Dubai World, the state-owned holding company in talks to renegotiate about $26 billion of debt, will ask banks for permission to delay loan repayments when it presents a plan to creditors this month, said three bankers familiar with the negotiations.

Banks may be able to avoid a so-called haircut, where they receive less money than what they’re owed, if they wait to be repaid, said two of the bankers, who declined to be identified because the talks are private. The banks may also receive a guarantee from Dubai’s government, one of the bankers said.

Dubai World and its Nakheel PJSC and Limitless LLC real estate units used loans to finance real estate projects such as palm tree-shaped islands off the emirate’s coast which they struggled to refinance amid the credit crisis. Dubai World said in November it would seek to delay repaying all loans until May, sparking the biggest plunge in developing-nation stocks.[Read More]