Friday, July 23, 2010

Dubai World - Lenders Will Be Worse Off If They Reject Current Deal


Reuters reports in an exclusive that it has seen a document that DW has circulated to its creditors warning of the dire results if creditors reject the current deal.
  1. No government guarantee
  2. Loss of pari passu with the Dubai Fund.
  3. Withdrawal of the generous offer to use previously ring fenced assets from Isthimar World and Infinity (MGM Grand in Las Vegas) to fund repayments.
  4. Longer tenors.
  5. Significant reduction in ultimate recovery.
As Reuters notes and quotes:
The document made clear that creditors would suffer in a liquidation scenario and that Dubai's own coffers would be protected.

"Recoveries for all creditors except DFSF in a liquidation scenario would be significantly below those expected under the proposal," the debt plan said.
Of course this announcement is completely unrelated to the fact that DW is trying to get creditor approval for its current plan which it "improved" once already because of creditor pressure.

Having been involved in similar such exercises,  AA can vouch that borrowers and/or bank steering committees never ever ever use dire threats to try and persuade other creditors to accept a plan.  No fear mongering.  No threats. You know stuff like:  This is the best deal you'll ever get.  Take it or leave it.  The alternative is destruction of value in a messy bankruptcy.  I'll hold my breath until my face turns blue.

And AA should know as he has been both a threatenee and a threatenor - though in an institutional and not a personal capacity.

Realistically at this point, DW is close enough to the magic number necessary to cram down creditors that it needs just a few more.  

You do remember how out of a solicitude for a fair and just process Shaykh Mohammed issued a special decree that DW's debt restructuring would be handled according to the DIFC regime.  And some said the Shaykh didn't have The Vision Thing.  As far as AA can see, he saw this coming all along.

And finally a virtual tip of AA's enormous tarboush to Aidan and DW.  It seems DW will sell "strategic assets" to fund repayments at least at some stage.  Note the use of the term "strategic" as opposed to "non core".

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