DUBAI World, the state-owned conglomerate, has reached an agreement “in principle” with most of its bank lenders to restructure debt worth $23.5bn (£16.4bn).
It said in a statement it would be left with debts of $14.4bn after the restructuring.
Dubai World asked for a six-month delay on debt repayments in a move which shook world markets.
The deal, which has no new financial aid from the government, must still be approved by banks outside the core negotiating panel.Dubai, famed for extravagant property projects and a tax-free lifestyle, has struggled to bring its debt burden, estimated at $101bn, under control.
The Gulf Arab emirate used massive amounts of leverage to transform itself into a trade and tourism hub, but the global financial crisis and a collapse in oil prices in 2008 brought an abrupt end to a six-year boom.
The emirate stunned global markets last November when it said it would delay repayment of $26 billion in debt linked to Dubai World and its property units, Nakheel and Limitless. Dubai unveiled a $9.5bn rescue plan in March.
"This closes the main chapter but that doesn't mean we don't have a bumpy ride ahead," aid Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.
"There are still issues such as Dubai Holding and others, but this has been mostly discounted for. The air is not completely clear but the main chapter is."
City A.M. Reporter