Dubai has unveiled plans to restructure the crushing $26bn (£17bn) debt of its troubled property arms, four months after it was forced to beg for a repayment freeze.
It says it will inject $9.5bn in new cash into state-run property firms Nakheel and Dubai World. Beleaguered Nakheel will receive the lion’s share at $8bn and Dubai world will get the remaining $1.5bn.
It is thought the bulk of the cash will come from a $10bn loan secured from its cash-rich neighbour Abu Dhabi in December, which helped Dubai World avoid defaulting on its debts. The emirate will also convert almost $9bn of Dubai World’s debt and $1.2bn of Nakheel’s debt into equity.
Dubai plans to convert $8.9bn of Dubai World’s debt into equity. The company is already wholly owned by the government.
It will convert its existing $1.2bn debt claim in Nakheel to equity.
The deal is still to be approved by a jury of creditors but early signs are that it will be accepted.
Dubai announced that Nakheel’s Islamic bonds will be repaid in full on maturity, sending its 2010 and 2011 bonds soaring on the back of the news. Nakheel’s dirham-denominated Islamic bond due May 2010 jumped 19 points to 89, and its dollar-denominated Islamic bond due in January 2011 soared 26.75 points to 92, its highest since July 2008.
It also has plans to extend the maturation of money owed to various creditors.
Limitless World, which has a $1.2bn loan repayment due later this month to creditors including Royal Bank of Scotland, will not be part of the deal. It is understood creditors pushed for Limitless World to be left out of the deal so a loan could be separately negotiated.
The emirate will look at the possibility of selling Dubai World assets including the QE2 cruise liner.