It said the restructuring of some $22 billion in debt would be "equal" for all creditors. A source said Dubai World will likely not repay a $980 million Islamic bond linked to its property unit Nakheel and due in May.

Dubai World, the debt-laden conglomerate whose property units built iconic landmarks in the Gulf Arab emirate, shook markets in November with plans to delay repaying $26 billion linked to property units Nakheel and Limitless World.

"The government wants to show it's handling this in the most equitable way, everyone gets a fair shot," a source familiar with the matter said on Monday. "We are going to put forward a plan that shares the recoveries with the lenders."

Dubai World will unveil its debt restructuring plan in March. The Gulf Arab emirate said it will continue to fund working capital and interest payments on an unsecured basis.

"That is a concession from the government," a source familiar with the matter said.

"We haven't let go of our want but we will continue to fund on an unsecured basis," the source said, adding: "We're not going to do this forever."

"We are going to put forward a plan that shares the recoveries with the lenders," the source said, referring to the government's intention to make the restructuring plan "equitable."

Dubai raised $10 billion late last year from Abu Dhabi banks and the Abu Dhabi government, as part of a $20 billion sovereign bond program, and has used about half.

"The $10 billion raised is all the money that was available to solve the problem, that is all there is for Dubai World."

Dubai funneled the funds via the Dubai Financial Support Fund (DFSF), which had wanted security against future aid, giving it senior status in the event of an insolvency.

"If one pocket of Dubai is funding another pocket of Dubai, why should that pocket be treated any differently than any of the other commercials banks?" said Khuram Maqsood, managing director of Emirates Capital, adding he would not rule out Abu Dhabi stepping in once again.

Dubai spent $4.1 billion to pay off the December Nakheel bond, after a last-minute bailout by its wealthier neighbor.

All options are open for the May Nakheel bond, a source said, including offering new paper for existing debt or, if needed, administration.

"Some were hoping that Nakheel's publicly traded bonds could be paid off," said Okan Akin, emerging credit strategist at RBS in London. "If they put the company into administration (it) would result in very low recovery.

"Nakheel's bonds do not even have any recourse to Dubai World and they are structurally subordinated to Dubai World debt."

The company has been negotiating with an unofficial seven-member coordinating committee of banks from the United Arab Emirates, Britain and Japan, which combined have about two thirds of total exposure to the conglomerate.

Moody's on Monday estimated the local banks' exposure to Dubai World to be around $15 billion. The ratings agency said UAE banks are in a position to "weather sizeable haircuts" but Dubai lenders may find it more difficult to tap the debt capital markets in a cost-effective way without government backing.

In Abu Dhabi, the head of the Arab Monetary Fund (AMF) said he expected Dubai to reach a speedy deal.

"Their reputation is not just for today so they are keen to reach a satisfactory solution fast," Jassim Al-Mannai, director general of the fund, told reporters.