Drydocks World, a shipbuilding and repair company that is part of the Dubai World conglomerate, in response to the 2009 Dubai economic crisis had proposed a restructuring plan to overcome its debt vows.

Drydock World with a debt of USD2.2 billion dollars went through a major management re-shuffle including the departure of the then chairman, Sultan bin Sulayem who oversaw the international expansion of Drydocks World during the boom time. The restructuring plans do not seem to have gone as planned and Drydock World has now filed a claim with a special Dubai tribunal for invoking “ Decree No 57 “ as insolvency protection.

Decree 57 is a law issued by Dubai’s ruler in 2009 which created a special tribunal for Dubai World and its subsidiaries to deal with any litigation related to debt restructurings. The move to seek tribunal’s help, the first by an indebted UAE company, is aimed at overcoming the opposition from a minority of lenders to its debt-restructuring plan that involves a five-year freeze on repayments.

The tribunal process, created under Decree 57 issued by Dubai’s ruler, requires 100 percent consent from creditors for a plan to be adopted. But there is a cramdown option which can force dissenters to accept the plan once creditors holding 75 percent of the debt agree to it – a level Drydocks had apparently had reached before it began legal proceedings. As understood the said relief sought under ‘Decree No 57’ is applicable only to syndicated lenders. Drydocks World has significant financial resources to meet all of its liabilities and is far from being bankrupt.

The Drydocks move is the first real test of the tribunal which has so far only handled smaller claims but not faced a restructuring disagreement.

New York-based Monarch Alternative Capital LP, a company that invests mainly in distressed debt, won a $45.5 million claim against Drydocks World in London’s High Court of Justice on February 28 for defaulting on a loan is probably one of the parties walking out of any proposed restructuring plans.

The shipbuilder, a unit of conglomerate Dubai World, was not included in the debt restructuring where Dubai World reached a deal with its core lenders to restructure majority of its debt.