UPDATE 3-Japan bank joins Dubai debt panel, debt deal may lag


By Nicolas Parasie and Rachna Uppal www.reuters.com

DUBAI, Jan 19 (Reuters) – Bank of Tokyo-Mitsubishi has joined Dubai World’s creditor committee, delaying the conglomerate’s debt standstill proposal and making an agreement unlikely before the end of the month, bankers familiar with the situation said.


State-owned Dubai World [DBWLD.UL] was expected to present its request to delay repayment of some $22 billion in debt by mid-January and the lack of information has been causing unease among investors.

Bank sources on Tuesday said the Japanese bank joined the six-member creditor committee to gain influence in debt talks.

“Tokyo Mitsubishi is in now. This has been communicated to us last week,” said a Gulf-based banker at a large international bank. “Banks have been allowed to the committee on the basis of their exposure but also on their expertise.

“On average it’s been said the creditors committee (excluding Bank of Tokyo) represents around 60 percent of Dubai World’s debts.”

The panel, which has yet to be formally announced by Dubai World, has four British and two United Arab Emirates’ banks.

“They (Tokyo Mitsubishi bank) want to have the benefit of what the others have done – due diligence, checks … and this takes longer to get approval,” said a Dubai-based banker who asked not to be identified. “A standstill agreement will now be more towards the end of the month.”

Dubai World rocked global markets on Nov. 25 when it said it would ask creditors to agree a standstill on $26 billion of debt, linked to its main property units, Nakheel and Limitless.

A last-minute bailout from Abu Dhabi in December helped Dubai avert default on a $4.1 billion Islamic bond by Nakheel.

But there has been no formal proposal to creditors on a debt standstill, which would enable it to restructure its operations.

Dubai World signalled in December it expected creditor approval on its debt proposal by the end of January.

Abu Dhabi’s bailout is contingent on the conglomerate reaching an agreeable deal with creditors, enabling it to fund operating costs and interest payments until the end of April.

“The banks are waiting for more clarity on Dubai’s position about what support is available,” said a banker at a Gulf-based lender, which is not on the coordinating committee.

Dubai admitted on Tuesday that half of a $10 billion bailout from Abu Dhabi last December came from an older debt deal, indicating the wealthy emirate wanted more evidence of Dubai’s fiscal probity before committing new money.

Dubai World said this month it is “some time away” from presenting its formal plan to creditors, though it is expected in coming weeks.


Bank of Tokyo-Mitsubishi is a unit of Japan’s biggest bank by assets Mitsubishi UFJ Financial Group.

It joins a coordinating committee which represents some 97 creditors of Dubai World and consists of Standard Chartered (STAN.L), HSBC (HSBA.L), Lloyds (LLOY.L) and Royal Bank of Scotland (RBS.L), and local lenders Emirates NBD (ENBD.DU) and Abu Dhabi Commercial Bank ADCB.AD.

“It is true that we have been considering joining the committee, but nothing has been decided yet,” said Takashi Takeuchi, a spokesman for Mitsubishi UFJ Financial Group in Tokyo.

A Dubai World spokesman declined to comment.

The debt standstill affects a $5.5 billion syndicated loan to Dubai World made in 2008 which was led, among others, by Bank of Tokyo-Mitsubishi and Sumitomo Mitsui Banking Corp. .

Although the Japanese bank does not disclose loans to individual clients, Takeuchi said it has about $8.9 billion of exposure to the Middle East.

Banks may have sold down their loan exposure in the secondary market, and one analyst has estimated that bookrunners typically retain only about 10-15 percent of a loan or bonds.

Other Asian creditors of Dubai World include Singapore’s DBS Group (DBSM.SI) and several Thai, Indian and Taiwanese banks.

“What this (Mitsubishi’s addition) implies is that the negotiation process will be prolonged and we may see some more banks enter the scene,” said Janany Vamadeva, banking analyst at HC Brokerage, predicting an agreement to extend maturities with interest paid out.

Earlier in January, Japan’s Nikkei business daily said a consortium of one Turkish and four Japanese companies will suspend construction of Dubai’s Metro due to a delay in payment from the Dubai government. A spokesman for general contractor Obayashi Corp  said the construction slowdown was due to cost increases linked to design changes.

(Additional reporting by Dinesh Nair in Dubai, David Dolan in Tokyo; Writing by Amran Abocar; Editing by Elaine Hardcastle)