Royal Bank of Scotland Group Plc and three others will be paid 18.5 cents to the dollar for their loans by Dubai Group LLC to end litigation in a $6 billion debt restructuring, two people with knowledge of the matter said.
Standard Bank Group Ltd., Commerzbank AG and Commercial International Bank Egypt SAE also agreed to the payment after walking away from the restructuring talks in July with Dubai Group, an investment company owned by Dubai’s ruler, according to the people, who asked not to be identified because the information is private. Dubai Group proposed last year to repay the loans in full over 12 years in the debt restructuring.
About 18 banks that were part of the same $1.5 billion syndicated loan have also been offered the deal or agree to the original 12-year restructuring plan, the people said. The lenders have until the end of the month to accept and litigation may begin again if the deal is blocked, one of the people said. A final restructuring agreement involving about 35 lenders and all of the debt is expected by the end of the month, the person said.
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 2008 global credit crisis. The company, whose parent is owned by Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum, used cheap loans to invest in financial-services companies in the region and property in the U.S.
The Financial Times reported the settlement earlier today. Spokesmen for Dubai Group and RBS declined to comment. A call to Commercial International Bank’s office in Cairo wasn’t answered. Martin Halusa, a spokesman for Commerzbank, and Ross Linstrom, a spokesman for Standard Bank, declined to comment.
Dubai Group, which also owes another $4 billion to shareholders, holds stakes in companies including Dubai-based investment bank Shuaa Capital PSC, Cairo-based investment bank EFG-Hermes Holding SAE and BankMuscat SAOG, Oman’s biggest bank by assets. 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.
Dubai Group’s 12-year restructuring deal proposed four interest-rate classes depending on the currency and the type of creditors, two people with knowledge of 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 of Dubai make up the committee of secured lenders. RBS and Emirates NBD PJSC were leading the group of partially secured and unsecured lenders.