Bankruptcy

Dubai World

By Stephen Lubben

Over the long holiday weekend, we have been treated to a series of increasingly breathless stories about Dubai World's decision to seek a six-month moratorium on some $60 to 80 billion of debt. How Dubai World, a corporation owed by the government of Dubai, will resolve its debt issues has been the subject of much speculation, and little hard fact. Indeed, I believe I saw one story that said Dubai was going to trade Clay Buchholz for Roy Halladay at the Winter Meetings -- but maybe I'm getting my rumor-filled stories mixed up.

One option that has yet to be mentioned is a Dubai World chapter 11 filing. Foreign companies file chapter 11 all the time. Sure the automatic stay is unlikely to have much effect on local creditors in the UAE, but such a filing would prevent any creditor will "minimum contacts" with the United States from taking any of the debtor's assets. That would cover most financial institutions, including many hedge funds, and might allow Dubai World sufficient time to resolve its problems -- and even impose a compulsory workout plan on the same group of creditors. The key question is whether the government of Dubai wants to expose its key asset to an American bankruptcy process.

Full post as published by Credit Slips on November 29, 2009 (boomark / email).