Dubai World, the state-owned holding company in talks to renegotiate about $26 billion of debt, will ask banks for permission to delay loan repayments when it presents a plan to creditors this month, said three bankers familiar with the talks.
Banks may be able to avoid a so-called haircut, where they receive less money than what they are owed, if they wait to be repaid, said two of the bankers. The banks may also receive a guarantee from Dubai's government, one of the bankers said.
Dubai World and its Nakheel PJSC and Limitless real estate units used loans to finance real estate projects such as palm tree-shaped islands off the emirate's coast which they struggled to refinance amid the credit crisis. Dubai World said in November it would seek to delay repaying all loans until May, sparking the biggest plunge in developing-nation stocks.
"The proposal will be a meaningful one," said Saud Masud, Dubai-based head of Middle Eastern research at UBS. "I would highly doubt that what they come out with will be accepted and everyone moves on." Deloitte and Moelis and Co, Dubai World's advisers, are asking the Dubai Financial Support Fund for more money to fund interest payments on the loans in the meantime, the bankers said.
Dubai World will primarily rely on asset sales to finance the payments, bankers said.
Spokesmen for Dubai World and the Dubai Financial Support Fund declined to comment. Dubai World will approach lenders for the first time this week with a plan to restructure its debt, the Financial Times reported today. The company has asked creditors to meetings in London from today, the FT said.
Dubai World will present a restructuring proposal to its creditors after its advisers complete valuing the company's assets, a person close to the Dubai government said February 17th.
The final proposal will be made after consultations with the Abu Dhabi government and the United Arab Emirates' central bank, which along with two Abu Dhabi-owned banks lent $20 billion last year to Dubai's financial support fund to help state-owned companies during the credit crisis, he said.
Bloomberg