Dubai World mulls sale of prize assets to pay debts

By Asa Fitch  www.thenational.ae

Dubai World may sell prized possessions, including the ports operator DP World and AtlantisThe Palm, to raise up to US$19.4 billion (Dh71.25bn) if it needs to meet debt obligations under its restructuring plan with bankers.

Nakheel Harbour and Tower

The plan to offload the assets is part of a contingency were revealed for the first time yesterday to be part of restructuring documents given to bankers last month.

Assets listed in the documents include DP World, the Atlantis, MGM Resorts International and the luxury retailer Barneys New York, along with other high-profile assets acquired before the financial crisis threw the state-owned company’s finances into the red.

Dubai World could raise up to $19.4bn over eight years through sales. The assets earmarked for possible sale are currently valued at as much as $10.4bn.

A source close to Dubai World said the company would hold on tightly to its best assets, including DP World. Those “strategic” companies would be last to go, the source said.

A spokesman for Dubai World declined to comment about the documents but the source confirmed the plan had been given to bank creditors and was one of a number of possible methods of raising money to repay debt.

Dubai World received approval from its main group of bank creditors in May on its restructuring, worth a total of $23.5bn including claims that the Government is forgoing. The company is now awaiting a final sign-off from smaller banks holding about 40 per cent of the bank debt of $14.1bn.

Under the restructuring proposal, banks are to be given new five and eight-year loans, with interest ranging from a flat 1 per cent to interest tied to prevailing rates in the UAE. The loans include additional payments due when the loans mature, and some lenders are to receive shortfall guarantees from the Dubai Government.

Dubai World’s most coveted assets, however, are not likely to be offloaded, according to sources familiar with the situation.

The five and eight-year restructured loans could be refinanced before they mature, in which case the company would not be obligated to execute further sales.

A banker involved in the restructuring talks said neither Dubai World nor the banks wanted the company to part with prized assets at distressed prices.

With the five and eight-year horizons, the company had plenty of time to ride out the global asset price decline and possibly arrange for alternative ways of paying back lenders, he said.

“Everything is for sale but they have breathing space given the five-year and eight-year debt,” the banker said. “It’s very cheap debt, so there’s no reason to sell immediately. It gives them the opportunity that if things get substantially better, they might refinance the debt in the future.”

The source said that because banks were keen to lend before, they might be again.

“It may be that they don’t sell the [prize] assets in the end,” he said.

As the restructuring talks continue, Dubai World has already begun to sell off some of its assets.

Istithmar World, a private equity subsidiary, put the marine services provider Inchcape Shipping Services up for sale earlier this year, although that transaction is now on hold. Istithmar, which holds Dubai World’s stake in Barneys New York, sold office space in London earlier this month for £173 million (Dh979.8m). It has recently sold other property assets in London and New York, as well as a stake in India’s SpiceJet.

Dubai World said in the restructuring documents that it planned to appoint a new managing director and chief financial officer. Aidan Birkett of the accounting firm Deloitte, who is currently serving as the company’s chief restructuring officer, is expected to remain in that position until December.

The documents also revealed that Nakheel, a Dubai World property subsidiary behind the emirate’s Palm islands and the World archipelago, had a total of $10.9bn of bank debt. It also has $5.1bn of claims from contractors and other businesses and $9.2bn of liabilities to customers.

The documents also said Dubai World planned to transfer assets to Nakheel after their planned separation, including land earmarked for the Nakheel Harbour and Tower and the massive Waterfront development near the border with Abu Dhabi.

afitch@thenational.ae