| DUBAI, Sept 13
DUBAI, Sept 13 Royal Bank of Scotland
and two other banks have begun legal proceedings against an
investment vehicle owned by Dubai's ruler, seeking immediate
repayment after abandoning talks to restructure $10 billion in
RBS, along with German lender Commerzbank and
South Africa's Standard Bank, had abandoned talks on
restructuring Dubai Group's liabilities and had threatened legal
action, sources told Reuters in July.
Legal action to reclaim debt owed has so far been
unprecedented in an emirate where banks have tended to take the
best terms on offer due to an opaque legal system and to avoid
jeopardising chances of winning future business.
The three lenders have decided to pursue "legal recourse
under the facility documentation," RBS said in a statement,
adding it was forced to take the action after several
concessions offered to the group failed to secure a solution.
"We do, however, want to make clear that our preference was
always to conclude an agreement without formal legal proceedings
and we therefore remain open to such an outcome if an acceptable
commercial resolution is forthcoming," the statement said.
The case has been filed in a London court and law firm SNR
Denton is representing the banks, two sources familiar with the
matter said. Clifford Chance is representing Dubai Group.
All three banks were part of a group of unsecured creditors,
the largest of three groups negotiating with Dubai Group, a unit
of Dubai Holding, the personal investment arm of
Sheikh Mohammed bin Rashid al-Maktoum.
RBS had been co-chair of the creditor committee representing
banks with either little or no security tied to their cash.
"We believe that we can reach a consensual agreement with
our creditors," Dubai Group said in a separate statement.
"Over 35 banks are working towards an agreement and a global
term sheet is now being considered by bank credit committees, a
number of which have indicated their support," the statement
Dubai Group was hit by the global financial crisis due to
excessive use of leverage in its investments and a sharp decline
in the value of its portfolio companies.
Like a number of other state-linked entities in the emirate,
it embarked on talks with creditors to restructure debt and
Its financial assets include stakes in Egypt's EFG Hermes
, an investment bank hit by Middle Eastern turmoil, and
Cyprus Popular Bank, formerly Marfin, whose
recapitalisation forced Cyprus to seek an international bailout.
Dubai Group also has a stake in Borse Dubai, which owns 20.6
percent of the London Stock Exchange and has relied on asset
sales to repay its obligations.