Dubai World may offer creditors new debt tranches at zero or reduced interest in a plan to restructure $26 billion in debt, a UAE newspaper said on its website, citing bankers close to the situation.

'What they (Dubai World) came back with was not as bad as most banks had anticipated. Under this plan they would refinance several different tranches. Some would come with zero interest and some with reduced interest rates,' the daily The National quoted one banker as saying.

Government-owned conglomerate Dubai World is expected to make a formal proposal to creditors on an informal seven-member coordinating committee this month.

'None of the proposed new tranches involves an immediate 'haircut', a reduction in principal, but all, because of the absence or reduction of interest payments, would mean that the banks forego future interest income,' the Abu Dhabi-based newspaper said.

'Among the possible scenarios are: repayment in full over five years but with no interest paid in that period; repayment over seven years with interest at about 2 per cent; repayment over a minimum of eight years with interest paid at close to the one-year London interbank offer rate (Libor),' it said.

The plans, which are yet to be finalised and approved by Dubai's government, were informally presented to representative of the creditors committee last week, it added.

Dubai World held informal talks with major creditors, which include HSBC and Standard Chartered, in London earlier this month as it finalises a deal. – Reuters