Dubai Group Agrees $6 Billion Debt Accord With Lender Committees

By Arif Sharif 

Dubai Group LLC, an investment company owned by the emirate’s ruler, agreed on final terms for restructuring $6 billion of bank debt as the emirate recovers from the 2009 debt crisis.

Dubai Group has agreed to the “restructuring documentation, incorporating the final economic terms with the coordinating committees” and their advisers, it said in an e-mailed statement today. “Lenders, who have been fully informed of the terms of the restructuring, will need to formally agree the terms with their internal credit committees.”

The emirate’s credit risk dropped this week to the lowest since at least the start of the 2008 global credit crisis after three state-linked companies paid or refinanced $3.75 billion of debt in 2012, in addition to a 3.3 billion-dirham ($898 million) liability that matured in April. Companies are restructuring as economic growth picks up amid a recovery in tourism, real-estate and trade.

We are “confident that all parties will work with us to finalise the restructuring by early summer,” Fadel Al-Ali, Dubai Group’s chief executive officer, said in the statement. After the completion of the restructuring $4 billion of debt to related parties will be subordinated to the claims of the bank creditors, it said in the statement.

‘Lower Uncertainty’

The yield on Dubai’s 5.591 percent bonds due in 2021 has fallen 108 basis points, or 1.08 percentage points, in the past year to 3.94 percent yesterday, compared with a 92 basis-point decline to 3.56 percent in the average yield on debt in the Middle East, the HSBC/Nasdaq Dubai Middle East US Dollar Sukuk/Bond Index shows.

An agreement “will lower the uncertainty of how much provision banks need to take against this exposure,” Shabbir Malik, a Dubai-based analyst at investment bank EFG-Hermes Holding SAE, said by phone today. “Any conclusion is positive to the industry because they’d know the haircut they need to take, and will help investor confidence in Dubai and its banks.”

Dubai Group holds stakes in companies including Dubai-based investment bank Shuaa Capital PSC (SHUAA), Cairo-based investment bank EFG-Hermes Holding SAE and BankMuscat SAOG, Oman’s biggest bank by assets.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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