March 25, 2010 9:53 PM

Ashurst, Clifford Chance, Latham Leading on Latest Dubai Debt Restructuring

Posted by Brian Baxter

UPDATE: Mar. 27, 9:15 a.m. This post has been updated with the additional names of lawyers from Latham & Watkins, Clifford Chance, and Allen & Overy.

Dubai's debt woes continue as the government of the Persian Gulf emirate announced on Thursday it would inject $9.5 billion into Dubai World to help recapitalize the state-owned holding company's ailing real estate arm Nakheel, according to The New York Times.

As previously reported by The Am Law Daily, Latham & Watkins is advising the Dubai government on its restructuring initiatives through Bryant Edwards, the Dubai-based head of the firm's Middle East offices. Edwards is being assisted by bankruptcy partners D.J. "Jan" Baker and Mitchell Seider in New York, restructuring partners John Houghton and Jackson Taylor in London, and associates Aaron Bielenberg and Nomaan Raja in Dubai.

Dubai received $10 billion in December from Abu Dhabi, its neighboring United Arab Emirate, which it used to prevent Dubai World's Nakheel unit from defaulting on a $4.1 billion sukuk, or Islamic bond.

Roughly $5.7 billion of those funds received from Abu Dhabi are being used by Dubai to prop up its ailing flagship company, Dubai World, according to news sources. The additional funds increase the amount of money the emirate has injected into Dubai World to nearly $20 billion since Dubai's debt crisis began last year. Clifford Chance's Robin Abraham is leading a team from the firm advising Dubai World, as we reported at the time, which now also includes restructuring partner Mark Hyde and Islamic finance partner Debashis Dey.

About $8 billion in new funds will go to repay bonds belonging to Nakheel, the property developer behind well-known land reclamation projects like The Palm Islands and The World. Another $1.5 billion will go into Dubai World itself.

Ashurst restructuring and insolvency partners Matt McDonald and David von Saucken are advising a group of Nakheel bondholders, along with the head of the firm's Islamic finance practice, Abradat Kamalpour. Reuters reports that roughly 80 percent of Nakheel's bondholders are local UAE banks, noting that a May 13 deadline loomed for restructuring a $980 million Islamic bond.

Sources in the region tell The Am Law Daily that Allen & Overy's Christian Saunders continues to advise a consortium of banks that lent money to Dubai World and its subsidiaries like Nakheel. Those same sources say that several other firms are representing individual banks and syndicates participating in Dubai World's ongoing restructuring, but we were unable to confirm any more specific engagements at the time of this post.

The problems of debt-stricken Dubai World and Nakheel have tarred the Islamic finance industry, as critics have called for reforms to help draw back Western players.

"The Islamic finance industry hadn't been through its first crisis at that point and people didn't know what to think," Dubai-based Fulbright & Jaworski corporate partner Michael McMillen recently told Reuters. "At the beginning people really hesitated as they saw swirling rumors of how devastating Nakheel's default would be to the Islamic finance industry."

Last week The Wall Street Journal reported that successfully restructuring Dubai World and its subsidiaries is essential for luring foreign investors back to the region. It will also be critical for Western law firms, who as reported by The American Lawyer's Andrew Longstreth in this feature story four years ago, headed to Dubai in droves looking for a lucrative new land to boost their billables and bottom lines.

As noted by The American Lawyer a year ago, those same firms have now been turning their attention to the UAE's wealthier emirate, Abu Dhabi.

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