* Dubai Group says expects to sign debt deal in weeks
* Last big restructuring related to Dubai's crisis
* Post-restructuring board to include creditors
* Banking sources caution not yet a done deal
* Would not end financial pressures on Dubai
By Mirna Sleiman and David French
DUBAI, May 9 The Dubai Group investment firm
said on Thursday it expected a $10-billion restructuring of its
debt within weeks, sealing the Gulf emirate's recovery from a
financial crisis that brought it to the brink of default.
A unit of Dubai Holding, the investment arm of the ruler
Sheikh Mohammed bin Rashid al-Maktoum, Dubai Group has been in
talks with bank creditors for nearly three years, since the
global credit crunch savaged its portfolio of assets.
Terms of the proposed deal, the last big debt restructuring
that remains to be agreed by local entities in the wake of the
crisis that gripped Dubai in 2009, have been sent to bank
creditors for their final approval.
"We are now nearing the end and are confident that all
parties will work with us to finalise the restructuring by early
summer," chief executive Fadel Al-Ali said in a brief statement.
Banking industry sources, speaking on condition of anonymity
because of the commercial sensitivity of the issue, confirmed to
Reuters that they were nearing agreement on plans that would
delay repayments by up to 12 years and give creditors seats on
the board; but they cautioned that it was not yet a done deal.
"The alternative is the deal will be brought down," said one
of the sources. "But banks will have to ask themselves, 'Would
this be a good thing for us and for Dubai if it fails?'"
There was little reaction in financial markets because many
investors have been expecting an eventual agreement. But Chavan
Bhogaita, head of the markets strategy department at National
Bank of Abu Dhabi, said it was important for Dubai's future.
"The conclusion of this restructuring would remove
substantial uncertainty and certainly be positive for investor
sentiment towards the Dubai story in general," he said.
Dubai, one of the seven United Arab Emirates, boomed in the
early part of the last decade as a banking and business centre,
building the world's tallest skyscraper, an indoor ski slope in
the desert and other symbols of conspicuous wealth.
But the global credit crisis halved the emirate's real
estate prices, forcing state-linked companies such as Dubai
Group to restructure tens of billions of dollars in debt. In
2009, the emirate needed $20 billion of emergency loans from
neighbouring Abu Dhabi to avoid defaulting on its debt.
Over the past year, Dubai's property market has started to
recover, partly because of a flood of money into the emirate
from investors seeking a safe haven from unrest elsewhere in the
Arab world since 2011. This has supported a dramatic recovery of
consumer spending and business confidence in Dubai.
Dubai Group owes about $6 billion to banks, mostly from the
Gulf and Egypt, including Dubai's own Emirates NBD and
Mashreq. France's Natixis also has a big
claim against the company. Dubai Group owes about another $4
billion to Dubai Holding, which is subordinate to the bank debt.
Ahmad Bin Byat, chief executive of Dubai Holding, told
Reuters that after the restructuring Dubai Group's board would
include representatives from creditor banks and shareholders, as
well as independent members.
A Dubai Holding spokeswoman added: "Creditors will have an
increasing say in the operation of Dubai Group through the board
representation. However, creditors will not receive any equity.
Dubai Group ownership will remain with Dubai Holding."
Creditors are being asked to delay repayment for between
3-1/2 and 12 years, to give Dubai Group's assets time to recover
in value before divestment. For unsecured creditors, who have
been asked for a 12-year extension, there is an option to be
repaid after five years, albeit at a discount.
Dubai Group's assets include 14.7 percent of Oman's top
lender, Bank Muscat, and 18 percent of Egypt's EFG
Hermes. It also owns part of Borse Dubai,
which has 20.6 percent of the London Stock Exchange.
A successful restructuring of Dubai Group would not mark an
end to all financial pressures on Dubai. The emirate survived
its crisis largely by pushing obligations of state-linked firms
several years into the future; many of those debts will now fall
due between next year and 2016.
Standard Chartered bank estimates Dubai and its
government-related entities will have around $48 billion of
obligations coming due in that period, and the emirate has not
yet outlined clearly how it will raise all of the money.
Nevertheless, strong bond and stock prices in Dubai suggest
investors are confident it will find the funds it needs.