Dubai March debt plan to be `equitable`

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Dubai will present an "equitable" plan to Dubai World creditors next month that does not give preferential treatment to the government but banks are unlikely to warm to the proposal, a source familiar with the matter said.

Dubai World, the debt-laden conglomerate whose property units built iconic landmarks in the Gulf Arab emirate, is in talks with creditors over restructuring USD 22 billion in debt.

"The government wants to show it's handling this in the most equitable way, everyone gets a fair shot," a source familiar with the matter said on Monday.

"We are going to put forward a plan that shares the recoveries with the lenders."

The company rocked global markets last November with its plan to request a delay on repaying USD 26 billion debt and narrowly averted default on a USD 4.1 billion Islamic loan.

It has been negotiating with an unofficial seven-member coordinating committee of banks from the United Arab Emirates, Britain and Japan, which combined have about two thirds of total exposure to the conglomerate.

"Ultimately, it is fully expected the banks will say they don't like it," the source said. "We are putting forward a plan that's very very fair.

"There may be some negotiation but it's not like we're going to leave a lot in our pockets."

No proposal has yet been made to creditors, the person reiterated. A report last week said the firm may offer 60 cents on the dollar in a plan of two proposals it may put to banks.

Negotiations over the debt plan will go on as long as needed, assuming they remain "constructive."

Dubai set up a bankruptcy framework in December in the event the company needs to seek protection from its creditors.

Dubai, which funded the company through the Dubai Financial Support Fund (DFSF), said on Monday it would give up its desire to be a preferred creditor as a concession to banks.

The DFSF wanted Dubai World security against future aid, giving it senior status in the event of an insolvency.

The issue was a key stumbling block in talks with creditors.

"That is a concession from the government. We haven't let go of our want but we will continue to fund on an unsecured basis," the source said, adding: "We're not going to do this forever."

"The money the government has, is better used in restructuring the company."

Dubai raised USD 10 billion late last year from Abu Dhabi banks and the Abu Dhabi government, as part of a USD 20 billion sovereign bond programme, and has used about half. It spent USD 4.1 billion to pay off the December Nakheel bond.

"The USD 10 billion raised is all the money that was available to solve the problem, that is all there is for Dubai World."

Dubai is paying interest and working capital until a restructuring is agreed.

Dubai World lenders, both local and foreign, have rolled over more than USD 2.5 billion in bilateral loans since May 2008.

Its Limitless unit has a USD 1.2 billion Islamic loan due in March which will also get rolled over, people familiar with the matter said last week.