DUBAI (Reuters) - State-owned property firm Dubai Real Estate Corp (DREC) has taken over management of troubled Zabeel Investments, which is owned by the crown prince of Dubai, two sources familiar with the matter said on Thursday.
Zabeel, which has hospitality, property and private equity assets, owes approximately 6 billion dirhams ($1.6 billion) to mostly local banks.
In January, several sources involved in the process told Reuters that talks with banks to restructure Zabeel’s debt had ground to a halt, with multiple loans in limbo and few assets available for sale, leaving banks facing the possibility of steep losses on their loans.
Zabeel’s assets will now be managed by DREC and most of its staff were asked to leave, although some are being moved to DREC, the sources said. They did not specify the number of staff at Zabeel.
Officials at DREC, which has the largest land bank in Dubai and also runs a real estate management firm, were not immediately available for comment. Telephone calls to Zabeel’s office were not answered.
Zabeel, formed in 2006 and owned by Sheikh Hamdan bin Mohammed al-Maktoum, owns the lavish Zabeel Saray hotel on Dubai’s man-made Palm Jumeirah island. In the past, its assets have included stakes in high-profile companies such as Sony Corp and plane maker EADS, as well as businesses in Las Vegas.
Like many Gulf investment firms, Zabeel was hit hard by the global economic downturn in 2008 and it has not fully recovered, despite selling assets and pulling back on many of its investments.
It was not clear whether DREC’s management of Zabeel’s assets might revitalize the debt restructuring talks with banks. Over the past year, Dubai has pushed for solutions to debt problems at some of its other state-linked companies; Dubai International Capital DUBAHP.UL reached an agreement with banks earlier this year to reschedule $2.4 billion of debt, and Dubai Holding Commercial Operations Group DUBAHC.UL agreed on a $555 million rescheduling last December.
Editing by Andrew Torchia