Dubai World says it can raise $19.4bn in 5-8 years

30/09/2010 00:00 AST

Dubai World (DW) has assured its creditors it could raise $19.4 billion from the sale of its assets if they agree on a restructuring period of up to eight years, the Saudi American Bank Group (Samba) said on Wednesday.

In a study, Samba said a landmark debt restructuring deal reached between DW and more than 99 per cent of its lenders had a positive impact in the country as it boosted share prices and cut the cost of insuring Dubai's sovereign debt.

Samba, one of the largest banks in Saudi Arabia, said completion of the DW deal is scheduled for October 1, but that September 9 was the deadline to sign a lock-in agreement which included a consent fee of an additional 20 basis points over the original interest rate as an incentive to accept the proposal quickly.

"DW has also been reassuring creditors that it can raise sufficient sums from asset sales to meet rescheduled debt repayments when they fall due in 5-8 years time... DW has reportedly told creditors that it could raise up to $19.4bn from assets if sales are spread over the next eight years, while the figure would be only $10.4bn if it was forced to sell at current prices," the study said.

Citing DW and other sources, Samba said such sales would include 'strategic assets' like DP World and Jebel Ali Free Zone.

But it added that there was no indication that Abu Dhabi would be prepared to step in to meet any funding gap should asset sales fall short of current estimates, "which some suggest may be optimistic, although DW should also presumably have recourse to its future revenue flows."

Reports also indicate that DW and Dubai Holding have already raised at least $844 million in asset sales over the past year, Samba said.

"That said, markets have reacted favourably to the confirmed DW restructuring agreement. UAE share prices have surged, especially in Dubai, and the cost of insuring Dubai's sovereign debt against default has fallen."

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