Dubai Group restarts $10 billion debt talks: sources

Thu Apr 12, 2012 12:23pm EDT
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By David French and Mirna Sleiman

DUBAI (Reuters) - Dubai Group, part of the investment vehicle headed by Dubai's ruler, has proposed a new solution to its $10 billion debt problem, sources said, reviving talks that stalled more than two months ago.

The company wants to pay as little as 1 percent interest for an extension of its debt of up to 12 years, sources told Reuters on Thursday.

The proposal, sent to lenders on the two creditor committees earlier this week and which will be put to all banks at a meeting on April 16, is the first time Dubai Group has offered a solution since the government walked away from talks at the end of January.

However it is unlikely this opening salvo in the new round of negotiations will yield an agreement, the sources said.

"The fact is this will be met with a lot of resistance and it is very unlikely that something that looks like this will be acceptable to the creditor group," one source said, speaking on condition of anonymity.

Under the plan put forward by Dubai Group, a unit of Dubai Holding DUBAH.UL, the personal investment vehicle of Sheikh Mohammed bin Rashid Al Maktoum, lenders will be offered new terms based upon the level of security they currently hold. Those with assets backing their claims will be offered a better deal.

Proposed tenors run from 3.5 years - for lenders holding debt in the $330 million syndicated loan backed by a stake in Malaysia's Bank Islam - up to 12 years for unsecured creditors, the source said.

Proposed interest rates on the debt will start at 1 percent for unsecured creditors and increase incrementally for those with assets against their claim, two sources said - although the higher interest rates are still regarded as low.   Continued...

Sheikh Mohammed bin Rashid Al Maktoum, vice president of the UAE and ruler of Dubai, is seen after the opening session of the World Economic Forum (Summit on the Global Agenda) in Abu Dhabi October 10, 2011. REUTERS/Jumana El Heloueh