Ashurst advises Nakheel creditors on Abu Dhabi bailout
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Ashurst has scored a victory for the creditors of Dubai real estate company Nakheel with the news that they will be paid off through a bailout from the Abu Dhabi government.
In a last minute deal Abu Dhabi agreed to put up $10bn (£6.15bn) in financing to neighbouring emirate Dubai, part of which will be used to settle the $3.52bn bond issued by Nakheel and redeemable today.
Ashurst Islamic finance partner Abradat Kamalpour (pictured) and restructuring partners Matt McDonald and David Von Saucken acted for holders of around 25 per cent of the total value of the paper.
Von Saucken said: “On behalf of our clients, the certificate holders, we’re delighted with a very sensible result.”
The news that Dubai had requested a debt standstill triggered concern in international markets after Dubai announced that creditors should not expect it to underwrite the debts of its wholly-owned company Dubai World (26 November 2009). This concern was magnified by the fact that Abu Dhabi also initially declined to offer a clear commitment that it would support the indebted businesses.
This led to speculation that, while the $3.52bn bond is governed by English law, creditors would have had the challenge of seeking enforcement in UAE courts, which could have been to their disadvantage.
Concern had also been raised over the lack of bankruptcy or administration legislation in Dubai (7 December 2009). However, a ruler’s decree announced today has taken steps to address this through launching a legal framework to govern possible bankruptcy or liquidation of Dubai World entities.
Three senior international judges have been appointed to a tribunal that will hear and decide on claims submitted against Dubai World under DIFC law. The judges are chief justice of the DIFC Courts Sir Anthony Evans, deputy chief justice of the DIFC Courts Michael Hwang and local judge justice Sir John Murray Chadwick.
But Denton Wilde Sapte Dubai managing partner Neil Cuthbert said that this will not necessarily be a panacea for creditors.
“This is a decree which is specific to Dubai World and its subsidiaries,” he said. “It’s being done as much for the company as for its creditors. Key sections relate to voluntary arrangements the company can impose on creditors.
“It’s also interesting to see that the decree imports sections of the DIFC Insolvency Law. This gives rise to some interesting legal and conceptual issues that’ll need careful consideration.”
Readers' comments (7)
Grendel | 14-Dec-2009 5:53 pm
Probably the last instruction Ashurst will ever have out of Dubai. They are not popular here for so publicly taking on a role that was adverse to the Government. I hope this 10 day job was worth it for them....
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Anonymous | 15-Dec-2009 12:29 pm
Reaching at straws to suggest Ashurst had any influence over Abu Dhabi. Success by association perhaps, but hardly something to shout from the rooftops about.
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Smug Pic | 15-Dec-2009 1:01 pm
What Anonymous | 12:29 pm says is true - to think (or claim) otherwise would suggest a total ignorance of how things work in the UAE.
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Anonymous | 15-Dec-2009 1:09 pm
Way to go Ashurst!!!
Though, what is the link between Ashurst and the payment by AD? The article neglects to elaborate...
I'm not sure I'd appreciate the implication even if I were in Ashurst!
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Anonymous | 15-Dec-2009 8:15 pm
A lot of "sour grapes" in the comments posted by competing lawyers. I doubt Dubai would be concerned given they have set up a specific DIFC tribunal to deal with Dubai World.
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Anonymous | 16-Dec-2009 11:17 am
The article does not correctly reflect the actual state of affairs in the UAE and the role Ashurst played in representing some of the sukuk holders. The fact of the matter is AD would never have let Dubai to default. Even if there was a default, the existing law didn't allow (and it still remains unclear if the new proposed law will) a judgment to be enforced against the government or for a court to order the sale or auction of government assets. It seems that Ashurst were able to sell themselves on the basis of a) having a lawyer who's worked on a few sukuk structures whilst at Decherts and NR and positioned himself well in the market and b) playing on a sentiment of investor discomfort and uncertainty which investors wanted to develop into legal threats. They may have billed substantially for this and in doing so improving their figures conveniently before year end but you cannot really say that they 'scored a victory' for the creditors of Nakheel.
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Anonymous | 19-Dec-2009 10:40 pm
Well done to Ashurst!
I agree with the comment above about "sour grapes". This is a huge victory for them in the MENA region.
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