Lenders must decide next week whether to approve Dubai World's $26 billion debt standstill request after Abu Dhabi's $10 billion bailout on Monday bought time to work on a wider debt rescheduling, bankers said.   

Abu Dhabi's $10 billion commitment to its neighbour in the United Arab Emirates will be used to keep state-owned conglomerate Dubai World afloat until April by repaying contractors, maturing bonds for its property developing unit Nakheel and keeping interest payments on other loans and bonds current, a senior banker said.

Bankers' relief that aid has been forthcoming is tempered by the realisation that they still can't escape a messy and lengthy restructuring that has spread to other Dubai entities.   

'Dubai World creditors are still going to be asked to agree to a standstill, and this can only mean one thing -- a debt rescheduling or restructuring,' an emerging markets loans specialist said.

A rescheduling and restructuring would involve partial repayment through asset sales, stretching the remaining loans out over a longer maturity and matching repayments to cashflows.

With bondholders removed from the equation by the Abu Dhabi cash, lenders now have to decide whether or not to approve Dubai World's request for a six-month $26 billion debt standstill.

A creditor meeting has been set up for December 21 at Dubai World's headquarters, but lenders will also want to see a bigger-picture plan to refinance the rest of the emirate's maturing debt in the next two to three years, the senior banker said.

'The standstill only applies to Dubai World at the moment, but who knows what's around the corner,' the senior banker said.

The first step for bankers seeking to unravel Dubai's finances is to take security over existing unsecured loans as there is insufficient cashflow to repay outstanding loans, bankers said.

'The companies within Dubai World offer no valid security. The only bit of Nakheel that is interesting is the service company that holds the cash for sewage and drainage businesses, but they have not got anything else. Limitless is shot to bits,' the senior banker said.

This security is likely to take the form of an explicit guarantee from the UAE or Abu Dhabi in any refinancing or rescheduling, several bankers said. 'I don't think the banks will agree to anything barring a full Federation or Abu Dhabi guarantee,' the senior banker said. - Reuters