Dubai Group LLC’s creditors are seeking an option to be repaid early as the investment company controlled by Dubai’s ruler reorganizes $6 billion of bank debt, according to three people familiar with the talks.
Under the early exit proposal for the 10-year debt restructuring, banks can choose to be repaid the market value of their loans after five years, said two of the people, who asked not to be identified because the information is private.
Banks opting for the exit clause are also seeking a guarantee that Dubai Group will have the cash to repay in case it can’t raise funds by selling assets, some of which are considered indivisible, one of the people said. A Dubai Group spokeswoman, who asked not to be identified because of company policy, declined to comment.
Dubai Group, controlled by Dubai Holding LLC, is one of several companies in the emirate reorganizing debt after the global credit crisis eroded the value of its assets. Royal Bank of Scotland Group Plc, Commerzbank AG and Standard Bank Group Ltd. abandoned 18 months of restructuring talks with the investment company after failing to reach an agreement, two people familiar with the matter said on July 10.
Dubai Group invests in financial services industry and owns property in the U.S., according to its website. It holds stakes in companies including Dubai-based investment bank Shuaa Capital PSC, Cairo-based investment bank EFG-Hermes Holding SAE and BankMuscat SAOG in Oman, the country’s biggest lender.
Dubai Group appointed eight banks to represent creditors in 2011 to negotiate the terms on $10 billion of liabilities, of which it owed $4 billion to shareholders.
Emirates NBD PJSC, the United Arab Emirates’ biggest bank by assets, said July 23 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.
In April, Dubai Group proposed paying interest of 1 percent to 2.5 percent in a $6 billion debt restructuring, three people familiar with the plan. Under the proposal, secured creditors would be repaid in three years, while partially secured and unsecured loans will mature in 12 years with additional interest paid at the end of the term, they said.