U.S. hedge fund wins claim against Dubai's Drydocks

Wed Mar 14, 2012 8:01am EDT

DUBAI, MARCH 14 - A U.S.-based hedge fund said it has won a $45.5 million legal claim against Dubai's Drydocks World for defaulting on a loan, putting the ship builder's $2.2 billion debt restructuring in further trouble.

Monarch Alternative Capital said in an emailed statement that Drydocks, a unit of Dubai World DBWLD.UL, has been ordered to pay the entirety of the sum of $45.5 million claimed plus Monarch's legal costs.

Monarch sued Drydocks last year in the High Court of London casting a blow to the restructuring talks.

A week ago, Drydocks proposed repaying creditors in five years and said it was seeking more working capital as it tried to restructure a $2.2 bln loan facility, ending lengthy and complex debt talks.

The restructuring had been scheduled to be completed by April 2011, but it was slowed by a lack of government support and opposition from hedge fund creditors, including Monarch.

When asked how the judgment would affect its restructuring Khamis Juma Buamim, Drydocks World chairman, said:

"As made clear at all lender meetings, the company is confident that it can still implement its restructuring if it transpires that Monarch do not accept the terms on offer."

"But I would very much hope that notwithstanding their legal action Monarch will accept the very reasonable restructuring proposal."

DEBT TALKS

Drydocks World's debts stem from a multibillion-dollar loan it took out to fund expansion in Singapore. Drydocks has its major ship and rig building facilities in southeast Asian countries such as Singapore and Indonesia.

The $2.2 billion facility, taken out in October 2008, comprised a $1.7 billion three-year loan paying 170 basis points and a five-year $500 million loan with a 190 basis point margin, according to Thomson Reuters data.

Bookrunners on the 15-lender syndicate were BNP Paribas (BNPP.PA), HSBC (HSBA.L), Mashreq MASB.DU, Standard Chartered (STAN.L) and Lloyds Banking Group (LLOY.L) among others.

Presence of hedge funds is seen complicating debt restructurings in the Gulf Arab region, where previous negotiations have been bank-only affairs.

Another U.S. hedge fund manager Davidson Kempner Capital Management is part of the creditor committee for the $1.1 billion debt restructuring at Bahrain investment house Arcapita ARCAB.UL, the first time a fund has fulfilled such a role in the region.

($1 = 0.6355 British pounds)

(Additional reporting by Mirna Sleiman, Editing by Matt Smith, Dinesh Nair)

(Corrects claim figure in lead and second paragraph to $45.5 million after Monarch Capital corrects statement)

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