Dubai creditors to get multiple options

Bankers in London and the Gulf are divided over how Dubai should restructure the $26 billion (17.4 billion pound) debt pile dogging its flagship holding company, leading the emirate to consider parallel offers in an effort to please all, the sources said.

How this "framework of a proposal" shapes up depends largely on how much additional capital the United Arab Emirate's (UAE) main oil exporter Abu Dhabi is willing to provide its neighbour Dubai, given that Dubai itself has little means of raising cash.

Markets entered a holding pattern ahead of any announcement, with Dubai's main stock index easing slightly after climbing 4.9 percent in the past three days. The price of insuring against default on five-year Dubai debt fell five basis points to 483, according to CMA DataVision, while the Nakheel bond of 2011 edged $0.50 higher to $61.50.

"Market sentiment depends on what happens with Dubai World, and there's still a lot of speculation in the market," said Samer al-Jaouni, General Manager of Middle East Financial Brokerage Co.

"The market is not moving according to fundamentals or technicals, but rumours about Dubai World."

State-owned conglomerate Dubai World held informal talks with major creditors, which include HSBC and Standard Chartered , in London this week as it finalises a deal.

There is widespread expectation among creditors that Abu Dhabi will ride to the rescue, as it did in December when it helped Dubai avert an embarrassing default on an Islamic bond linked to property developer Nakheel.

The final proposal, which is expected in the coming days or weeks, may include more than two tranches in an effort to meet the needs of the 97 lenders known to have extended credit to Dubai World in one form or another.

Local banks with little lending power may want whatever they can get from Dubai World fast, while international lenders with big balance sheets can afford to wait for full repayment.