The cost of insuring Dubai’s debt rose to its highest level in almost a year yesterday after news that Dubai World was considering offering its creditors 60 per cent of their money back, with repayments delayed until 2017. The state-owned Gulf company’s international banking creditors said that it was unlikely that such an offer would materialise, adding that it was “miles away” from anything that would be acceptable to the lenders’ syndicate. “They could be trying to pre-market this, but we don’t think it will happen,” one well-placed person said. The London-listed shares of Royal Bank of Scotland, HSBC and Standard Chartered, which are among Dubai World’s biggest creditors, all rose yesterday, indicating that the stock market was not pricing in big Dubairelated debt write-offs. However, five-year credit default swaps in Dubai leapt to 650 basis points, their highest level since March last year, as local markets gave credence to suggestions that Dubai’s Government might try a low-ball offer to resolve the state-owned conglomerate’s $22 billion (£14 billion) debt crisis. Related Links Dubai World seeks six-month debt standstill Dubai World fails to seal deal on debt talks The Dubai Financial Market fell sharply in early trading before recovering to close down 0.2 per cent. The exchange plunged 3.5 per cent on Sunday, when news of the planned offer emerged. After almost two months of talks, the two sides remain far apart. The offer floated in the markets by Dubai World would see the group’s banks take a 40 per cent “haircut” on their investment in return for a sovereign guarantee that they would be repaid after seven years. Under an alternative restructuring proposal being prepared by Dubai World, the banks would be repaid in full. However, 40 per cent of this would be formed of assets in Nakheel, the group’s struggling property developer, which owns The Palm and The World developments. Crucially, that agreement would not carry a sovereign guarantee. The banks have signalled that they do not wish to take on real estate assets to cover the debt. Many of Nakheel’s extravagant construction projects have been suspended or scrapped after the collapse of Dubai’s property market last year. Bankers said yesterday that they believed the mooted offers from Dubai World were an effort to test the water. Although the group’s big creditors are willing to accept a long-term restructuring, they remain committed to getting most, if not all, of their money back. The sides have been locked in talks since late December and the banks have become frustrated at progress. A proposal to secure a six-month standstill on Dubai World’s debt repayments was expected by the end of last month, but has yet to emerge. A London-based creditor said that the banks’ immediate priority was to secure a standstill agreement that would involve the governments of Dubai and Abu Dhabi committing to funding ailing state-backed companies if they ran out of cash. The source said that a deal could be reached in the next two weeks. The Dubai Department of Finance said yesterday that no formal offer had been made to creditors. Dubai World declined to comment but people close to the company have said that the scale and complexity of the restructuring should be weighed against the apparent lack of progress.