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Banks take Dubai ruler's firm to court
Source: Agencies |
September 14, 2012, Friday
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Print Edition
ROYAL Bank of Scotland and two other banks have begun legal proceedings against an investment vehicle owned by Dubai's ruler, an unprecedented move to secure repayment after two years of unsuccessful debt talks.
RBS, along with German lender Commerzbank and South Africa's Standard Bank, had threatened legal action after walking away from negotiations over Dubai Group's US$10 billion debt pile, sources said in July.
The banks began legal proceedings in London last Thursday, breaking with the precedent in previous restructuring cases involving Dubai state-linked entities because of the opaque and untested insolvency system in the United Arab Emirates.
Given the complexities of the case, in particular the lack of precedent, the London filing threatens to extend debt talks well into the future, having dragged on since Dubai Group missed interest payments on two facilities in late 2010.
"Arbitration could be two years and we don't want to see the destruction of shareholder value just because these banks have thrown their toys in the corner," said a source with knowledge of the matter.
In a statement, RBS said it was forced to take action after several concessions offered to the group failed to secure a solution.
"We do, however, want to make clear that our preference was always to conclude an agreement without formal legal proceedings and we therefore remain open to such an outcome if an acceptable commercial resolution is forthcoming," the statement said.
RBS, along with German lender Commerzbank and South Africa's Standard Bank, had threatened legal action after walking away from negotiations over Dubai Group's US$10 billion debt pile, sources said in July.
The banks began legal proceedings in London last Thursday, breaking with the precedent in previous restructuring cases involving Dubai state-linked entities because of the opaque and untested insolvency system in the United Arab Emirates.
Given the complexities of the case, in particular the lack of precedent, the London filing threatens to extend debt talks well into the future, having dragged on since Dubai Group missed interest payments on two facilities in late 2010.
"Arbitration could be two years and we don't want to see the destruction of shareholder value just because these banks have thrown their toys in the corner," said a source with knowledge of the matter.
In a statement, RBS said it was forced to take action after several concessions offered to the group failed to secure a solution.
"We do, however, want to make clear that our preference was always to conclude an agreement without formal legal proceedings and we therefore remain open to such an outcome if an acceptable commercial resolution is forthcoming," the statement said.
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