UAE private equity group Dubai International Capital (DIC) completed a $2.5 billion restructuring with banks last month. It ends a difficult period for a firm whose ability to raise capital for international buyouts epitomized the extent to which banks trusted the creditworthiness of government-related entities in Dubai during the boom years.
DIC, part of the ruler Sheikh Mohammed Al Maktoum’s personal investment vehicle, Dubai Holding, still owns stakes in firms including US hedge fund Och Ziff, German industrial packager Mauser and German aluminium products manufacturer Almatis, as well as UK hotel chain Travelodge and UK engineering group Doncasters.
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| $2.15bln is extended to five years, $350mln to three years |
After valuations plunged and credit dried up globally, the firm’s own access to capital was further constrained by the debt-standstill request by state-owned conglomerate Dubai World in late 2009. DIC’s final $2.5 billion restructuring comes two years after it asked creditors for a three-month delay in repayment on a $1.2 billion debt in May 2010. Loan extensions
Under the terms of the restructuring, creditors will extend some $2.15 billion for five years, receiving a 2% interest coupon on the new facilities. A further $350 million will be extended for three years at the unchanged contractual rate of interest. US investment bank Lazard advised on the restructuring.
"Although we are under no pressure to sell assets, we have been able to make a number of profitable exits in recent months, demonstrating the quality of our investments and our ability to find buyers in current market conditions," chief executive David Smoot said in a statement.
Last year, according to Reuters, DIC was able to sell several local firms: Oger Telecom, steel castings firm KEF Holding, and hotel operator Ishraq Dubai, according to Reuters. In 2009, it sold stakes in Sony, European defence and aerospace firm EADS, and Indian bank ICICI.
"The restructuring of DIC is one step towards clearing one of the series of refinancings coming up in Dubai in 2012, 2013 and beyond," says Bashar Al Natoor, an analyst at Fitch (which rates DIC’s fellow Dubai Holding unit, DHCOG). Attention is now turning to the restructuring of the other international investment arm of Dubai Holding, Dubai Group, an entity with $6 billion of debt, mostly held by local banks.
Compared with DIC, Dubai Group focused more on financial firms. It owns stakes in Egyptian investment bank EFG Hermes and Cyprus’s Marfin Popular Bank – firms whose profitability has been adversely affected, respectively, by the revolution in Egypt and by the Greek debt crisis. Dubai Group missed two loan instalments in 2010. Its restructuring is complicated as the government has refused to give a backstop demanded by the firm’s unsecured creditors.
Consensus sought
"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," said Dubai Holding chief executive Ahmed Bin Byat in the statement on DIC’s restructuring.
London frontier markets brokerage Exotix calculates that, subsequent to the DIC deal, roughly two-thirds of Dubai’s bank-debt restructurings have been completed. According to Exotix, out of 11 debt restructurings announced since late 2009 and worth $34 billion in total, six have been completed, worth $21.9 billion.
