THURSDAY, APRIL 5, 2012
Dubai International Capital LLC, the owner of Travelodge Ltd., reached an accord to alter terms of $2.5 billion of liabilities as Dubai’s state-linked companies restructure debt after roiling global markets in 2009.
Lenders will get 2 percent interest on about $2.15 billion of debt that will be extended for five years, Dubai Holding LLC, the company’s parent, said in an e-mailed statement today. The maturities of a further $350 million will be extended for three years at an “unchanged contractual rate of interest.”
Optimism about the Persian Gulf’s tourism and trade hub, which was rescued from default in 2009 by a $20 billion loan from the United Arab Emirates’ central bank and Abu Dhabi, has surged after state-owned Dubai World restructured $25 billion of debt last year. Dubai Holding Commercial Operations Group LLC repaid a $500 million bond that matured in February.
“We have seen Dubai Inc. achieving tangible progress on debt restructuring and refinancing, and making repayments on time,” Chavan Bhogaita, head of the markets strategy group at National Bank of Abu Dhabi PJSC, said in an e-mail today. “The combination of these factors, and the improved communication with the markets, has helped generate a much more positive tone in the debt capital markets toward Dubai credits.”
Yields on Dubai government’s dollar-denominated bonds dropped to record lows this year. Dubai’s benchmark index has advanced 25 percent this year, making it the best performing measure in the Persian Gulf.
Dubai International, the private equity unit owned by the emirate’s ruler, has already sold stakes in Sony Corp., European Aeronautic Defence & Space Co. and India’s ICICI Bank Ltd. in recent years. It still owns stakes in companies such as German industrial packager Mauser AG, alumina-products maker Almatis and Doncasters Group Ltd., according to its website.
The company sold its stake in Oger Telecom Ltd. in August and two months later offloaded the holding in hotel operator Ishraq Dubai for $130 million. It also sold its 45 percent interest in steel castings company KEF Holdings Ltd. to Tyco International Ltd. for $178 million in June after paying $126 million for the stake in September 2008.
‘No Pressure to Sell’
Dubai International is under “no pressure to sell assets,” Chief Executive Officer David Smoot said in the statement. “Despite the challenging macroeconomic environment, the portfolio is well-positioned to navigate current markets with less leverage, better liquidity and long-term financing, reflecting significant future value potential.”
A group of six lenders, HSBC Holdings Plc (HSBA), Emirates NBD PJSC, Royal Bank of Scotland Group Plc (RBS), Lloyds Banking Group Plc (LLOY), Mashreqbank PSC and Noor Islamic Bank PJSC, negotiated with Dubai International on behalf of about 20 lenders.
Dubai International is considering a sale of Mauser, people familiar with the plans said on Feb. 10. Its U.K. budget hotel chain Travelodge is restructuring its debt with financing from New York-based hedge funds Avenue Capital Group LLC and GoldenTree Asset Management LP.
Dubai Holding, owned by ruler Sheikh Mohammed Bin Rashid Al Maktoum, also appointed a new board for Dubai International with Fadel Al Ali, executive chairman of Dubai Holding Commercial Operations, becoming the chairman. Other board members include Smoot and three independent directors Aidan Birkett, Christopher Rowlands and Abdullah Sharafi.
Dubai Holding said it is now focusing on restructuring the debt of Dubai Group LLC, another investment company owned by the emirate’s ruler.
“Dubai Holding will continue to focus on reaching a consensual agreement with Dubai Group lenders and remains confident that the Dubai Group restructuring will also reach a successful agreement,” CEO Ahmed Bin Byat said in the statement.
Dubai Group offered to pay creditors over five to 10 years as it seeks to restructure $6 billion of bank debt, a banker familiar with the proposal said in February. RBS, Emirates NBD and Mashreqbank PSC (MASQ) are among banks that are leading the talks with the company.