Thursday, May 02, 2013

(This story was originally published on Wednesday.)

DUBAI (Zawya Dow Jones)--Debt restructuring talks between Dubai Holding Investment Group, a company with links to the emirate's ruler, and its creditors over a $1.2 billion loan have stalled after the government-controlled firm added new terms to an initial deal agreed by both parties earlier this year, people familiar with the matter said.

The bone of contention is an administrative fee that DHIG wants to charge creditors in case they want to sell off their exposure which wasn't part of the head terms both parties had agreed upon. Failure to resolve the debt talks could in theory lead to the unit having to declare insolvency, although that is unlikely to happen, said the people.

DHIG borrowed $1.2 billion in 2007 to fund the acquisition of a 9.9% stake in U.S. hedge fund Och-Ziff Capital Management by its subsidiary Dubai International Capital. The consortium that helped fund the acquisition consists of 9 banks including Morgan Stanley, Mashreq, Bank of Tokyo-Mitsubishi and Emirates NBD.

DHIG is the part of Dubai Holding, the conglomerate owned by the emirate's ruler, that oversees Dubai Group and Dubai International Capital. DIC signed a $2.4 debt deal with creditors last year, while Dubai Group is still trying to finalize its own $10 billion debt restructuring.

"Earlier this year Dubai Holding signed heads of terms with DHIG's creditors concerning the restructuring of DHIG's $1.2 billion syndicated loan," said a spokesperson for Dubai Holding. "Legal documentation is progressing well and we look forward finalizing the transaction as soon as possible," the person added.

But after agreeing initial terms, creditors and the company now appear to be in a deadlock.

"We are all very tired of spending so much time and efforts when they (Dubai) keep coming up with new requirements," said one person with knowledge of a conference call that took place between Dubai Holding representatives and the creditors.

Under the initial agreed terms, the DHIG loan facility was extended until December 2020, after originally maturing in 2010.

It is unclear what the next step in the debt talks will be, but two people involved in the matter said it is unlikely creditors would undertake legal action and are still working on resolving the issue soon in order to wrap up the lengthy restructuring.

"Inevitably when you go from short to long form, there are always a number of minor commercial issues that need to be resolved," said one of the people close to the talks, who added that DHIG's restructuring talks are independent of Dubai Group's own restructuring discussions.

Clifford Chance is advising DHIG, while Norton Rose is working with the creditors, one of the people familiar with the matter said.

Write to Nicolas Parasie at nicolas.parasie@dowjones.com

Copyright (c) 2013 Dow Jones & Co.

(END) Dow Jones Newswires

02-05-13 0338GMT