Some of the world’s largest banks, including HSBC (LON: HSBA), Standard Chartered (LON: STAN), Royal Bank of Scotland (LON: RBS) and Lloyds Banking Group (LON: LLOY) have joined with bondholders in organizing their response to Dubai World’s request for restructuring over $26 billion in debt.
A group of bank creditors including HSBC, Standard Chartered, RBS, Lloyds and several local banks have formed a steering committee and are expected to meet with representatives from Dubai World on Sunday or Monday.
Since Dubai’s department of finance took over the management of Dubai World last week and shocked the financial community last week by calling for a standstill on its debt until May, there has been a focus on the repayment of $4 billion sukuk from Dubai World’s developer Nakheel.
The statement made by Dubai World left the world thinking that the restructuring may involve more than a six-month standstill on debts. Although the total size of Dubai World’s bank debt isn’t clear, some say it could be around $16 billion. Banks from around the world, including Europe, North America, Asia and the Middle East are believed to have exposure to debt from Dubai World. Some analysts believe that about 40% of the debt that Dubai World owes could be held by local banks in the U.A.E.
Analysts are trying to figure out what debt that Dubai World owes is trying to be rescheduled. Many believe that banks will begin asking the same questions that its bondholders are asking, such as “what really are Dubai World’s liabilities and assets?” Many banks are expecting the worst from Dubai World and believe that regardless of what disposals and asset sales occur, the final numbers will not result in anything close to a full recovery. “There is a major gap and there will be major pain,” one analyst said.
