Dubai World gets $9.5bn government backing

The Dubai government has announced it will provide $9.5bn (£6.4bn) in funding to help its Dubai World investment vehicle to restructure its debt.

The troubled company has presented a plan to restructure $23.5bn of debt to its creditors, including converting $8.9bn of debt into equity.

Creditors will now decide on whether to accept the plan.

Dubai World stunned global markets in November last year when it asked for a six-month delay on debt repayments.

'Strong future'

The restructuring plan also involves a cash injection of $1.5bn from the Dubai Financial Support Fund (DFSF), as well as issuing two tranches of new debt to be repaid over five- and eight-year periods.

"This proposal represents the best possible solution for all stakeholders," Dubai World said.

"It follows extensive discussions with our creditors, a thorough review of Dubai World's businesses and significant financial support from the government."

Sheikh Ahmad bin Saeed al-Maktoum, chairman of the Dubai Supreme Fiscal Committee, said the proposals would ensure that both Dubai World and property company Nakheel were "key contributors to the strong economic future of the Emirate of Dubai".

"The government of Dubai, acting through the DFSF, will support these proposals with significant financial resources, including a commitment to fund up to $9.5bn in new funding over the business plan period."

'Good response'

Analysts said the proposals would be well received by investors.

"It boosts sentiment because this is a strong commitment," said Ayman al-Saheb at Darahem Financial Brokerage.

He said the companies could now begin "restructuring properly".

"Information is key in the capital markets, and now that we have received some information, we definitely expect a good response from investors."

After Dubai World first asked for extensions on debt repayments last year, major global stock markets fell as investors worried about the health of the Dubai economy.

Banks were hit particularly hard on concerns over Dubai's ability to pay back its debts.

Dubai World is the centrepiece of Dubai's economy and helped to drive the emirate's economic expansion.

---- from BBC news