DUBAI: Dubai World, which is in talks to restructure $26 billion in debt, has made a revised offer to lenders but the sweetened deal is unlikely to satisfy banks, analysts said on Thursday.
The new offer is for 1 percent cash interest and 1 percent payment-in-kind interest note, a source familiar with the matter said, an upgrade from its opening 1 percent interest rate which was rejected as being too low.
Dubai unveiled a $9.5 billion rescue plan for state-owned conglomerate Dubai World and its property unit Nakheel in March.
The source, who asked not to be identified, said Dubai World added the 1 percent payment-in-kind option this week to sweeten the offer.
"(It’s) fish market haggling over prices, only this is played out in the media," said another source familiar with the process.
A Dubai government spokeswoman declined to comment on Thursday, reiterating that the government’s plan called for a cash interest payment as well as a payment-in-kind.
Under Dubai’s debt deal, lenders would receive new debt covering the $14.2 billion they are owed over five to eight years at an undisclosed commercial rate.
"It’s a step in the right direction but I am not sure the offer will be overwhelmingly accepted by the creditors," said John Bates, head of fixed income at asset management firm Silk Invest in London.
"It’s looking closer now but there’s still quite a gap between the current level (2 pct) and the level being offered to trade creditors."
Nakheel’s trade creditors have been offered repayment through a mix of 40 percent cash and 60 percent in a sukuk, with a 10 percent annual return.
In contrast, Dubai Electricity and Water Authority (DEWA) offered an 8.5 percent coupon on a recent bond issue.
"If you think DEWA’s offer, which is not part of the Dubai World group, was priced at 8.5 percent, I feel that it really ought to be at that kind of level," Bates added.
"I would say 4 to 5 percent interest rates is the kind of level that is likely to be an acceptable offer."