Dubai World, the state-owned holding company seeking to restructure $14.2 billion of debt, has offered creditors a so-called shortfall guarantee as part of a repayment plan, a person close to the Dubai government said.
If the sale of Dubai World's assets does not generate sufficient cash to repay loans, the government will make up the shortfall up to a certain level, said the person, who declined to be identified because the discussions are private. The guarantee clause was not outlined in Dubai World's announcement last week when the restructuring plan was announced.
"This is certainly an improved offer from the earlier one," said Murad Ansari, a Riyadh-based analyst at Egyptian investment bank EFG-Hermes Holding SAE. It "provides a little more comfort to lenders that their loans will be repaid."
Dubai World, one of the emirate's three main state-owned holding companies, and its property unit Nakheel PJSC, are seeking to renegotiate terms on $24.8 billion of debt after the global credit crisis battered Dubai's property market and hurt the ability of the emirate's companies to raise loans. The Dubai government and its state-owned companies racked up $109.3 billion of debt, according to International Monetary Fund estimates, as the emirate sought to transform itself into a tourism, trade and financial services hub.
Dubai World asked creditors on March 25 to roll over outstanding debt into two new loans of five-year and eight-year maturities. Lenders will be paid their principal in full, although the interest rate on the loans is still being negotiated with the creditor banks, Dubai World's chief restructuring officer, Aidan Birkett, said then.