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Will Dubai World manage to attract investment?
Dubai World, Saudi Arabia’s biggest investment fund, is currently holding talks with a range of small-scale lenders on the company’s debt restructuring. The company has to do it in order to avoid getting sued by the lenders.
In order to understand the situation around Dubai World it is necessary to go back to 2009, which was a revealing one for the company. In November 2009 Dubai World asked for a 6-month debt payment delay. The total debt was estimated at $26 billion. Such an incredible amount of debt testified to the fact that the company was on the verge of default. The investors quickly reacted in a negative way. As a result, the company’s shares collapsed at stock markets. The Emirates authorities had to take emergency actions concerning Dubai World. According to some experts, the default at the stock markets negatively affected the countries experiencing financial problems. In the first place, it holds true for Greece and Portugal. By the end 2009 the company’s debt had grown up to $39 billion. Moreover, $11 billion of debts of Istithmar, its affiliated investment company, and $2 billion of Infinity should be added to the sum as well. Some experts believe that at the end of the year the company’s total debt was $60 billion.
The fact that the state authorities are forced to help the investment fund makes the situation spicy. The Emirates government understands that if Dubai World becomes bankrupt the economy of the state may face unpredictable processes, which will negatively affect its future. It should be noted that the county’s law is unfriendly towards lenders. So, the lenders have to agree on a peaceful solution in order to avoid losing their money.
Six month later, in May 2010, Dubai World’s management held talks with the lenders. The Coordinating Committee talked on behalf of the lenders. It owns 60% of Dubai World’s debt liabilities. The Coordinating Committee had been founded by the majority of the lenders, including the big-scale ones such as HSBC Holdings, Royal Bank of Scotland and other major banks. It also includes some representatives of the state authorities.
During the May talks it was necessary to decide on the way to pay off $23 billion of debt. The offered program included the restructuring of $14 billion and Istithmar’s efforts to attract $4.5 billion. Having succeeded in restructuring most of the debt, Dubai World won the time for planning further actions.
The debt restructuring program offered by the holding authorities is to be implemented within 8 years with interest rates for 1 to 3%. In order to encourage the restructuring process and to feel secure, the management of Dubai World offered a bonus for lenders, which varies from $150.000 to $800.000.
Dubai World, Saudi Arabia’s biggest investment fund, is currently holding talks with a range of small-scale lenders on the company’s debt restructuring. The company has to do it in order to avoid getting sued by the lenders.
In order to understand the situation around Dubai World it is necessary to go back to 2009, which was a revealing one for the company. In November 2009 Dubai World asked for a 6-month debt payment delay. The total debt was estimated at $26 billion. Such an incredible amount of debt testified to the fact that the company was on the verge of default. The investors quickly reacted in a negative way. As a result, the company’s shares collapsed at stock markets. The Emirates authorities had to take emergency actions concerning Dubai World. According to some experts, the default at the stock markets negatively affected the countries experiencing financial problems. In the first place, it holds true for Greece and Portugal. By the end 2009 the company’s debt had grown up to $39 billion. Moreover, $11 billion of debts of Istithmar, its affiliated investment company, and $2 billion of Infinity should be added to the sum as well. Some experts believe that at the end of the year the company’s total debt was $60 billion.
The fact that the state authorities are forced to help the investment fund makes the situation spicy. The Emirates government understands that if Dubai World becomes bankrupt the economy of the state may face unpredictable processes, which will negatively affect its future. It should be noted that the county’s law is unfriendly towards lenders. So, the lenders have to agree on a peaceful solution in order to avoid losing their money.
Six month later, in May 2010, Dubai World’s management held talks with the lenders. The Coordinating Committee talked on behalf of the lenders. It owns 60% of Dubai World’s debt liabilities. The Coordinating Committee had been founded by the majority of the lenders, including the big-scale ones such as HSBC Holdings, Royal Bank of Scotland and other major banks. It also includes some representatives of the state authorities.
During the May talks it was necessary to decide on the way to pay off $23 billion of debt. The offered program included the restructuring of $14 billion and Istithmar’s efforts to attract $4.5 billion. Having succeeded in restructuring most of the debt, Dubai World won the time for planning further actions.
The debt restructuring program offered by the holding authorities is to be implemented within 8 years with interest rates for 1 to 3%. In order to encourage the restructuring process and to feel secure, the management of Dubai World offered a bonus for lenders, which varies from $150.000 to $800.000.
Dubai 
