Creditors threaten legal action on Dubai Group (By IFN)

Friday 14^th September 2012

UAE: After more than two years of turmoil in Dubai Group’s efforts to resolve its US$10 billion debt restructuring, the group’s struggles have come to a head with creditors Commerzbank, The Royal Bank of Scotland (RBS) and Standard Bank now planning legal action to seek repayment of the obligations. In a statement, Commerzbank said that: “Despite the banks’ goodwill and numerous possible long-term concessions offered by the banks, no viable solution has been reached. In the circumstances, Commerzbank, RBS and Standard Bank were unfortunately left with no alternative but to pursue legal recourse.” Nonetheless, it said that the banks have yet to file formal legal proceedings and remain open to settling the matter out of court, provided an “acceptable commercial resolution” was forthcoming. The group’s US$10 billion in liabilities include an outstanding US$1.5 billion Murabahah financing facility that fell due in August last year. In January 2011, it appointed eight banks, including Noor Islamic Bank, to represent two committees of creditors to resolve the debt restructuring. Commerzbank also noted that it has been seeking a consensual solution for the obligations, during which time the group has been default of its obligations, failing to repay the debts or interest and profit owed. The latest development follows a breakdown in debt negotiations in July this year, in which Commerzbank, RBS and Standard Bank walked out. Prior to that, in April, Dubai Group proposed to pay a interest and profit of just 1% for an extension of its obligations, which also include a US$330 million Syariah compliant syndicated financing backed by its 30.5% stake in Bank Islam Malaysia.