(This item was originally published Thursday.) By Oliver Klaus, Summer Said and Tahani Karrar-Lewsley Of ZAWYA DOW JONES DUBAI (Zawya Dow Jones)--A long awaited meeting between Dubai World and its creditors ended Thursday with little hope of an immediate agreement to restructure $23.5 billion of the conglomerate's debt. The gathering held at the swanky Atlantis hotel on Dubai's Palm Island was described as an "informational session" and it could be months before a final deal is agreed, the company said in an emailed statement. Reaching an agreement with creditors is seen as a vital step for the emirate as it rebuilds it reputation as a financial an investment hub in the Gulf after an estimated $100 billion pile of debt and the global downturn exposed its fragile economy. Thursday's meeting saw bankers presented with the key points of the term sheet that was already agreed in principle by its main group of seven creditors in May. That group comprising HSBC Holdings PLC (HBC), Royal Bank of Scotland Group PLC (RBS.LN), Standard Chartered PLC (STAN.LN), Lloyds Banking Group PLC (LLOY.LN), Bank of Tokyo Mitsubishi and local lenders Emirates NBD PJSC (EMIRATES.DFM) and Abu Dhabi Commercial Bank PJSC (ADCB.AD) holds $8.64 billion in Dubai World debt. Of the debt being restructured, banks hold $14.4 billion and Dubai government the rest. NOT HAPPY Despite the support of Dubai World's major creditors the mood of bankers leaving the meeting was mixed. All one executive had to say was that "the food was good", while many others simply rolled their eyes and frowned when asked if anything positive had come from the day. Suresh Vaidyanathan, head of operations at Bahrain-based Alubaf Arab International Bank, told reporters on leaving the session that he wasn't happy with the terms of the proposal. "We are not happy," he said. "The pricing is low. The backing of the U.A.E. government guarantee is not as per British law and anything can happen. We have to depend on their cashflow coming correct." In theory, Dubai World's smaller creditors could still block a deal that's supported by the coordinating committee, which accounts for about 60% of the debt. If unanimous support can't be gained, the deal will go before a tribunal, which can approve the proposal if there is support from 66% of creditors. The tribunal was established last year to deal with legal issues that might arise from the restructuring of Dubai World. "Dubai World has basically floated the idea that it may go to tribunal to force creditors to accept their terms. But this is unlikely to happen since many creditors don't have many options but to accept the terms," said one banker who attended Thursday's meeting. MARKETS CALM Dubai's government said in March that it plans to repay Dubai World's creditors 100% of the principal amount due but through extended tenor periods. Under the terms presented in May the first portion, or tranche, of $4.4 billion will be paid in five years, with 1% annual interest in cash but no shortfall government guarantee. The second tranche of $10 billion will be paid over eight years, with 1% interest plus varying payment-in-kind interest and shortfall guarantees. Lenders will have to choose between three options, depending on their exposure and on their priorities in regard to the shortfall guarantee and payment in kind. "Many of the creditors are not quite pleased with the terms and the pricing. But this is a long process and it could take months before we reach something solid," another banker said. The government of Dubai will convert $8.9 billion of debt and claims into equity in Nakheel, the real-estate arm of Dubai World, and commit to fund as much as $500 million of Nakheel's expenses and an interest facility of as much as $1 billion while maintaining 100% ownership of the company. Nakheel, the company behind Dubai's palm tree-shaped artificial islands, on June 14 presented its formal recapitalization and debt restructuring plans to bankers and said it expected "to complete the restructuring over the coming months." Nakheel earlier in July began making 40% cash payments, worth about 4 billion U.A.E. dirhams ($1.08 billion), to trade creditors after the developer signed "a substantial number of restructuring agreements." Stocks in Dubai closed down just 0.2% at 1528.97 Thursday amid light activity. Meanwhile the emirate's five-year sovereign credit default swap spreads tightened by around 2 basis points to 480 basis points, from Wednesday's close, according to Markit. Dubai's 5-year sovereign CDS peaked in February at 654.45 basis points. -By Oliver Klaus, Summer Said and Tahani Karrar-Lewsley, Dow Jones Newswires; +9714 446-1693; oliver.klaus@dowjones.com (Mark Brown in London contributed to this article.) Copyright (c) 2010 Dow Jones & Co. (END) Dow Jones Newswires July 24, 2010 23:47 ET (03:47 GMT)
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