* Drydocks turns to Decree 57 special tribunal
* Drydocks in talks to restructure $2.2 bln debt
* Company files proceedings in Singapore to push through
debt plan
By Shaheen Pasha
DUBAI, April 2 (Reuters) – Dubai World’s
shipbuilding unit is to test a form of insolvency protection
developed after Dubai’s 2009 debt crisis, using a special
tribunal to force holdout creditors to sign up to its $2.2
billion debt restructuring plan.
The move, announced by Drydocks World on Monday, is the
first real test of the tribunal, set up in the aftermath of
Dubai’s 2009 debt crisis where Dubai World itself took centre
stage, and is aimed at bringing resistant hedge funds to the
table.
Drydocks, a shipbuilding and repair business with operations
in Singapore and Indonesia as well as Dubai, also filed legal
proceedings in Singapore to push through the proposal, its
lawyers told the tribunal.
It said on Saturday it had the support of enough creditors
to implement the restructuring, which involves a five-year
moratorium on debt repayments.
“We take this step to protect the interests of the vast
majority of the Group’s syndicated lenders, the clients,
suppliers and wider stakeholders who continue to support the
business throughout its restructuring,” Drydocks’ Chairman
Khamis Juma Buamim said in a statement on Monday.
The company filed a notification seeking insolvency
protection under Decree 57 on Sunday night, sources had told ALB
The Brief, a Thomson Reuters publication.
Dubai’s ruler issued Decree 57 in 2009, creating a special
tribunal for Dubai World to deal with any litigation related to
the state-linked conglomerate’s $26 billion debt crisis.
The special court – which has so far only handled smaller
claims but not faced a restructuring disagreement – met late
Sunday night and imposed a moratorium, allowing Drydocks to make
a proposal to reach a voluntary arrangement with its creditors.
If that fails, the court can force holdout creditors to
accept terms already adopted by the majority.
“The fact that this system is now being tested is a
significant development, as is the fact that a Dubai-linked
entity is going down this route,” said Chavan Bhogaita, head of
markets strategy unit at National Bank of Abu Dhabi.
“This to some extent shows that they’re being more
commercial, more savvy about the way in which they handle such a
situation, which is indeed positive.”
The tribunal was established in the Dubai International
Financial Centre and incorporates elements of other
international bankruptcy laws.
The company has been in negotiations to restructure its loan
facility in an effort to put an end to lengthy and complex debt
talks. In March, it proposed repaying creditors in five years
and said it was seeking more working capital.
“The company has significant financial resources to meet all
of its liabilities,” Mark Hyde, head of insolvency and
restructuring at Clifford Chance LLP, said in a statement at the
DIFC Courts. “The company is far from being bankrupt.”
Drydocks World’s debt restructuring, initially set to be
completed by April last year, has dragged on as the presence of
hedge funds and a lack of government support curbed prospects of
an amicable deal.
A U.S.-based hedge fund Monarch Alternative Capital won a
$45.5 million legal claim against Drydocks this month for
defaulting on a loan, putting the ship builder’s restructuring
in further trouble.
The firm’s debts stem from a multibillion-dollar loan it
took out to fund expansion in Singapore. Its major ship and rig
building facilities are in southeast Asian countries such as
Singapore and Indonesia.
