Dubai's most powerful private equity company, which owns stakes in Travelodge, Merlin Entertainment and DaimlerChrysler, has been forced to delay the repayment of a $1.25bn (£860m) tranche of debt in a shock move that has renewed fears in the emirate's financial stability.
Dubai International Capital (DIC), which is the investment arm of Dubai Holding, a conglomerate owned by the ruler, Sheikh Mohammed bin Rasid al Maktoum, announced it has secured agreement with its six lending banks to push back the repayment of the debt from June until September.
In a short statement, the company said: "The extension period would allow the implementation of a consensual longer-term plan that would enable DIC to maximise the value of its business for the benefit of all its stakeholders."
DIC and its banks agreed to the three-month delay at a meeting in Dubai yesterday. The banks, which are led by HSBC and Emirates Bank, were represented by Deloitte while Lazard, the London-based investment bank, was acting for DIC. The company has agreed to continue to pay interest and amortisation to keep the loans current, a DIC spokesman said.
The move comes amid increasing efforts by government-related entities to restructure loans as Dubai seeks to manage its $109bn debt burden.
Foreign banks, including British banks, have a large exposure to Dubai's debts, which adds to the concern about the financial institutions that are already under pressure from Europe debt crisis.
Just six months ago Dubai World, the bigger conglomerate behind Dubai Ports World, stunned global markets by announcing the need for a standstill agreement on its debts.
Last week, Dubai World said it has agreed in principle with its main creditors to restructure $23.5bn of debt and that it will now seek a final deal with all its creditors by end June.
Dubai Holding is smaller than Dubai World but, since it is owned and controlled by Sheikh Mohammed bin Rasid al Maktoum, its inability to pay its debts is more surprising. The conglomerate is thought to have around $12bn of debt due of which $2.6bn is held by DIC, including the $1.25bn that has just been delayed.
Dubai Holding is divided into DIC and Dubai Holding Commerical Operations which oversees Dubai Holding's property, business-park and hospitality investments, including hotel operator Jumeirah At its peak in 2008, DIC held assets of thought to be in the region of $13bn.
Over five years its high-profile investments have included £800m in Tussauds Group, the owner of the London waxworks, that was merged with Blackstone's Merlin Entertainment Group in 2007 and in which DIC owns a 20pc stake; £700m in Doncasters, the engineering group;and £675m in Travelodge. Through its smaller public equity arm, DIC owns stakes in HSBC Holdings, DamilerChrylser and EADS.
http://www.telegraph.co.uk/finance/news ... delay.html