Dubai's Drydocks restructuring hit by snag

DUBAI: Legal proceedings in the $2.2 billion debt restructuring of Dubai World's shipbuilding unit have been delayed due to a court challenge in Singapore over a rig-building contract, a lawyer said yesterday.

Drydocks World, a shipbuilding and repair business with operations in Southeast Asia as well as Dubai, sought insolvency protection last month and is using a special tribunal in Dubai to force creditors to sign up to the plan. It also filed legal proceedings in Singapore to push through the proposal.

Singapore's Court of Appeal overturned an initial ruling which prevented the calling of a refund guarantee provided to the buyer by three Singaporean banks concerning the delayed rig, a Drydocks lawyer told the special tribunal on Monday.

Discussions aimed at securing a consensus — letting banks gain security over the rig in exchange for forfeiting the claim against Drydocks — were at an advanced stage but would now be pushed back. "I'm very confident by the time we are next here, this is a problem that will have gone away," lawyer Mark Hyde told reporters outside the DIFC Courts.

A commercial agreement with the three banks had been reached but now required the approval of the wider creditor group before it can be put in place, Hyde added.

The three banks are Oversea-chinese Banking Corp, United Overseas Bank and DBS Group, who is also a creditor in the main debt deal, he said.

Under the terms of a refund guarantee, banks agree to pay back the buyer's capital outlay on a project if it encounters issues such as a delay or if it is cancelled. Hyde would not comment on how much the affected guarantee was worth, nor who the buyer was.

Drydocks has been in negotiations to restructure its loan facility in an effort to put an end to lengthy and complex debt talks. Restructuring talks have been complicated by the involvement of hedge funds, who forced it to seek redress under Decree 57, a form of insolvency protection developed after Dubai's 2009 debt crisis.

Drydocks lawyers were expected to present the voluntary arrangement agreed with creditors on Monday but that has now been scheduled for June 5. Once that occurs, the 19-member creditor group will vote on the final terms on or around July 8, Hyde told the court.

A final hearing to sanction the restructuring under Decree 57 would not be held before the beginning of August, he added.

"The short delay should not have any material impact on the business or its operations," Drydocks Chairman Khamis Juma Buamim said in a statement issued after the hearing.

The company said last month it had the agreement of all but one creditor to its proposed restructuring plan.