Dubai inks $2.5 billion debt deal for private equity arm

Dubai Holding, the investment conglomerate owned by the Emirate’s ruler, said its private equity arm reached an agreement with creditors on restructuring $2.5 billion of debt, ending talks that la s ted nearly two years.

Dubai International Capital (DIC), which has stakes in British-based budget hotel chain Travelodge and German alumina products maker Almatis, will extend $2.15 billion of outstanding liabilities by five years at an interest rate of 2 percent under the agreement.

The remaining $350 million of the facility will be extended for three years at unchanged interest, Dubai Holding said in a statement on Thursday.

DIC also formed a new board for itself, naming Fadel al-Ali, a senior executive at Dubai Holding, as the new chairman. David Smoot, DIC’s chief executive, has also been appointed to the board, the company said.

DIC’s core creditors include HSBC Holdings, Royal Bank of Scotland, Emirates NBD and Mashreq

The debt accord was reached as Dubai works to rebuild its credibility among investors who fled the region after state-owned conglomerate Dubai World said in 2009 that it would restructure about $25 billion in debt. That crisis left Dubai coping with a burst property bubble and a debt pile estimated at over $100 billion at its state-owned companies.

“Despite the challenging macroeconomic environment the portfolio is well-positioned to navigate current markets with less leverage, better liquidity and long-term financing, reflecting significant future value potential,” Smoot said in the statement.

The talks with creditors were difficult partly because the Dubai government late last year withdrew a $150 million line of credit set up for the firm, sources said.

Dubai Holding holds a substantial portfolio of brands in the property and hospitality sectors, organized under three main groupings: Dubai Holding Commercial Operations Group (DHCOG) , DIC and Dubai Group. Dubai Group and DHCOG are at various stages of addressing their debt obligations.

“Dubai Holding will continue to focus on reaching a consensual agreement with Dubai Group lenders,” Dubai Holding’s chief executive Ahmed Bin Byat said in the statement.

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