Dubai removes shipbuilding arm from restructuring

Dubai removes shipbuilding arm from restructuring
By Rondo Docille
December 10, 2009, 3:17pm

DUBAI, United Arab Emirates (AP) - Dubai World, the state-run company at the heart of the emirate's credit woes, is looking to protect another of its prized assets as pressure mounts on the debt-saddled company to pay back its lenders.

The troubled conglomerate said in a statement late Tuesday that its shipbuilding and repair arm Drydocks World will not be included in a restructuring launched late last month. It added that the unit is in ``constructive dialogue'' with its lenders and has improved its operations in reaction to the global slowdown.

``Drydocks World continues to have sufficient financial capacity to service its debt and remains well positioned to take advantage of the expected improvements in the shipbuilding and offshore industries in the coming years,'' the company said.

Dubai shocked global markets a day before the U.S. Thanksgiving holiday with the announcement that Dubai World would seek a six-month ``standstill'' - effectively a delay - on repaying some of its debt. The company later said it wanted to restructure roughly $26 billion of its debts, and indicated that it might sell some assets to raise cash.

Dubai World initially said its profitable ports and related free zone operations would be exempt from the restructuring, along with its private equity division Istithmar World and Infinity World Holding, the co-owner of Las Vegas' new $8.5 billion CityCenter hotel and casino complex.

Analysts say Dubai World appears to be drawing a line between profitable and other ``good'' assets it hopes to keep and more toxic holdings that are loaded with debt. The company's latest announcement puts Drydocks World in the former category.

Drydocks World runs the largest shipyard in the Middle East, servicing an average of 400 oil tankers and other ships per year, according to its Web site. The yard has been in operation since 1983.

The division has $1.7 billion in debt coming due in 2011, and another half a billion two years later, according to Morgan Stanley research.

Even as it tries to fence off more valuable assets, Dubai is coming under mounting pressure from creditors that have loaned the emirate's web of state-run companies more than $80 billion.

Dubai World's Istithmar lost ownership of the W Union Square New York hotel in a foreclosure auction Tuesday. Istithmar acquired the hotel in October 2006 for $285 million, according to Real Capital Analytics, a data tracking firm.

The W was not the only Dubai World hotel in trouble. The Fontainebleau in Miami Beach is also in dire financial straits. The property's $660 million loan was due in August. Contractors also claim the owner of the historic hotel owes them $60 million.