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Dubai Group Completes $6 Billion Debt Restructuring

Dubai Group LLC, an investment company owned by the emirate’s ruler, said it reached a final agreement with lenders on $6 billion in debt restructuring after three years of talks.

Lenders agreed to extend the maturity for secured debt to December 2016, and for partially secured and unsecured loans to December 2024, Dubai Group said in an e-mailed statement today. A further $4 billion of “related party debt has been subordinated to the claims of the bank creditors,” it said.

The company also announced management changes, with Ahmed Al Qassim appointed as chief executive officer, succeeding Fadel Al-Ali, who becomes chairman.

The deal is a further milestone in Dubai’s recovery from the 2009 debt crisis, which roiled global markets. Several state-owned companies in the Persian Gulf tourism and business hub, including palm island developer Nakheel PJSC, were forced to delay repayments after credit markets froze. Dubai Group, which owns stakes in Oman’s biggest lender Bank Muscat SAOG and local investment bank Shuaa Capital PSC, agreed on the main terms with a group representing lenders last year.

“It’s another step in Dubai ticking off the issues that lingered from the financial crisis,” Abdul Kadir Hussain, who oversees about $700 million as CEO at Mashreq Capital DIFC Ltd., said today by telephone. “This is yet more good news for Dubai’s credit.”

Dubai’s benchmark stock index, the world’s best-performing gauge this year among 94 tracked by Bloomberg, surged 3.6 percent, the most in more than four months, before today’s announcement.

Default Swaps

Dubai credit-default swaps, contracts for insuring its debt against default for five years, climbed to 660 basis points in 2010, according to data compiled by Bloomberg. The contracts were at 209 as of 5:46 p.m. in London.

The sheikhdom still owes Abu Dhabi and the central bank of the United Arab Emirates $20 billion, lent in 2009 to help save it from default. The emirate was forced to seek the bailout after property prices lost more than half their value. The first of that $10 billion comes due next month.

This week’s agreement will add to positive sentiment in the market, Amer Khan, senior executive officer at Shuaa Asset Management, said today in e-mailed comments. “There was an asset-quality overhang in Dubai over a year ago but that’s dissipated through the last four quarters quite steadily,” he said.

Emirates NBD PJSC, Dubai’s biggest bank by assets, led the group of partially secured and unsecured lenders which negotiated the deal on behalf of banks. The group also included Union National Bank PJSC, Noor Bank, Abu Dhabi’s Al Hilal Bank and Doha-based Commercial Bank of Qatar QSC. Paris-based Natixis SA and Dubai-based Mashreqbank PSC made up the committee of secured lenders, whose loans are backed by assets.

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