Dubai’s Drydocks Said to Ask 80% Write-Off on $1.4 Billion Loan

(Bloomberg) -- Drydocks World LLC asked creditors to write off 80 percent of a $1.4 billion loan as the Middle East’s biggest shipyard seeks to reorganize debt for a second time, two people familiar with the talks said.

The company, controlled by state-owned Dubai World, is offering to pay 20 cents to the dollar in cash on the 15-year so-called profit participating loan it agreed with lenders in 2012, said the people, asking not to be identified because the information is private. Talks with creditors have been informal and a debt restructuring plan hasn’t been presented, they said.

Hedge funds and non-bank companies, including New York-based Silver Point Capital LP and Davidson Kempner Capital Management LLC, now hold a majority of the debt and may accept the terms after buying the loans at a discount, the people said. Local lenders aren’t expected to agree to the deal, two people said. Citigroup Inc. is advising Drydocks World in the talks, while Moelis & Co. is working with the creditors, the people said.

Drydocks World was one of several state-owned companies in Dubai that delayed debt payments after credit markets froze and asset prices slumped during the global financial crisis. The company used the court at the Dubai International Financial Centre to reach an agreement with lenders in 2012 to reorganize $2.25 billion of loans.

HSBC, BNP Said to Agree on Profit-Sharing Loan for Drydocks

A spokesman for Drydocks World declined to comment. Spokesmen for Citigroup, Moelis, Silver Point Capital declined to comment, while a spokesman for Davidson Kempner Capital Management couldn’t be reached.

Drydocks World, which carries out ship repairs, vessel conversions, ship building and offshore construction as well as owns vessels, is also expected to raise a new $800 million loan next year to replace an existing facility that it agreed to with banks in 2012, according to one person. The company borrowed $2.2 billion to finance two acquisitions in Singapore in 2008 to gain ships and Asian shipbuilding sites.

A profit participating loan pays creditors profit or cash from asset sales, but no interest, and has an option to be converted into equity.