On August 28, 2012, the Special Tribunal related to Dubai World (the “Tribunal”) formally approved the restructuring of more than US$2 billion of debt of Drydocks World LLC and Drydocks World – Dubai LLC (together, “Drydocks”) under a syndicated term loan facility and separate hedging agreements, in the first restructuring approved under Dubai Decree No. 57 for 2009 (“Decree 57”).
Decree 57 creates an unprecedented insolvency regime applicable to Dubai World and its subsidiaries. Decree 57 gives the Tribunal exclusive jurisdiction over claims against Dubai World and its subsidiaries and the administration of formal company reorganisation proceedings. Decree 57 also provides Dubai World and its Subsidiaries with the opportunity to implement a restructuring without the support of all creditors; provided that certain minimum thresholds are met, the Tribunal has the discretion to bind dissident creditors to a restructuring deal approved by the majority.
The Tribunal is a special-purpose court comprised of three judges of the DIFC Courts with substantial experience in insolvency matters. Decree 57 served as the foundation for the successful restructurings of more than US$40 billion of debts of Dubai World and Nakheel PJSC. Latham & Watkins LLP represented the Government of Dubai and Dubai Financial Support Fund in connection with the restructurings of Dubai World and Nakheel and the drafting of Decree 57.
The Tribunal’s public approval of the Drydocks restructuring represents the first major regional restructuring concluded through a judicial process with the support of a majority of creditors and public transparency. The key terms of the Drydocks restructuring reflected in the public record include:
- Restructuring and amendment of the US$2.2 billion syndicated term loan facility, with support of a majority of creditors.
- Hold-out creditors (representing approximately 2% of the total claims) bound by the support of the majority and the approval of the Tribunal.
- Extension of multiple new credit facilities to support the restructuring.
- Sale of Drydocks’s operations in Southeast Asia in consultation with, and subject to approval of, a majority of creditors under the amended US$2 billion syndicated term loan.
The Tribunal’s handling of the Drydocks restructuring is a ground-breaking development for Dubai and the Middle East as a whole. The fallout from the global financial crisis has placed insolvency and restructuring law reform initiatives firmly in the sights of the region’s policy makers; it remains to be seen whether Decree 57 and the successful restructurings of Dubai World, Nakheel and Drydocks will be used as a template for law reform in the UAE and the wider region.
Further information regarding the Drydocks restructuring and Middle East insolvency law reform initiatives can be accessed via the following links: