Sunday, January 26, 2014
Even as Restructurings Progress, Dubai’s Debt Demons Linger
Global Insolvency reports that some people are critical of restructuring deals that are based primarily on extending debt maturities. So what are alternatives for companies in Dubai? Perhaps we will be seeing them file for bankruptcy protection in the U.S. so as to obtain a stay of collection efforts worldwide. We welcome related inquiries and comments.
Mon., January 27, 2014
State-owned investment firm Dubai Group announced its long-awaited $10 billion debt restructuring deal with creditors late on Thursday. While all bankers and advisors who took part in the often acrimonious negotiations breathed a sigh of relief, most of them are also aware that Dubai’s debt problems aren’t quite a thing of the past yet,The Wall Street Journal Middle East Real Time blog reported. Indeed, the Dubai Group debt deal is another example of what bankers often call an “extend and pretend” or “delay and pray” agreement: repayments are postponed (in the case of Dubai Group between 3 and 12 years depending on the type of exposure a bank holds) and meanwhile the indebted company must hope business picks up again and valuations improve so that asset sales are profitable enough to help pay back the creditors. Banks at the same time need to take provisions anticipating their potential loss in case not all of the loans are recovered. Some banks will treat the exposure as an outright loss, take the hit and move on but other, larger creditors cannot afford to swallow the bitter pill all at once and spread out their provisions over time.