Dubai World, the state-owned holding company seeking to alter the terms on $14.4 billion of bank debt, may raise as much as $19.4 billion in eight years by selling assets, a person with knowledge of the matter said.
If it sold those assets now it would probably get $10.4 billion, the person said, declining to be identified because the information is private. Dubai World and a group of its seven biggest lenders that are negotiating on behalf of about 70 creditor banks agreed on these asset values, the person said. Reuters reported the news earlier today, citing a document Dubai World presented to banks on July 22.
“These values are quite aggressive even in eight years’ time,” Andre Andrijanovs, an emerging market credit analyst at Exotix Ltd. in London, said in a phone interview. “I don’t see Dubai World raising this much from real estate.”
Dubai World, whose real-estate unit, Nakheel PJSC, has built palm-shaped islands off the emirate’s coast, and its main creditor banks agreed in May to alter the terms on $14.4 billion of bank loans and $8.9 billion of government liabilities to resolve a crisis that roiled global markets last year. It said banks would be paid $4.4 billion in five years and another $10 billion over eight years at below-market interest rates supported by assets sales.
Dubai World told banks it will sell assets if operating cash flows are insufficient to repay debt, a banker who attended the presentation said. The decision on which assets would be sold would depend on when each asset’s price recovers and by how much, the banker said.
A Dubai World official declined to comment.
Dubai and its state-owned companies racked up $109.3 billion of debt, according to International Monetary Fund estimates, as the emirate transformed itself into a tourism, trade and financial-services hub. About $15.5 billion of that is due this year, the IMF said.
Dubai World controls DP World Ltd., the world’s fourth- biggest port operator, private-equity firm Istithmar World PJSC, and Economic Zones World, an operator of business parks such as Jebel Ali Free Zone. Istithmar bought New York luxury retailer Barneys in 2007 for $942.3 million, while Dubai World acquired a $5.1 billion stake in U.S. casino company MGM Mirage in 2008.
Dubai World has identified DP World, Jebel Ali Free Zone, the Dubai Maritime City development and ship repair company Dry Docks World as its “strategic assets” that may generate as much as $11.8 billion if sold in eight years, the person said.
“The high end of the valuation range could be explained by Dubai World assigning high value to real estate based assets such as Maritime City, JAFZA and certain Istithmar’s holdings,” said Zafar Nazim, a London-based credit analyst at JPMorgan Chase & Co. “We expect the debt market to be more conservative and generally to head toward the lower end of the range.”