiations that have dragged on nearly three years.
The proposed Dubai Group deal is the last big debt restructuring related to Dubai's 2008-2009 financial crisis that has not yet been agreed. So success in the talks would be seen as a major step in the emirate's recovery from the crisis.
The company, which is a unit of Dubai Holding, the investment arm of Sheikh Mohamed bin Rashid Al-Maktoum, was hit hard by the global financial crisis in 2008 as asset values tumbled, exposing its use of leverage.
Since it missed interest payments on two loan facilities in 2010, it has been locked in talks with its lenders to extend repayment deadlines. Of Dubai Group's $10bn total debt, $6bn is owed to banks and the remaining $4bn is classed as inter-company loans.
Final restructuring documents were sent to unsecured creditors on Wednesday and a meeting with bankers is scheduled to take place in Dubai on May 15, two sources familiar with the negotiations said, speaking on condition of anonymity as the information isn't public.
Other creditor classes have already agreed on the restructuring; unanimous approval from unsecured creditors is needed to allow the deal to be completed.
Dubai Group wasn't immediately available for comment.
“The docs went out today so we're finally there on that, but this is far from a done deal,” said one of the sources, adding that while there was informal agreement on the terms among banks, the plan could still be rejected.
“The alternative is the deal will be brought down, but banks will have to ask themselves, ‘would this be a good thing for us and for Dubai if it fails?’”
If the banks agree to the deal by June 6, a signing fee will be paid to them, the sources said. They declined to specify how much.
Dubai Group's creditors include a wide range of banks such as Britain's RBS, South Africa's Standard Bank, Germany's Commerzbank and Commercial International Bank of Egypt.
Under the terms of Dubai Group's restructuring, creditors are being asked to extend their obligations for between 3.5 and 12 years, depending on the assets secured against their exposure, to allow Dubai Group's assets to recover in value before divestment.
For unsecured creditors, who have been offered a 12-year extension, there is an option to be repaid after five years, albeit at a discount.
In January, Dubai Group settled with banks which brought legal action to secure repayment of their share of the debt, a move which paved the way for a deal to be offered to unsecured creditors.