Bankers said they expect Dubai World to make a formal request for a standstill on its $26 billion debt at Monday's creditor meeting, but it could be more than a month before banks agree.

Banks are expected to support Dubai World's request, but what happens next will depend on the information they receive about the health of its finances, as the scale and complexity of the restructuring and its political overtones put creditors in uncharted territory.

"You can't bet on it, because anything could happen; it could be anything from a complete write-off to 100 per cent recovery," a senior banker said.

Dubai's $10 billion bailout from neighbouring Abu Dhabi, the richest of the United Arab Emirates, will be used to keep Dubai World's debt payments current, but a person with knowledge of the situation said these funds were contingent upon creditors reaching a sensible standstill agreement.

The emirate's new bankruptcy law, introduced by decree this week, could provide additional incentive to strike a deal. Dubai World's meeting with a group of 90 of its lenders at 12.30pm (8.30 GMT) at its offices in Dubai on Monday is expected to lead to a lengthy debt rescheduling involving extra support from Abu Dhabi or the UAE Federation, bankers said.

"We're going to pitch up, hear what they say, give our views, wait for the formal extension request and work on a restructuring," a Dubai-based banker close to the talks said.

With so many lenders and different debt instruments involved, Dubai World is unlikely to issue a single standstill agreement, a third banker close to the talks said.

It is expected to tackle some of its bilateral loans first, since these fall due before other syndicated loans and bonds maturing in the next couple of months, two bankers said. "The initial focus is on bilaterals that expire sooner," the third banker added.

Piecemeal approach

It remains to be seen whether a piecemeal approach will be acceptable to banks, which are concerned about the bigger task of refinancing all of Dubai's debt.

Debt restructuring by Dubai state-run companies could almost double to $46.7 billion as more of the emirate's businesses need help making payments, Morgan Stanley said in a report on December 8.

A steering committee of Dubai World's largest lenders met the company on December 7, but no proposals or information have been forthcoming since Dubai notified lenders on Nov. 25 of its intention to seek a standstill.

"We have not seen any materials at all about what their thoughts or plans are," the first banker said.

The steering committee consists of London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland, and local lenders Emirates NBD and Abu Dhabi Commercial Bank.

Lenders will take Dubai World's requests back to their credit committees, which are expected to agree the standstill request early in the New Year, several bankers said.

Creditors could use the meeting to air their grievances at the unusual process that has rocked global markets.

"Dubai World is expected to gauge the atmosphere before it does anything -- the questions asked could play a big part in what's put to banks," the Dubai-based banker said.

A debt restructuring is likely to involve separating Dubai World's "good" and "bad" companies, bankers said. Good companies could be put together to service debt from cashflow, while bad companies may require a guarantee from Abu Dhabi or the UAE Federation.

Dubai World's single largest loan, for $5.5 billion, was quoted at around 84 percent of face value on Thursday, according to Thomson Reuters LPC, but it is not trading because sellers are unwilling to offer the deep discount that prospective buyers are demanding on what is still a performing asset.

Dubai's five-year credit default swap rate, a measure of expectations of sovereign default, was 440 basis points on Thursday after peaking at 645 bps on November 27.-Reuters