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Dubai World document reveals price of failure

Dubai World is restructuring $23.5 billion in debt.

July 22, 2010 4:07 by

Dubai World warned that lenders, aside from the government’s own support fund, would face a “significantly” lower chance of recovery if its debt plan fails and it is forced to seek liquidation, according to the debt restructuring plan outlined to bankers on Thursday.

The document seen by Reuters also said the repayment of an initial $4.4 billion, five-year debt tranche would be financed by its Istithmar World portfolio and its Infinity investment — two segments that were ringfenced from the conglomerate’s debt proposal.

The Infinity World unit holds a stake in MGM Resorts International.

“Recoveries for all creditors except DFSF in a liquidation scenario would be significantly below those expected under the proposal,” the debt plan said.

The DFSF, or Dubai Financial Support Fund, has lent billions to Dubai World as the flagship company struggles to cope with a massive debt burden.

Dubai World is restructuring $23.5 billion in debt. The government has agreed to take a hit on its claims against the firm, leaving $14.4 billion in bank debt outstanding.

( By Amena Bakr, Reporting by Amena Bakr; Editing by Andrew Callus)

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