Dubai flagship conglomerate Dubai World is holding informal meetings in London with its creditors to update them on the progress of, and to work towards, an agreement on the restructuring of its $22 billion (Dh80 billion) debt, people familiar with the matter said yesterday.

No formal proposal will be presented during the two days of meetings which end today, the people said. However, if the meetings progress well, negotiations could advance quickly from this point, one of the people said.

The meetings will also focus on how to best use any fresh funds that have been injected into Dubai World as part of the debt restructuring, another person said.

The talks will take place with members of the steering committee, which represent the interests of Dubai World's 90 creditors. The committee includes Standard Chartered, Royal Bank of Scotland Group, HSBC Holdings and Lloyds Banking Group. Business services firm KPMG is representing the steering committee.

Meanwhile, the cost of insuring Dubai's sovereign debt against debt restructuring fell sharply yesterday and stocks rallied on signs that Dubai World will approach creditors with a proposal to restructure the $22 billion in debt.

Speculation

"There is a lot of speculation surrounding the Dubai World debt deal and that is being reflected on the market," said Vyas Jayabhanu, head of Al Dhafra Financial Brokers.

The Financial Times, citing people close to the situation, reported yesterday that Dubai World is expected to approach lenders for the first time this week with a suggested proposal for its debt restructuring.

The plan, which may be an initial outline, is expected to offer lenders an option to be repaid over several years but with a "haircut", or to be repaid more over a longer term, potentially with a government guarantee, the Financial Times said.

A Dubai World spokesperson declined to comment when contacted by Zawya Dow Jones.

People familiar with the matter told Zawya Dow Jones last month that Dubai World may offer creditors 60 per cent of the money they're owed backed by the emirate's government as part of an agreement to reschedule the debt over several years.

The offer, which pays no coupon, will come with a sovereign guarantee when eventually presented to creditors, they added.

"The CDS is the tightest it's been in the last two months and it's the first time it's traded below 500 in a while," said one local bond trader.

"It shows market confidence that there will be clarity on the Dubai World debt situation and the market is hoping for a solution," the bond trader added.