Drydocks Files For Insolvency Protection
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Drydocks Files For Insolvency Protection

Drydocks Files For Insolvency Protection

The move is expected to force all the creditors of the Dubai-based shipbuilding unit to agree to its $2.2 billion debt-restructuring plan.


Dubai World’s shipbuilding unit has filed for a special form of insolvency protection, two sources said on Monday, using a special tribunal to force holdout creditors to sign up to its $2.2 billion debt restructuring plan.

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 centre stage, and is aimed at bringing resistant hedge funds to the table.

Drydocks World said on Saturday it had the support of enough creditors to implement the restructuring, which involves a 5-year moratorium on debt repayments.

The company filed a notification seeking insolvency protection under Decree 57 on Sunday night, sources told ALB The Brief, a Thomson Reuters publication.

A hearing before the Dubai World tribunal was due to take place on Monday 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 conglomerate’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 development, 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 tribunal was not immediately available for comment. The tribunal was established in the Dubai International Financial Centre and incorporates elements of other international bankruptcy laws.

The company has been in negotiations to restructure its loan facility in an effort to put an end to lengthy and complex debt talks. In March, it proposed repaying creditors in five years and said it was seeking more working capital.

Drydocks World’s debt restructuring, 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.

A US-based hedge fund Monarch Alternative Capital won a $45.5 million legal claim against Drydocks this month for defaulting on a loan, putting the ship builder’s restructuring in further trouble.

The firm’s debts stem from a multibillion-dollar loan it took out to fund expansion in Singapore. Its major ship and rig building facilities are in southeast Asian countries such as Singapore and Indonesia.

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