Debt restructuring: 2011 the year that was…
If 2010 was the year in which massive debt revelations were made public—2011 is the year of debt restructuring. We take a look at some of the major debt restructuring deals of companies here in the UAE...
December 20, 2011 2:54 by Eva Fernandes
It isn’t often that a shopping mall is used as collateral, but that is just what Emaar chose to do in order to secure Dh3.6 billion of financing. Dubai Islamic Bank, National Bank of Abu Dhabi and Standard Chartered Bank make up the three banks that have subscribed a combination of Islamic and conventional financing: according to an Emaar spokesman Dh2.8 billion of the facility is Islamic, and the remaining Dh800 million is conventional. As Emaar slowly but surely begins to near the end of its debt restructuring, Kipp can’t help but think that if 2010 was the year in which massive debt revelations were made public—2011 is the year of debt restructuring. In this article we outline just some of the major highlights in the debt-laden landscape of the UAE.
The most infamous of the lot, the $25 billion debt of Dubai World took 12 months of negotiations to finally restructure. In the last week of March, Dubai World signed the final agreement on its debt restructuring plans. The debt had been divided into two phases: the initial $4.4 billion will be paid over five years and the remaining $10.3 billion will be paid over eight years at a fixed interest rate of 2.4 per cent. Dubai World’s main lenders include Royal Bank of Scotland Group, HSBC Holdings, Lloyds Banking Group, Standard Chartered, Bank of Tokyo-Mitsubishi UFJ, Abu Dhabi Commercial Bank and Emirates NBD.
Late last month, Dubai International Capital (DIC), a unit of Dubai Holding, announced that it had it had finalized its $2.4 billion debt restructuring. Sources say DIC has agreed to repay $2 billion of the debt being restructured after 5 years at an interest rate of 2 percent, with a $400 million is to be repaid after three years, at current rates.
Here’s another infamous darling of the Dubai debt story: Damas. In March of this year, Damas International signed a debt-restructuring agreement with 25 creditor banks including Barclays and BNP Paribas. Damas had been in talks for months, and had finally reached an agreement with lenders for 93 per cent of Damas’ debt of $872 million. In addition to the debt restructuring, Damas was also in the news for the Dh614 million its founders, the Abdullah brothers owed the company—including Dh 256 million worth of gold that the three brothers had withdrawn from the company. But in spite of all the bad press, Damas has enjoyed a particularly decent year. The rising cost of gold meant that last month Damas said its net profits for the last six months has increased 531 percent. What is more Damas has upped its expansion drive, taking 100 percent ownership of its operations in Kuwait and 98 percent in its joint venture in Saudi.
This August Nakheel completed a $16 billion debt restructuring. Nakheel, which was previously owned by Dubai World, is now wholly and directly owned by Dubai government. After 18 months of negotiations, Nakheel marked the last of debt restructuring plans when the company announced a Dh4.8 billion sukuk to its trade creditors to be listed on Nasdaq Dubai.
Cooling firm Tabreed took its time working on a deal with its creditors to refinance the Dh5 billion dirhams it owed but finally completed its recapitalisation program on 1st April 2011.Tabreed refinanced Dh2.63 billion of bank debt and secured up to Dh3.1bn in long-term capital from Mubadala: which included Dh1.7 billion of subordinated mandatory convertible notes which mature in 2019 and a subordinated convertible loan facility of up to Dh1.4billion. Across the Middle East, Tabreed currently operates 60 district cooling plants – 51 wholly owned by the company and 9 through joint ventures and subsidiaries . Tabreed has operations in Oman, Qatar, Saudi Arabia and the UAE and has worked on projects including Zayed Sports City, Yas Island and the Dubai Metro.