Dubai Holding Debt Restructuring

Asa Fitch over at The National has an article about Dubai Holding which has left me scratching my head.

If I'm not mistaken, in the last day or so, I read a statement by HE AlSuwaidi or maybe HE AlTayer that there would be no additional mega debt reschedulings.

And I definitely recall Shaykhk Ahmed Bin Saeed Al Maktoum saying around mid April that Dubai Holding doesn't have any problems.  Apparently not a single one.  And that's quite an enviable position to be in for a company at any time, but especially in the current environment.

So you can imagine my surprise when I read in both the Financial Times and The National that indeed Dubai World (Oops, that should be Dubai Holding) had engaged advisors to study the financial condition of its two key subsidiaries.

"The accounting companies are being asked to evaluate the subsidiaries’ financial health and make recommendations that could include pushing for lower interest rates and delaying debt repayments."

Either or both of these would fit my bankers' definition of a restructuring.  And would as I've noted before fit that of IFRS as well. 

Dubai Holdings Commercial Operations Group - Voluntary Suspension of MTN Listing on Nasdaq Dubai

DHOC announced that it was voluntarily suspending its listing due to failure to provide 31 December 2009 financials within the mandated time frame.  It expects to report by 16 May as reported earlier.

NasdaqDubai also announced that it had suspended IIG for failure to provide its 2009 financials as well as the continuing suspension of the following (already suspended) for failure to provide 31 December 2009 financials:

1. TID Sukuk
2. Nakheel 2
3. Nakheel 3

Dubai Holdings Commercial Operations Group - Delay in Financials

From today's Nasdaq Dubai.

29 Apr 2010 - 09:34:26

Dubai Holding Commercial Operations Group LLC (“DHCOG”) has extended the publication date for its 2009 consolidated financial statements by two weeks until 16 May 2010 as DHCOG has extensively realigned its operating businesses, undertaken a conservative revaluation of its real estate portfolio, and has conducted a thorough impairment testing exercise across all its projects.

These steps have resulted in a slight delay in completing the consolidation process of its financial statements.

The expressions "conservative revaluation of its real estate portfolio" and "thorough impairment testing exercise across all its projects" are unlikely to be accompanied by bumper earnings for 2009.

Dubai Holding to Restructure?

Quoting unnamed sources, The Financial Times reports that Dubai Holding is considering appointing a financial advisor to assist it with exploring the rescheduling of its loans which are said to be about US$20 billion.  DH declined to comment on "speculation".

It seems that if DH has an issue, it is largely with highly levered foreign investments, many of which were bought for top dollar at the top of the market.

I'd expect that in terms of priority, Cirque du Soleil would be further back in the line for cash than say Nakheel or Limitless.

On DH's portfolio, just last week, Dubai International Capital filed a motion in Amsterdam Court to try and prevent Oaktree Capital (a distressed debt specialist investor) from taking control of AlMatis (which DIC acquired in November 2007) via a debt to equity conversion.  As has been noted in the press, a couple of hotels were turned back to the lenders earlier.

A financial advisor could be quite useful to DH not just for rescheduling but  perhaps more importantly for a corporate reorganization or refocusing of strategy.  One  key step could be triage of the foreign assets.  In effect deciding which ones have the better prospects and focusing resources on those and letting the less robust ones go.