Dubai World close to an agreement over its debt

State-owned conglomerate Dubai World has come to a formal agreement with over 99 percent of its creditors to restructure around $24.9 billion of liabilities, the government of Dubai said on Friday.

In a separate statement Dubai World said it is well-positioned to close the restructuring in "the coming weeks".

"The agreement formalizes a strong consensus about a fair and balanced restructuring proposal and is a key step to putting Dubai World on a sound and stable financial footing," Sheikh Ahmad Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee said in a statment.

By winning broad support for the revised terms, Dubai World said it should be able to finalize the restructuring process in a matter of weeks.

Friday's announcement, which came during a holiday weekend in the region, moves Dubai closer to closure on at least one chapter of a crisis that has resonated well beyond the small Persian Gulf emirate.

Acute credit problems at Dubai World sent shock waves though global markets last November when the company unexpectedly announced -- again over a holiday weekend -- that it was seeking new terms on billions of dollars in debt.

That announcement was effectively an admission that the company didn't have the cash to cover all its bills, and reignited fears that the world's financial system remains exposed to immense amounts of debt that won't all be repaid as promised.

Dubai World has been seeking to win over 73 creditor banks to its restructuring plan, first outlined in March.

The proposal offers creditors full repayment on the principal of their outstanding loans over a five to eight year period, and gives them a range of repayment options. Some bankers have criticized the interest being offered, starting at 1 percent, as too low and below market rates.

In May, the conglomerate won the support of seven core banks that are owed about 60 percent of the debt. That group includes Bank of Tokyo-Mitsubishi UFJ, HSBC Holdings PLC, Lloyds Banking Group PLC, Royal Bank of Scotland Group PLC and Standard Chartered PLC. The other two are local lenders Emirates NBD and Abu Dhabi Commercial Bank.

The challenge since then has been getting dozens of smaller banks to agree to the plan -- something that appears to now be all but resolved.

Dubai World runs an array of businesses, including the property developer responsible for building multibillion-dollar islands in the shape of palm trees and a map of the world off Dubai's coast. It also operates DP World, the world's fourth-largest seaport operator.

Even with the Dubai World crisis behind it, Dubai will still face daunting financial challenges.

The International Monetary Fund estimates the emirate and its web of state-linked companies are shouldering as much as $109 billion in debt.