Friday, September 14, 2012
Banks Launch Legal Challenge Over Dubai Debt
Fri., September 14, 2012
Three international banks that backed out of $10 billion debt restructuring talks with an investment company controlled by Dubai's ruler said Thursday they are now pursuing legal action against the firm, dashing hopes of a consensual deal, The Seattle Times reported on an Associated Press story. The move by Britain's Royal Bank of Scotland, Commerzbank of Germany and South African lender Standard Bank will likely further complicate Dubai Group's efforts to move beyond its debt troubles after more than a year and a half of negotiations with creditors. The three banks said in a joint statement they had offered numerous concessions but since no deal could be reached, they had no choice but to take their case to court. "Our preference was always to conclude an agreement without formal legal proceedings and we therefore remain open to such an outcome if an acceptable commercial resolution is forthcoming. However, to date no satisfactory proposal has been put forward," the banks said. The lenders say they will not be commenting further because they are bound to keep details of any proceedings confidential. Dubai Group and its parent, Dubai Holding, are personally controlled by the city-state's hereditary ruler, Sheik Mohammed bin Rashid Al Maktoum. That means cases involving them are not eligible to be heard in a special Dubai tribunal set up to deal with legal challenges involving Dubai World, another state-linked company that faced serious debt repayment difficulties. Dubai Group said a number of creditors have expressed their support for the revised repayment terms it is offering, and it remains optimistic about the negotiations. The legal challenge has been filed with a court in London, according to people familiar with the matter. They spoke on condition of anonymity because they were not authorized to release details of the case. Dubai Group's severe debt repayment problems came to light in late 2010, a year after the fast-growing Gulf emirate shocked world markets with a financial crisis involving state conglomerate Dubai World.