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Dubai Holding unit delays $555 million loan once again

02 December 2010

Shaheen Pasha

Reuters

DUBAI: Conglomerate Dubai Holding’s main unit has extended a $555 million loan due November 30 to December 30, reinforcing niggling doubts over Dubai’s ability to resolve its debt troubles.

This was the third extension for Dubai Holding’s loss-making hospitality and property arm, Dubai Holding Commercial Operations Group ( DHCOG ). DHCOG previously delayed the loan in July and September. “The extension is required to finalize a new long-term facility,” the company said Wednesday.

Analysts say there was general optimism Dubai would be able to successfully restructure debt at Dubai Holding and its units, but until there is an official plan in place, markets will remain cautious.

State-owned conglomerate Dubai World sent global markets reeling last year when it requested a standstill on almost $25 billion of debt. The company secured unanimous approval for its restructuring plan in under a year.

“Once the Dubai World debt problem was fixed, the general impression is that you created a blueprint for future restructurings,” said Shakeel Sarwar, head of asset management at Bahrain-based Securities & Investment Co.

“But until we come up with solid news that the loan has been restructured like the previous Dubai World loan, there will be a bit of nervousness.”

DHCOG , a unit of the conglomerate owned by the Gulf Arab emirate’s ruler, took a big hit from its exposure to Dubai’s property crash and said in June it might resort to asset sales to deal with its debt after posting a $6.2 billion loss for 2009.

All eyes have been on Dubai Holding and its units following Dubai World’s restructuring, which was often bumpy as the company and its creditors butted heads over rates and terms.

“We can’t make an automatic assumption that Dubai World’s restructuring will be the same for everyone else,” said Abdel-Kadir Hussain, chief executive at Mashreq Capital.

“ Dubai Holding has some attractive businesses, and its overall debt is smaller than Dubai World’s.”

The company has debt obligations estimated at $14.8 billion.

Hussain said while DHCOG’s latest extension was expected, the market is looking toward signs of a more permanent solution on the horizon.

At a meeting with reporters in Dubai Sunday, Sheikh Ahmad bin Saeed al-Maktoum, chairman of the Dubai Supreme Fiscal Committee, said Dubai Holding was facing challenges as a result of the global financial crisis but reiterated that the company still had solid assets and investments.

He said Dubai Holding’s issues were “in no way comparable” to Dubai World’s challenges, but officials declined to provide specifics about Dubai Holding’s restructuring plans.

Officials at the meeting also indicated the debt-laden emirate might sell stakes in state-owned companies as it tries to dig itself out of a $100 billion-plus debt pile.

In November, Reuters reported that financial services firm Dubai Group, a unit of Dubai Holding , missed two payments on separate loans. A spokesman for the group said it set up a committee of banks to discuss its debt obligations.

Private equity firm Dubai International Capital (DIC), a unit of Dubai Holding with around $2.6 billion of debt, also delayed a $1.25 billion loan for the second time in September to November 30.

Analysts widely expect that DIC will also extend its November 30 loan.

© Copyright The Daily Star 2010.