Monday, September 13, 2010

Dubai World: Aurelius Capital Management, The Single Recalcitrant Creditor?

According to the Financial Times quoting informed sources close to DW, Aurelius Capital Management with a $5 million stake bought in the secondary market is the only creditor not yet to have signed on to the rescheduling.  

The company is billed as a US company.  It's unclear if there's a relation to Aurelius Capital Management in Vienna.   Perhaps this is a US-based fund managed by ACM Vienna?  There is an office for Aurelius Capital Management LP and Aurelius Capital Partners LP at 535 Madison Avenue in Midtown Manhattan.

With this level of acceptance and ACM's small ticket, it seems they can be easily brushed aside by recourse to the DIFC Special Court.  Once the Court ratifies the restructuring, I think that ACM would be effectively crammed down not just in the UAE.  

Perhaps, ACM is hoping that it's so small a fish, that rather than incur the fuss, DW will pay it to go away.

It all depends on how DW wants to respond.  Since Dubai Inc has other debts to reschedule, it may make sense to make an example of a recalcitrant creditor. Particularly, when the stakes are low.   If the Company wants to play hard ball, it can string  ACM out in court actions in other jurisdictions, forcing them to incur legal expenses.  Holding payments in escrow until they sign the rescheduling. 

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