DUBAI, (Reuters) – Japan’s Bank of Tokyo-Mitsubishi will join Dubai World’s creditors committee, potentially delaying a debt standstill plan as it completes due diligence, several bankers familiar with the situation said.
The Asian bank has demanded a voice on the committee — made up of four British and two United Arab Emirate banks — to represent its interests as well as that of other Far East lenders exposed to Dubai World, according to one bank source on Tuesday.
State-owned Dubai World rocked global markets on Nov. 25 when it said it would ask creditors to agree a standstill on $26 billion of debt, linked to its main property units, Nakheel and Limitless.
A last-minute bailout from Abu Dhabi in December helped Dubai avert default on a $4.1 billion Islamic bond by Nakheel.
But the conglomerate has yet to present a formal proposal to creditors on a standstill for the rest, some $22 billion, which would enable it to restructure its operations.
“It’s good they got in, they were making all the noise, saying there was no representation from the Far East,” said a Dubai-based banker, who asked not to be identified.
Bank of Tokyo-Mitsubishi is a unit of Japan’s biggest bank by assets Mitsubishi UFJ Financial Group.
“It is true that we have been considering joining the committee, but nothing has been decided yet,” said Takashi Takeuchi, a spokesman for Mitsubishi UFJ Financial Group in Tokyo.
A Dubai World spokesman declined to comment.
“Tokyo Mitsubishi is in now. This has been communicated to us last week,” said a Gulf-based banker at a large international bank.
“Banks have been allowed to the committee on basis of their exposure but also on their expertise. We don’t have a geographical breakdown of exposure. But on average it’s been said the creditors committee (excluding Bank Tokyo) represents around 60 percent of Dubai World’s debts.”
MORE DELAYS ON STANDSTILL
The debt standstill affects a $5.5 billion syndicated loan to Dubai World made in 2008 which was led, among others, by Bank of Tokyo-Mitsubishi and Sumitomo Mitsui Banking Corp.
Although the Japanese bank does not disclose loans to individual clients, Takeuchi said it has about $8.9 billion of exposure to the Middle East.
Banks may have sold down their loan exposure in the secondary market, and one analyst has estimated that bookrunners typically retain only about 10-15 percent of a loan or bonds.
Other Asian creditors of Dubai World include Singapore’s DBS Group and several Thai, Indian and Taiwanese banks.
Earlier in January, Japan’s Nikkei business daily said a consortium of one Turkish and four Japanese companies will suspend construction of Dubai’s Metro due to a delay in payment from the Dubai government. A spokesman for general contractor Obayashi Corp said the construction slowdown was due to cost increases linked to design changes.
The addition of the Japanese bank to the creditor committee — which has yet to be formally named by Dubai World — has further delayed an already protracted process.
Dubai World was expected to present its proposal in early January for creditor approval by the end of the month. Abu Dhabi’s bailout is contingent on the conglomerate reaching an agreeable standstill deal with creditors.
The coordinating committee, which represents some 97 creditors of Dubai World, consists of Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland, and local lenders Emirates NBD and Abu Dhabi Commercial Bank.
The conglomerate said this month it is “some time away” from presenting its formal plan to creditors, though it is expected in coming weeks.
On Tuesday, Dubai admitted that half of a $10 billion bailout from Abu Dhabi last December came from an older debt deal.