Dubai World plans alternatives for $26 billion debt

In a 'constructive' progress to move out of its debt repayment crisis, troubled conglomerate Dubai World has said it is considering alternatives for obligations worth $26 billion, an amount nearly half of its total debt.

"The total value of debt carried by the companies subject to the restructuring process amounts to approximately $26 billion, of which approximately $6 billion relates to the Nakheel sukuk (Islamic bond)," state-owned Dubai World said in a release.

This statement came as a breather, after Dubai government on Monday hinted that it may not bail out debt-ridden Dubai World unconditionally and asked its creditors to share responsibility for the crisis.

The restructuring move by Dubai World is likely to ease investor sentiment globally. Markets across the world went into a tailspin following the November 25 announcement by Dubai.

On that day, the Dubai government had announced the restructuring of Dubai World, and asked all providers of financing for the company and Nakheel to "stand still" and extend maturities until at least May 30, 2010.

Accordingly, leading benchmark indices in the Asian and European markets showed significant rebounce and were trading in the positive territory. However, bourses in Dubai as well as Abu Dhabi continued to reel under pressure.

The proposed restructuring of $26 billion would only relate to Dubai World and some of its subsidiaries, including Nakheel World and Limitless World, the statement added.

However, the process would not include Infinity World Holding, Istithmar World and Ports & Free Zone World (which includes DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone) as "all of which are on a stable financial footing", it added.

Dubai World further said that the initial discussions in this regard have commenced with the banks of Dubai World and are proceeding on a constructive basis.

Meanwhile, the UAE President Shaikh Khalifa bin Zayed Al Nahyan on Tuesday in a statement stressed that "we would like to assure everyone that our country is stronger and better off, since our economy is fine and our society enjoys welfare."

Dubai World has further said in light of the current operational challenges and future obligations of the Group, the process and any related actions to address strategic alternatives will be conducted on an expedited basis."

Moelis & Company have been appointed to advise on the Dubai World restructuring with Rothschild, who will continue their ongoing role as financial advisor.

Meanwhile, Nakheel has requested its sukuk (Islamic bond) holders to appoint an authorised representative with whom discussions can commence.