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Dubai World to focus $26bn restructuring on RE

The state-owned ports and real estate conglomerate at the centre of Dubai’s current economic crisis has announced it is focusing the restructuring of its debt obligations towards itself and its real estate subsidiaries Nakheel and Limitless. It also confirmed that asset sales could form part of the process.

Dubai World has announced it would seek to restructure approximately $26 billion of debt owed by itself and real estate subsidiaries Nakheel World and Limitless World and that assets sales could be part of the process.

The state-owned ports and real estate conglomerate shook the global economy last week when it stated it would seek to attain extensions on certain of its debt maturities, including a $3.5 billion Islamic bond owed by Nakheel due to mature this month. In total the group’s liabilities extend to $59 billion.

Dubai World said in an announcement that the proposed restructuring should apply only to “Dubai World and certain of its subsidiaries including Nakheel World and Limitless World” and that “it should immediately consider alternatives in respect of the debt obligations of certain entities within the group”.

In addition, the conglomerate said the restructuring would not relate to its private equity platform Istithmar World and others businesses including Infinity World Holding, Ports & Free Zone World, the latter of which includes DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone. These businesses, it said, “are on a stable footing”.

Dubai World said: “It is envisaged the restructuring process will be carried out in an equitable way for the overall benefit of all stakeholders and will comprise several phases including: long term plans and commitment of stakeholders; determination of maintainable profit and cash generation; assessment of deleveraging options, including asset sales; assessment of funding requirements and the formulation of restructuring proposals to financial creditors and their implementation.”

The announcement comes less than 24 hours after Abdulrahman al-Seleh, director general of Dubai’s department of finance, distanced the liabilities of Dubai World from the financial position of the state, sending many share prices across the world to fall. Speaking to Dubai TV, Selah said: “Dubai World is not part of the government” and that “creditors need to take responsibility for their decisions to lend to [its] companies.”

The announcement by Dubai World could ultimately prove beneficial to its investors. Ahment Akarli, an economist at Goldman Sachs said: “This is the first tangible evidence to suggest that Dubai World is looking to restructure incoming payments, on a ‘voluntary’ basis.”

“The exact terms of any potential restructuring remains still highly uncertain but considering previous statements of various senior Dubai officials and parties involved in ongoing negotiations, it seems investors may well end up with an extension of maturities and possibly even a significant haircut.”

Dubai World is being advised by Moelis & Company as its restructuring advisor and Rothschild as its financial advisor.