Sunday, April 18, 2010

Dubai World to offer 1% interest on restructured loans

Dubai World, the state-owned holding company restructuring US$24.8 billion (RM79.17 billion) of debt, is offering to pay creditors 1% interest on new loans as part of a restructuring plan, according to a banker familiar with the plan, reports Bloomberg.

Banks are reluctant to accept the new rate presented on March 25 as it is lower than the market rate of about 5% and would force Dubai World’s creditors to book impairment provisions, two bankers said, declining to be identified because the talks are private. Provisions could vary from 5% to 20% of the loan value depending on how the transaction is structured, they said. Reuters reported the 1% interest rate on the new loans earlier yesterday. A spokesman for Dubai World declined to comment. He repeated comments made by Dubai World chief restructuring officer Aidan Birkett in March that the company did not expect the fundamentals of the restructuring proposal to change and that the negotiations could take months.

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