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Dubai World Said to Stop Paying Interest on Loans as of May 1

2010-05-06

May 6 (Bloomberg) -- Dubai World won’t pay interest on outstanding loans starting this month as the state-owned holding company waits for lenders to agree to the $14.2 billion debt restructuring proposal, two bankers familiar with the plan said. Interest accrued on the loans as of May 1 will be added to the new rolled-over loans offered to creditors, the bankers said, declining to be identified because the negotiations are yet to be completed. Creditors of Nakheel PJSC, Dubai World’s real-estate unit, will continue to be paid interest, according to a letter by law firm Allen & Overy to Nakheel creditors.  A separate coordination committee of Nakheel’s creditors has also been set up to negotiate with the real-estate company, the letter from the law firm says. A group of seven banks including Royal Bank of Scotland Group Plc, HSBC Holdings Plc and Standard Chartered PLC, is currently negotiating the debt deal with Dubai World on behalf of more than 90 lenders. Dubai World, one of the emirate’s three main state-owned holding companies, and its property unit Nakheel, are seeking to renegotiate terms on a combined $24.8 of debt after the global credit crunch battered Dubai’s real-estate market and left the emirate’s companies unable to raise new loans. Dubai World asked its creditors on March 25 to roll over debt into two new five- year and eight-year loans.