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Banks sue Dubai Group over $10bn in debts

The UK’s Royal Bank of Scotland, Commerzbank of Germany and Standard Bank in South African has launched legal proceedings against Dubai Group over failing to pay debts of $10bn.

The four parties failed to reach a common consensus to restructure the debt, in the past one and half year.

The banks launched "legal recourse available under the facility documentation" in London court against Dubai Group.

Dubai Group, a unit of Dubai Holding the investment arm of Sheikh Mohammed bin Rashid al-Maktoum, was hit by the global financial turmoil in 2008, as the firm witnessed a drastic decline in the value of its portfolio companies.

Issuing a statement over the matter, RBS said it had no other option, after several concessions offered to the group failed to secure a solution.

RBS, which was partly nationalized by the UK government, is a key member of a committee negotiating with Dubai Group on behalf of several partially secured and unsecured creditors.

The banks said in a statement, "We do however want to make clear that our preference was always to conclude an agreement without formal legal proceedings and we therefore remain open to such an outcome."

Dubai Group anticipates that the matter will get an amicable solution, as 35 lenders are backing the group, supporting its restructuring deal.

The investment firm has been discussing with its creditors to restructure the $10bn in debt, including $6bn owed to lenders and $4bn in intercompany loans with its parent.