Dubai World seeks restructuring of all debt

Dubai World, the state-run company grappling with $59 billion of liabilities, will ask creditors for a “standstill agreement” and to extend the maturities of all debt repayments by Dubai World and its property unit Nakheel PJSC until May 30 next year.

Dubai’s Supreme Fiscal Committee also hired Aidan Birkett from Deloitte LLP to restructure Dubai World, Dubai’s Department of Finance said in an e-mailed statement today. Nakheel has a $3.52 billion Islamic bond maturing on Dec 14.

“The Dubai Financial Support Fund, working with the chief restructuring officer, will start to assess and evaluate the extent of the restructuring required,” it said. “As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least May 30, 2010.”

The Department of Finance said the $5 billion Dubai raised today by selling bonds to two Abu Dhabi government-controlled banks for its support fund “is not linked to the restructuring of Dubai World and is meant for the general purposes of the Dubai Financial Support Fund.”

Nakheel’s bond repayment was the biggest maturity for a Dubai entity since credit markets froze following the September 2008 collapse of Lehman Brothers Holdings Inc in New York. The developer owes more than $5 billion in Islamic bonds by 2011, Bloomberg data show. Nakheel accumulated debt during a five-year real-estate boom in Dubai in which the emirate borrowed $10 billion and its state-controlled companies $70 billion to help diversify the economy.

The emirate set up a $20 billion support fund after the global credit crunch hurt its property, finance and tourism industries, leaving companies unable to raise debt as credit markets froze. The first $10 billion was raised by selling five- year bonds to the United Arab Emirates central bank in February, and some of the money went to Nakheel.