Dubai’s debt-laden private equity group faces closure

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Dubai’s ambitious attempts to build an overseas investment empire to rival Europe’s biggest private equity firms could soon come to an embarrassing end.
Dubai International Capital (DIC), the international investment arm of the Dubai government that once tried to buy Liverpool football club, could be forced to wind itself up.
DIC has debts of $2.5 billion (£1.7 billion). A $1.2 billion loan is due this month but the fund has asked creditors to approve a three-month extension. Its lenders, which include HSBC, are expected to push for the fund to sell its assets to raise the money. The banks have appointed Deloitte, the accountancy firm, to advise on their options. DIC owns several big companies in Britain, including Travelodge, the budget hotel chain, and Doncasters, the engineering firm.
DIC is unlikely to be bailed out by the Dubai government, which is facing its own debt crisis. In 2009, Dubai World, the state-owned conglomerate, caused chaos when it admitted it was unable to repay its debts. Abu Dhabi, its oil-rich neighbour, was forced to step in with $20 billion of bailout loans.

The move to wind up DIC would be the latest blow to Dubai’s international ambitions.
DIC was set up in 2005 to compete for deals with Europe’s biggest buyout houses. It snapped up a string of companies in its attempt to build a portfolio that would rival established private equity firms.
However, many assets were bought at high prices at the top of the boom. DIC was one of the private equity firms hardest hit by the crunch. Deals structured with large debt packages and little equity soon ran into trouble and DIC was forced to inject fresh capital into, among others, Travelodge and Doncasters.
As well as its move for Liverpool in 2007, DIC acquired Alliance Medical for £600m and Almatis and Mauser in Germany for $1.2 billion and $850m, respectively.
The banks are unlikely to push for a fire sale of assets, preferring to wait until prices rebound, when they will stand a better chance of recouping their cash.
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