March 24, 2010 / 12:01 PM / in 8 years

WRAPUP 3-Dealmakers meet to sort $26 bln Dubai World debt

* Dubai-linked CDS falls, Nakheel unit bonds rise

* DP World says choice to offload stake is with Dubai World

* Ex-UK Minister Vadera helped draft deal in Dubai -sources

(Adds Dubai comment on UK adviser, end of talks)

By Dinesh Nair and Tamara Walid

DUBAI, March 24 (Reuters) - Bankers met in Dubai on Wednesday to hammer out a $26 billion debt plan with state-owned Dubai World as a repayment deadline loomed, adding to pressure on the glitzy emirate to settle the conglomerate’s debt.

Core creditors representing 97 banks met to finalise months of talks on how Dubai World [DBWLD.UL] can restructure the debt, about a quarter of Dubai’s estimated total debt of $101 billion.

Before the meeting ended at around 1600 GMT, a spokeswoman for Dubai World said the talks were “very positive”.

Sources earlier told Reuters that former British minister Shriti Vadera had also been in Dubai for weeks, despatched quietly by the UK government after British banks, who form the bulk of the informal creditor committee, raised concerns about the process to London.

The sources said Vadera, an abrasive character who was nicknamed “Gordon Brown’s representative on Earth” for her long and close alliance with him as finance and prime minister, had played a key role in hammering out the debt proposal. The Dubai government later said it had invited Vadera to provide strategic advice. [ID:nLDE62N28V]

No one from the British Cabinet Office was immediately available for comment.

Markets anticipated a deal favourable to lenders, with the cost of insuring Dubai sovereign debt falling and bond prices rising for Dubai World unit Nakheel, the property firm that built a giant island replica of the Earth. [ID:nLDE62N1LK]

Dubai is expected to lean heavily on its oil-exporting neighbour Abu Dhabi, the leading member of the seven-member United Arab Emirates federation, which has stumped up $10 billion in bailouts and is expected to write another cheque. [ID:nLDE62K00S]

“It looks very much like the main scenario of an Abu Dhabi bailout is taking shape,” said David Butter, director for Middle East and North Africa at the Economist Intelligence Unit.

“I doubt that we will ever be able to get an authoritative figure on it, but the bottom line is that Abu Dhabi seems to have decided that it has to pay whatever is necessary to avoid serious reputational damage for the UAE as a whole.”

Dubai’s request for payment delays in November shook global markets and raised wider concerns among international investors about transparency and disclosure standards in the region.

Wednesday dealt a further blow to the emirate when it revealed it had detained Omar bin Sulaiman, the former governor of the Dubai International Financial Centre, in connection with a $13.6 million embezzlement probe. Bin Sulaiman was abruptly removed from office days before the Dubai World debt crisis struck last year. [ID:nLDE62N1UR]

Dubai World’s debt woes also weighed on the local banking sector. Moody’s estimated total UAE banks’ exposure to be around $15 billion. For a Factbox, click [ID:nLDE62909Q]

Speculation during the months-long debt talks has centred on the amount of new aid from Abu Dhabi and on the size of the “haircut”, or cut in principal, that lenders will swallow.

Another of Dubai World’s construction units, Limitless, has a $1.2 billion Islamic loan due on March 31 and could be the next tripwire in the conglomerate’s path.

For other stories on Dubai debt, click [ID:nLK12160]


    Separately, Dubai World learnt it stood to receive a welcome cash boost of more than $100 million from its 77 percent subsidiary DP World DPW.DI. The ports operator reported a sharp fall in 2009 profit but raised its dividend by 19 percent.

    DP World downplayed speculation it would use plans to list on the London Stock Exchange by mid-year to raise new capital. [ID:nLDE62L08F]

    But the company’s chief executive said it was up to the parent to decide whether to reduce its stake at the same time.

    “The ultimate decision is with the shareholder,” Chief Executive Officer Mohammed Sharaf told reporters.

    DP World’s assets are ring-fenced from any potential claims by creditors, and Dubai World has said the restructuring plan does not include key assets such as DP World.

    DP World’s shares rose to a seven-month high on Wednesday, while analysts said the London listing would provide more support for the stock. [ID:nLDE62N073]

    Dubai World, which also owns Barneys department stores and entertainment company Cirque du Soleil, is meeting with a seven-member committee representing the 97 creditors.

    The panel is made up of Standard Chartered (STAN.L), HSBC (HSBA.L), Lloyds (LLOY.L), Royal Bank of Scotland (RBS.L), Emirates NBD ENBD.DU and Abu Dhabi Commercial Bank ADCB.AD, which are believed to have two-thirds of the total exposure.

    A seventh lender, Bank of Tokyo-Mitsubishi, a unit of Mitsubishi UFJ Financial Group (8306.T), joined the panel this year. (Additional reporting by Raissa Kasolowsky, Amran Abocar, Amena Bakr, Rachna Uppal, Nicolas Parasie and Carolyn Cohn; writing by Thomas Atkins; editing by Will Waterman)

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