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Dubai World Reaches Deal With Key Creditors

Debt-troubled Dubai World says it has come to an agreement "in principal" with major lenders to restructure $23.5 billion in debt. The decision comes six months after the conglomerate sent shockwaves through global markets by suggesting it would be unable to repay its loans.

The new deal requires no new support from the government, but it does need the backing of further banks outside the main negotiation committee to become official. Analysts expect a full agreement by the end of next month.

The restructuring plan leaves Dubai World with $14.4 billion in debt, which will be divided into two trenches for repayment.

The first trench, equaling $4.4-billion, is scheduled to be paid off in five years, while the second, totaling $10-billion, will take eight years.

An additional $8.9-billion of government debt will be converted into equity.

CEO of Gulfmena Alternative Investments, Haissam Arabi says the deal is exactly what Dubai needs.

"It is a good deal. In my opinion, it is better than expectations simply because it is looking at the best interests of both parties." says Arabi. "It looks at Dubai World and its financial standing and well-being over the next five to 10 years."

Despite his support for the agreement, Arabi says it does not mean Dubai has seen the last of its problems.

"It is still probably going to be a bumpy ride, but I think the worst is over in terms of the bulk of the debt that has been on people's minds and concerning investing in Dubai," Arabi adds.

Dubai World's financial troubles have largely been attributed to its subsidiary Nakheel, which borrowed money for development projects like the Palm Jumeirah and the World.

In December, the emirate of Abu Dhabi gave Dubai $10 billion to repay its immediate debt obligations.

British banks HSBC, Lloyds, RSB and Standard Chartered Bank have all lent to Dubai World and are believed to be in the main negotiating committee.