Struggling state firm Dubai World
is ready to use a special tribunal to force rebel lenders into line on plans to delay repayment of $14.4 billion in debts, according to a source familiar with the matter.
The source spoke ahead of a key meeting on Thursday for creditors of the ambitious Gulf Arab emirate, which is laboring under more than $100 billion of debt including those of its flagship conglomerate.
It's unlikely all 73 banks will accept terms, which means it will likely go to a tribunal, the source said, adding that if the majority support the plan, the tribunal can compel holdouts to get in line so the restructuring can proceed.
Dubai set up the special tribunal to be arbiter of disputes between lenders and the stricken state company.
A deal has already been agreed with core lenders representing 60 percent of the loans.
The company, whose operations include real estate, ports and private equity investments, needs two-thirds acceptance to be able to take the deal to the tribunal in the event of a rebellion. Any lender can use the tribunal, but none has yet.
Bankers at the closed-door meeting said terms presented were unchanged from those agreed by the core group. Some are unhappy but saw little alternative.
We definitely have to go (with the plan), we don't want to be left out, said a Bahrain banker. We're not happy, the pricing is low.
According to a source who attended, one banker complained that lenders to Dubai World subsidiary Nakheel were getting a better deal.
A Dubai World statement said it expected to complete the restructuring in coming months.
Thursday's meeting took place in a lavish pink resort hotel at the tip of a man-made palm tree-shaped peninsula -- one of the ambitious projects that left Dubai gasping for cash after the global real estate bubble burst in 2008.
Bankers picked their way to the meeting past holidaymakers enjoying cut-price deals at the resort, which boasts a huge aquarium in one air-conditioned lobby protecting guests from the searing summer heat outside.
We're at the end game now, said one. Another was hopeful something good will come of this.
Accountancy firm Deloitte's Aidan Birkett has become the public face of Dubai World. Chairman Sultan Ahmed bin Sulayem, a childhood friend of Dubai's ruler Sheikh Mohammed bin Rashid al-Maktoum, is rarely seen in connection with the company since the debt crisis unfolded.
The Dubai government is the ultimate owner of Dubai World, part of the network of state firms known locally as Dubai Inc. Oil-rich Abu Dhabi, another of the United Arab Emirates, stepped in last year to help its neighbor with its debt burden.
The seven-strong core group of Dubai World lenders has agreed to reschedule repayment of loans due in the next few years into a five to eight year package paid at between 1 and 3.5 percent.
Investors in the region hoped the meeting, the first all-bank gathering since December, would pass off without any negative publicity.
As terms stand at the moment it's already priced in, but there's downside risk if some banks refuse to sign or hold out for better terms, said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading in Dubai.
The seven-member coordinating committee of banks comprises HSBC, Lloyds, Royal Bank of Scotland, Standard Chartered, Bank of Tokyo Mitsubishi, and local lenders Emirates NBD and Abu Dhabi Commercial Bank.
(Additional reporting by Rachna Uppal; Writing by Andrew Callus; Editing by Amran Abocar and David Holmes)