Drydocks World's voluntary bankruptcy was delayed in court yesterday over a complex legal dispute in Singapore concerning a vessel sold by the Dubai shipbuilder to an undisclosed customer.
At the Dubai World Tribunal in the Dubai International Financial Centre Courts, lawyers from Clifford Chance, who were representing Drydocks, asked for an adjournment of bankruptcy proceedings to early next month to allow the dispute in Singapore to unfold.
Drydocks last month filed for insolvency protection at the Dubai World Tribunal to push through its US$2.2 billion (Dh8.08bn) debt restructuring.
The filing was the first time a company had sought protection under Decree 57, which was issued by the Dubai Government in 2009 to deal with disputes related to the debt restructuring of Dubai World, which owns Drydocks.
But the bankruptcy proceedings have been delayed by a dispute in Singapore, where a Drydocks customer is seeking a refund on a vessel, called LT06, and believed to be a drilling rig of some kind.
Drydocks expects to solve the issue in the next few days but the dispute is complicated and involves a number of parties and legal guarantees.
The unidentified customer put in place bank guarantees with three Singapore banks, DBS, UOB an OCBC, and Drydocks when it bought the vessel, to ensure that if any issues with the vessel arose, it could be refunded by the banks.
The customer was unhappy with the rig and has now been repaid. The banks are dealing directly with Drydocks over the legal ownership of the rig. "As the customer pays the money for the vessel … [he] gets a guarantee from a bank that if anything goes wrong, the bank will effectively refund the money … and then the bank has the issue with the company," said Ian Schneider, a partner and leader of business restructuring services at PricewaterhouseCoopers, which is advising Drydocks. "It's a very standard form of financial management. Nothing unusual."
To resolve the situation, Drydocks needs approval from two thirds of its creditors to pass ownership of the vessel to the three Singapore banks, which also need to find another buyer for the vessel.
"The complexity is that this wasn't just a guarantee given out by the South East Asia [Drydocks subsidiary] businesses but it had a parent company guarantee from the Drydocks World," said Mr Schneider. "It has no impact on the operations."
If the situation in Singapore is not resolved, the three banks will be added to the list of affected creditors in the bankruptcy proceedings and the process will be forced through and resumed early next month.
Drydocks first sought a restructuring of its debt in 2010. It is seeking to restructure two bank loans issued in 2008, one valued at $1.7 billion (Dh6.24bn) and the other at $500m.
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