Tuesday, January 12, 2010

Dubai World: Some free advice.

Not being an insider, or otherwise in the know of what is happening between the lenders and Dubai World I am in a sense handicapped as to how to approach the issue of offering some unsolicited advice. At the outset therefore this attempt may well be scuttled as 'un-needed' but being a well wisher of Dubai and the UAE and conscious of the delicacy of the matter I am venturing forth with some advice.

Some of the biggest names in the business world have fallen on hard times, this is part of the financial history we know, and any study of them and their successful come back is based on one truth; an acceptance of the situation and the embracing of a high degree of humility to steer through the crisis. Because one whetted the appetite of bankers eager to lend and in a sense were in control of the situation is now a matter of the past, today its a different set of circumstances and counting friends is as important as cultivating new ones.

If I was Dubai World here is what I would do:

1. Seek a quick and equitable solution with the banks. Make this a priority above all else.
2. Given them the true picture of the health, or lack of it, today and show them the plan over say a five year period of how things are likely to change. Build scenarios, from the conservative to the most optimistic; the truth of what will happen lies in between.
3. Seek their advice where they offer it, and most importantly LISTEN.
4. What Dubai World needs to achieve is to fix the mismatch of its borrowing from the short term to the longer term, but this needs to be matched to a plan and not a simple roll over in a vacuum. Bankers need to know when they will be paid and how?
5. Do not take any confrontational stance, avoid words like 'standstill', 'rebates', 'write offs' and 'discounts'.
6. Do not threaten to seek bankruptcy this is no more an option given that everyone has expressed a public stance of solving the debt issue and remarkable progress has been made, some, ofcourse, with the support from Abu Dhabi.
7. Remember always, and this also applies to banks, that when you negotiate do not put people in the corner, then they act irrationally. A good negotiator keeps the other party in the center of the room so they can see all the exits and options,
8. Make it clear that there can be longer term repayments and these will need the support of the banks if they want to be repaid and allow for accelerated payments if the better, more optimistic scenarios start to unravel.
9. Given the recent two months of focus on these issues, this is no more an issue that ONLY concerns Dubai World, it effects the UAE and indeed even the region. This is the test of credibility and commitment.
10. Always remember that not all banks want this to be a battle of brinkmanship so it does not do good to walk the tight line each time.

For those who think that all the money went into a endless pit in the sand they too must realize that there are assets; land and other assets that Dubai World owns elsewhere. Yes the land is impaired in value, but it has some infrastructure on it and land may go sick for a while but it never dies. Eventually these land values will recover and this is a matter of patience, all that is needed is to realize that when you nurture confidence and do things to build confidence then this helps the recovery process. The world will not remain in a perpetual state of recession and this is also true of Dubai.

It was mentioned somewhere in the press that in January 2010 we would see progress on the restructuring talks between the banks and Dubai World. It is important that this process continues and information is made more available that indeed such meetings may well be going on. But get the news out that there is a dialogue; a much better message then people guessing what is going on.

Over all we must remember that indeed this a matter that can be resolved, the banks want it resolved and so does Dubai World. It is now a question of finding out what will be the meeting place of this resolve. This is a much better place to be in than neither side wanting to negotiate, yet there has to be give and take. The circumstances dictate that and demand that. Pride, on either side of the table should be put aside, as must the opinions of lawyers who may prefer to be pit bulls wanting to fight rather than legal counsels assisting in an equitable solution.

I believed that the Sukuk that started this whole saga would be paid and it was. I also believe that a restructuring will happen, even though at times it might seem everyone has hit a brick wall and tension will heighten. The truth is that everyone knows too much is at stake for it not to happen.

1 comment:

Anonymous said...

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