The source spoke ahead of a key meeting on Thursday for creditors of the once fast-growing Gulf Arab emirate, now laboring under more than $100 billion of debt including those of its flagship conglomerate.
"It's unlikely all 73 banks will accept terms which means it will likely go to a tribunal," the source said, adding that if the majority support the plan, the tribunal can compel holdouts to get in line so the restructuring can proceed.
Dubai set up the special tribunal to be the arbiter of disputes between lenders and the stricken state company.
Dubai invited some 250 bankers to discuss the restructuring plan, already agreed with core lenders representing 60 percent of the loans.
Dubai World, whose operations include real estate, ports and private equity investments, needs two-thirds acceptance to be able to take the deal to the tribunal in the event of a rebellion. Any lender can use the tribunal, but none has yet.
END GAME
Thursday's meeting kicked off in a lavish pink resort hotel built at the tip of a man-made palm-shaped island — one of the ambitious projects that left Dubai gasping for cash after the global real estate bubble burst in 2008.
Accountancy firm Deloitte's Aidan Birkett, who is overseeing the process and is now the public face of the company, arrived looking relaxed in an open-necked shirt.
Bankers picked their way to the meeting past holidaymakers enjoying cut-price deals at the resort, which boasts a huge aquarium in one air-conditioned lobby where guests are protected from the searing summer heat outside.
"We're at the end game now," said one. Another said he was "hopeful something good will come of this."
Dubai World Chairman Sultan Ahmed bin Sulayem, a childhood friend of Dubai's ruler Sheikh Mohammed bin Rashid Al-Maktoum, is rarely seen in connection with the company since the debt crisis unfolded. The government is the ultimate owner of Dubai World, part of the network of state firms known locally as "Dubai Inc."
Oil-rich fellow United Arab Emirates member Abu Dhabi had to step in last year to help its neighbor with its debt burden.
A seven-strong core group of bank lenders has already agreed to reschedule repayment of Dubai World loans due in the next few years into a five to eight year package paid at between 1 and 3.5 percent.
Investors in the region are hoping the meeting, the first all-bank gathering since December, passes off without any negative publicity.
"As terms stand at the moment it's already priced in, but there's downside risk if some banks refuse to sign or hold out for better terms," said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading in Dubai.
Dubai World has signalled that the terms presented in the May proposal are unlikely to fundamentally change on Thursday. The seven-member coordinating committee of banks comprises HSBC, Lloyds, Royal Bank of Scotland, Standard Chartered, Bank of Tokyo Mitsubishi, and local lenders Emirates NBD and Abu Dhabi Commercial Bank.
