DUBAI: A potential $2.2 billion debt restructuring for Drydocks World, the shipbuilding arm of indebted Dubai World, is seen facing tough headwinds with the presence of hedge funds and a lack of government aid seen threatening an amicable deal.
Drydocks has set up a committee to thrash out an agreement for the restructuring of its $2.2 billion debt pile. The firm missed a payment deadline for a $1.7 billion three-year loan facility that it took in October 2008. It also has another five-year $500 million facility on the restructuring table.
But a potential debt accord may be hampered with a large portion of the loans getting offloaded by banks to hedge funds in secondary market deals. The loans last exchanged hands at 49 cents to the dollar in September, one secondary market loans trader said.
"Some of the lending bank consortium members have sold the loans to international hedge funds
This will make an amicable restructuring deal difficult for the company," said Suketu Sanghvi, head of structuring and investments at Essdar Capital in Dubai.
"The international hedge funds are unlike the commercial banks or regionally based fund managers. These funds do not invest for long-term relationships and are usually not concerned about reputation risks associated from dealing with distressed borrowers or their governments through litigation routes.
Bookrunners in the 15-lender syndicate were BNP Paribas, HSBC Mashreq, Standard Chartered and Lloyds TSB among others.
"We are working with all our lender across the board and hopefully we can come up with a solution.
We are in serious discussions and we are committed to completing the restructuring in a fair manner," Khamis Juma Buamim, chairman of Drydocks World, told Reuters on Sunday.
He said the restructuring could be completed as early as the first quarter of 2012.
The restructuring has dragged on for months after the company said earlier it expected to complete the deal by end of April and had agreed on headline terms with banks.
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