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2012 April 4   15:11

Dubai World tests new insolvency law for its shipbuilding subsidiary

Dubai World's shipbuilding unit has filed for a special form of insolvency protection, two sources said, using a special tribunal to force holdout creditors to sign up to its $2.2-billion debt restructuring plan, Reuters reports. The move by Drydocks World is the first real test of the tribunal, set up in the aftermath of Dubai's 2009 debt crisis where Dubai World itself took center stage, and is aimed at bringing resistant hedge funds to the table.
Drydocks World said it had the sup¬port of enough creditors to implement the restructuring, which involves a 5-year moratorium on debt repay¬ments.
The company filed a notification seeking insolvency protection under Decree 57 on Sunday night, sources told ALB The Brief, a Thomson Reu¬ters publication.
A hearing before the Dubai World tribunal was due to take place on Mon¬day morning, said the sources, who spoke on condition of anonymity.
A spokesman for Drydocks, a shipbuilding and repair business with operations in Singapore and Indonesia as well as Dubai, declined to comment further.
Dubai's ruler issued Decree 57 in 2009, creating a special tribunal for Dubai World to deal with any litigation related to the state-linked conglomer¬ate's $26 billion debt crisis.
The special court – which has so far only handled smaller claims but not faced a restructuring disagreement – met late Sunday night and imposed a moratorium, allowing Drydocks to make a proposal to reach a voluntary arrangement with its creditors.
If that fails, the court can force holdout creditors to accept terms already adopted by the majority.
''The fact that this system is now being tested is a significant develop¬ment, as is the fact that a Dubai-linked entity is going down this route,'' said Chavan Bhogaita, head of markets strategy unit at National Bank of Abu Dhabi.
A spokesman for the special tri¬bunal was not immediately available for comment. The tribunal was es¬tablished in the Dubai International Financial Center and incorporates elements of other international bank¬ruptcy laws.
The company has been in negotia¬tions to restructure its loan facility in an effort to put an end to lengthy and complex debt talks. In March, it pro¬posed repaying creditors in five years and said it was seeking more working capital.
Drydocks World's debt restructur¬ing, initially expected to be completed by April last year, has dragged on as the presence of hedge funds and a lack of government support curbed prospects of an amicable deal.

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