DUBAI (AFP) – Dubai World proposed Thursday to repay its creditors in full by issuing two tranches of new debt maturing in five and eight years, after months of talks on restructuring sovereign liabilities that had rattled world markets.
The announcement came shortly after the government of Dubai committed to pump up to 9.5 billion dollars in further support for the troubled group, helping the emirate’s main stock market index to a 4.5 percent rise by midday (0800 GMT).
Creditors, apart from the government’s financial support fund which has pumped cash into Dubai World, “will receive 100 percent principal repayment through the issuance of two tranches of new debt with five and eight years maturities,” the company said in a statement.
It said that the debt owed to creditors by Dubai World Company which will be negotiated amounts to 14.2 billion dollars, implying that the remainder of its total liabilities of 23.5 billion dollars “as at 31 December 2009” will be paid by the government.
The figure excludes debt owed by the group’s giant real estate subsidiary Nakheel, however, as it is intended that the two entities will be separated, company officials said.
The government will convert its financial support of 8.9 billion dollars to the group into equity, the company said.
The government will also undertake to inject up to 1.5 billion dollars in cash into Dubai World “to fund the company’s working capital and interest payment commitments that will arise from the new debt facilities,” the firm added.
The government will support Dubai World’s proposals to restructure its liabilities “with significant financial resources,” the head of the emirate’s Supreme Fiscal Council, Sheikh Ahmed bin Saeed al-Maktoum said in a statement.
These resources include a “commitment to fund up to 9.5 billion dollars in new funding over the business plan period,” he said.
Dubai World chief restructuring officer Aidan Birkett said: “This proposal represents the best possible solution for all stakeholders.
“It follows extensive discussions with our creditors, a thorough review of Dubai World’s business and significant financial support from the government,” he added.
Dubai had rocked global financial markets in late November when it said it might need to freeze debt payments by its largest conglomerate Dubai World, stoking fears of a state default over sovereign debt.
In December, Dubai World began negotiations with its creditors aimed at reaching an agreement to restructure its debt, shortly after the government covered due debts worth 4.1 billion dollars owed by Nakheel.
A government advisor told reporters in a telephone conference that Dubai World and Nakheel “will be separated.”
“That is frankly one of the pieces of the plan that will be worked out over the next couple weeks as well. But long-term, yes, they will be separate entities,” he said, asking not to be named.
Nakheel issued its own statement saying it will repay its debt, but without giving a figure on the amount.
Islamic Sukuk bonds will be paid as they mature in 2010 and 2011, while “secured bank creditors” will get 100 percent of the principal in addition to accured interest, it said.
Dubai was able to raise money in December to cover Nakheel’s debt thanks to a last-minute lifeline from neighbouring Abu Dhabi, which enjoys more than 90 percent of the oil revenues of the United Arab Emirates.
Dubai borrowed heavily during its boom years before the global economic downturn, fuelling its rapid growth into a regional trade, tourism and IT hub.
Dubai World’s total debt, including liabilities, is around 60 billion dollars. The emirate’s debt is estimated at between 80 and 100 billion dollars, but some analysts say it could be as high as 170 billion.
Dubai World is a state-owned conglomerate of 10 firms including Nakheel and the world’s third-largest ports operator, DP World.