Monday 1 March 2010

Dubai World - Debt Tribunal Opens But No Claims Lodged Yet


The National reports that the special tribunal has received about 100 inquiries on the process for filing claims though no claims have been filed yet.

The article also notes that if DW files a notice of an intent to restructure the Court can grant it a 120 stay of legal action to develop such a plan and present it to creditors.

Whether or not the company can restructure as is hoped depends on its economic position.  If that is weak and there is no external support, then it's hard to see how it can continue except under a disguised wind down.

I'd guess that this is precautionary move on the part of creditors.  They are preparing for a breakdown in the debt restructuring or some other need to prove their claims.

Earlier one of the reasons given for the delay on the DW side in presenting concrete proposals to its creditors was that it needed to "sort out the mess in its accounting".  If that is indeed the case, then it is perhaps just as likely that not all liabilities were recorded properly.  Back in the early 80's when oil prices collapsed many Saudi and foreign contractors found out that those "change orders" which their clients had needed done on a rush basis were not documented properly.  Whether it was a matter of proper procedures or a way to ride the trade and get discounts, the Saudi authorities slowed payments down dramatically.  Some improperly documented changes were disallowed.  A creditor (particularly one whose obligation is not a clear cut loan or bond) might be wise now to make sure its debt were acknowledged by the obligor.  And if not to prepare to litigate.

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