Drydocks restructuring agreed by 85% of lenders, DP World to fund PPL takeout

18 September 2017

Drydocks World, the UAE-based shipyard embroiled in long-running restructuring talks - and part of the Dubai World complex - has secured a restructuring deal with creditors funded by a USD 225m injection by DP World.

The transaction was announced by DP World today and confirmed by a source close to the situation. “It’s a Dubai-based solution,” said the source.

Around 85% of creditors across both classes have signed lock-up agreements. Most Drydocks World debt holders are cross holders of both the USD 630m equivalent of senior NTL debt and the USD 1.43bn junior PPL debt.

More than 75% of Drydocks World debt holders, across both tranches, are international lenders, said the source close. This includes a large number of international funds – a rarity in Middle East loan situations.

The NTL senior debt holders have the option to receive reinstated senior debt with either a three-year or five-year maturity, carrying margins of 200bps and 250bps respectively. Additionally, senior lenders will receive an extension fee of 1% of their nominal senior holdings for rolling into the new loans.

The five-year tranche will be repayable at par upon maturity, however the three-year tranche features an early repayment incentive. If the three-year tranche is repaid by end-December 2018, 98.5% of the balance will be repayable. Conversely, if repayment is after end-December 2019, repayment will be 102% of the outstanding value of the debt. 

DP World will acquire 100% of Drydocks World’s equity, providing a cash investment of USD 225m. This will fund a cash out of the junior PPL debt at 22.85 cents on the dollar, extinguishing the junior claims altogether.

Some USD 630m-equivalent of senior NTL debt, denominated in US dollars, euros and UAE dirham, is outstanding. Reinstated debt will be denominated only in US dollars and UAE dirham, with euro exposure converted to US dollars. The NTL debt has been quoted in the low-80s in recent weeks.

Meanwhile, USD 1.43bn of the junior PPL debt remains outstanding. The PPL notes have been quoted in the mid-to-high-teens in recent weeks. The junior debt is viewed by the market as effectively an equity instrument, and by injecting USD 225m the investor is effectively buying out the PPL to take control of the business.

Creditors of both classes will receive an early-bird consent fee of 30bps for agreeing to the lock-up agreement.

 

The institutional bank group (IBG) which has driven the restructuring process from the creditor side consisted of Davidson Kempner, Emirates NBD, Goldman Sachs ESSG and Mashreqbank.

 

The IBG is advised by Moelis and Allen & Overy as financial and legal advisers respectively. The company is advised by Citi and Clifford Chance as financial and legal advisers respectively.

 

Under the terms of the loan documentation, the restructuring requires 100% lender consent. Should unanimous consent not be achieved, a Decree 57 process – under which lenders can be crammed down with a two-thirds majority – will be used. Proceedings will be initiated in early October regardless, to ensure the deal progresses swiftly, said the source close to the situation.

 

Decree 57 is a bespoke insolvency protection regulation to govern formal reorganisation of Dubai World and any of its direct or indirect subsidiaries and was used on Drydocks 2012 restructuring.