Dubai Group, Banks Said Close to $6 Billion Debt Agreement

Emirates NBD PJSC (EMIRATES) and Noor Islamic Bank are among creditors close to an agreement with Dubai Group LLC on restructuring $6 billion of debt after more than two years of talks, four bankers familiar with the matter said.

Law firm Linklaters LLP, which represents the so-called co- ordinating committee of creditors, is drafting the accord and a final agreement may be reached as soon as mid-December, the people said, asking not to be identified as talks aren’t public. The deal envisages interest of 1 percent to 2.5 percent and was proposed by Dubai Group earlier this year, the people said.

The creditor group, comprised of about 35 banks, is seeking to win approval from Royal Bank of Scotland Group Plc, Standard Bank Group Ltd. and Commerzbank AG for the deal, three of the people said. The three banks walked away from the lender group in July because of a lack of progress on the restructuring.

Dubai Group, controlled by Dubai Holding LLC, is one of several companies in the state seeking to restructure loans that were arranged before property prices slumped and credit markets froze with the onset of the 2008 global credit crisis.

Katie Taylor, a spokeswoman for Linklaters, declined to comment. A spokeswoman for RBS in Dubai, who can’t be identified under corporate policy, declined to comment. An Emirates NBD spokesman said the bank won’t comment on client issues. Martin Halusa, a spokesman for Commerzbank, declined to comment. A spokesman for Noor Islamic bank also declined to comment. A Dubai Group spokeswoman also declined to comment.

Sheikh Mohammed

Dubai Group, whose parent company is owned by Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum, used cheap loans to invest in financial services companies and property in the U.S. The company, which also owes another $4 billion to shareholders, holds stakes in companies including Dubai-based investment bank Shuaa Capital PSC (SHUAA), Cairo-based investment bank EFG-Hermes Holding SAE (HRHO), and BankMuscat SAOG (BKMB), Oman’s biggest bank by assets.

Dubai Group is also among several companies that have restructured debt in the emirate since the financial crisis. Dubai World, one of the sheikhdom’s three main state-controlled holding companies, reached a deal in March 2011 with about 80 banks to delay payments on about $15 billion of loans.

Restructuring Deal

The restructuring deal proposed four different interest rate classes depending on the currency and the type of creditors, two people familiar with the proposals said in April. Secured creditors, whose loans are backed by assets, will be repaid principal in three years, according to the people. Banks that offered partially secured and unsecured loans will be returned principal in 12 years and receive additional interest at the end of the loan term, they said.

In 2011, Dubai Group appointed eight banks to two committees representing creditors. Paris-based Natixis SA’s Nexgen unit and Mashreqbank PSC (MASQ) of Dubai make up the committee of secured lenders. RBS and Emirates NBD PJSC were leading the group of partially secured and unsecured lenders.

The debt restructuring has also led to loan losses at banks. Emirates NBD, the United Arab Emirates’ biggest bank by assets, said in July it had set aside 32 percent of the value of Dubai Group’s loans, or 1.47 billion dirhams ($400 million), to cover for losses as a result of the debt restructuring.

To contact the reporter on this story: Dana El Baltaji in Dubai at delbaltaji@bloomberg.net or Stefania Bianchi in Dubai at sbianchi10@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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