Dubai Defaults on Debt Payments

Discussion in 'International Politics' started by Singh, Nov 26, 2009.

  1. Singh

    Singh Phat Cat Administrator

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    Dubai Fund Asks for Stay on Debt Payments


    LONDON — The government of Dubai, in a blunt acknowledgment of the severity of its financial position, said on Wednesday that it had asked its banks for a six-month stay on its schedule of debt repayments.

    The terse statement came in the middle of negotiations between creditors and Dubai World, the corporate arm of Dubai, which has led many of its most ambitious real estate projects, but is now struggling under the burden of $59 billion in liabilities.

    For the banks that financed the debt-fueled ascent of Dubai — analysts’ estimates put its total debt at about $80 billion — the move by Dubai to obtain a standstill highlights a truth that many in the region had been trying to make clear to bankers. It is that Abu Dhabi, the oil-rich governing emirate of the United Arab Emirates, will not unconditionally bail out its more profligate neighbor. Instead, a genuine restructuring of Dubai’s debt, with pain being shared equally between Dubai and its bankers, needs to take place.

    The news came as a shock to the markets as well as Dubai’s bankers. The bonds of Dubai World’s property developer, Nakheel, dropped sharply and the cost of insuring against a Dubai government default soared.

    To some extent, the announcement of the standstill request was mitigated by earlier news on Wednesday that Dubai had raised $5 billion from Abu Dhabi banks. Still, that figure was considerably less than the $20 billion Dubai had been hoping to attract from investors in the region as well as abroad.

    “What is interesting is the timing,” said Chris Davidson, an expert on the region at Durham University. “This indicates that the money from Abu Dhabi is not to be spent on Nakheel and Dubai World.”

    The decision to take such a step comes just weeks before Nakheel, the developer of Dubai’s signature palm-shaped islands, was scheduled to make payment on its $3.52 billion of Islamic bonds. The conglomerate, which also owns Dubai’s huge port operations and has taken stakes in glamorous overseas properties like Barneys and MGM Mirage in Las Vegas, has billions of dollars of payments due in the months that follow.

    A representative for Dubai World declined to comment.

    Earlier this year, Dubai raised $10 billion in a bond issue that was taken up by the Abu Dhabi central bank.

    It is clear now that these sums have not been enough — especially as many of the assets in Dubai World’s diffuse portfolio have plunged in value over the last year.

    Executives at Dubai World have said they will not engage in any distressed asset sales and that they are sure of recovery in real estate prices that have dropped by as much as 40 percent.

    In its statement, Dubai said that it had appointed a special support fund to manage the restructuring effort and that Deloitte L.L.P. had been hired as an adviser in the process.

    “As a first step,” the statement said, “Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least 30 May 2010.”

    Dubai World is run by Sultan Ahmed bin Sulayem, a close adviser to Dubai’s ruler, Sheik Mohammed bin Rashid al-Maktoum, who has insisted publicly that Dubai and Abu Dhabi will work together to reach a solution on the debt question.

    But while Abu Dhabi may sit upon 9 percent of the world’s oil and manage the largest sovereign wealth fund, it is evident now that it is not willing to just write a check to cover all of Dubai’s mounting debts — at least not right now.

    http://www.nytimes.com/2009/11/26/business/global/26dubai.html?src=tw
     
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  3. Daredevil

    Daredevil On Vacation! Administrator

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    World stocks dive on Dubai default fears

    World stocks dive on Dubai default fears

    By Roland Jackson (AFP) – 5 hours ago
    LONDON — Global stock markets fell sharply Thursday on mounting fears of a debt default by Dubai and tighter lending conditions in China, analysts said.
    London shed 1.95 percent to 5,260.05 points in mid-afternoon deals. The market was earlier forced to suspend trading for three and a half hours due to a technical hitch.

    Elsewhere, Frankfurt sank 1.91 percent to 5,692.06 points and Paris plunged 2.04 percent to 3,730.77 points.

    In Asia, Beijing nosedived 3.62 percent, Tokyo fell 0.62 percent and Hong Kong closed 1.78 percent lower.

    Chinese shares were also hit by the prospect of tighter banking rules and worries about monetary policy next year.

    New York markets were closed Thursday for the Thanksgiving Day holiday in the United States.

    "We have two major factors weighing on equities and other risk markets: Dubai's call for a moratorium on its debt repayment to May and more stringent capital adequacy requirements for Chinese banks -- but Dubai is bigger," David Morrison, an analyst at financial betting firm GFT, told AFP.
    The government of Dubai shocked financial markets on Wednesday when it said it would ask creditors of its Dubai World conglomerate for a debt moratorium of at least six months.

    The Dubai government announced that it would revamp the Dubai World group and wanted its lenders to extend its maturing debt until at least May 2010.

    Dubai added that it had raised five billion dollars in a new bonds issue aimed at helping meet other debt obligations.

    "Dollar weakness ... sent Asian markets plunging, which then took European exchanges with them," said Xavier de Villepion, an analyst with Global Equities in Paris.

    In addition, the debt delay request by Dubai "fed a climate of insecurity and crisis of confidence at a time when fears are mounting about excessive public debt."

    As equities sank heavily, investors sought safety in the bond market and gold, which struck yet another record high point.

    "It's causing a mini flight-to-quality as US, European debt gets bought as a relative safe haven," noted Morrison.

    He added: "If (Dubai) had given the debt markets more warning, then there would be less of a panic now."

    Meanwhile, ratings agency Standard & Poor's said the development could be considered a default and downgraded a raft of Dubai government entities including Dubai World.

    "The rating actions are the result of the announcement on November 25 of the restructuring of the debt obligations of Dubai World and its subsidiary, (property developer) Nakheel," S & P said in a statement.

    "In our view, such a restructuring may be considered a default under our default criteria, and represents the failure of the Dubai government to provide timely financial support to a core government-related entity."

    Barclays Capital analyst Paul Robinson warned that the issue of Dubai could contribute towards a "serious" pullback in global stock markets.

    Others warned that it could take more than a decade for investor enthusiasm for the Gulf emirate to return as a result of this week's development.

    "Dubai could not undermine either itself, or global perception any further as a place not to do business in at the moment," MF Global analyst Manus Cranny told AFP.

    "Quite literally, this geographic region is now looking as a mirage in stability terms.

    "It is the much longer term implications on funding, confidence and capital raising that will take a decade or more to re-establish.

    "This last-minute moratorium on debt repayments at Dubai World is unacceptable has all the smacking of an Ireland -- nay worse, an Iceland -- in the making.

    "The two regions may be polemic in climate but mirror images in terms of credit and ability to meet their bills."

    Elsewhere on Thursday, gold soared to a record high of 1,195.13 dollars an ounce after a purchase of IMF gold by Sri Lanka's central bank, traders said.
    The precious metal has also won support in recent weeks from inflationary fears, the weak US currency and increasing moves by central banks to diversify assets into gold.
     
  4. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    This along with the weakness in the dollar and a possible future dollar collapse does not bode well for any recovery ;also a possibility of dumping of US bonds and treasury by big holders, as everyone makes a dash for the exits.
     
  5. sob

    sob Moderator Moderator

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    LF, I do not see any foreseeable collapse of the dollar. On the other hand countries like Japan and China are going to be buying US treasury bonds in a big way to shore up the Dollar. These two countries along with other SE Asian countries have been buying US Dollars as a weak Dollar has a negative impact on their exports.

    OTOH for India a weak Dollar is the perfect oppurtunity to go in for mega Defence and nuclear deals with the US companies, to take advantage of the weak Dollar.
     
  6. Pintu

    Pintu New Member

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  7. sob

    sob Moderator Moderator

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    Dubai tremors in the Forex Market

    With the Dubai financial scare playing across the Forex Market, the Japanese Yen jumped against the Dollar, going to a 14 year high level.

    FOREX-Yen surges as Dubai woes put investors off risk

     
  8. Daredevil

    Daredevil On Vacation! Administrator

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    Is this bye-bye Dubai?

    Dubai dazzled the world with its extravagance and excess. Now it wants to defer its debts. What went wrong, asks Richard Spencer.

    By Richard Spencer
    Published: 7:52AM GMT 27 Nov 2009

    Early one morning at the end of last month, a throaty roar rippled over the sands of the Arabian desert. As it grew in pitch in the warm dawn air, it also became fainter, reverberating through the vacant car parks and abandoned building sites of the city towards the calm waters and newly built islands of the Persian Gulf.

    As the caravan disappeared over the western horizon, it lumbered rather more than you might expect from one made up of luxury sports cars: but then, there were 82 of them. The Ferrari Owners' Club was on its way.


    Dubai debt worries grip financial markets It could only be Dubai. The emirate – the very term has oriental echoes of excess – does nothing by halves, and though analysts said the financial crisis would induce a sober new realism, we in Dubai didn't listen.

    When we go to watch Formula 1 in Abu Dhabi – the case that Saturday morning – we go by police-escorted Ferrari convoy. When we build new buildings, we build them higher than any that have gone before. Then we build more of them. When we build sandcastles in the shape of palm trees, full of splashy houses with swimming pools and private beaches, we don't just order one. We have three (two are deserted).

    And when we decide, after months of silence, to issue statements about our financial problems, we do not whisper honeyed words: we drop noisy, clattering bombshells.

    So it was on Wednesday night, just as the lights went out at the start of the lengthy Eid al-Adha holiday and the city's expat banking legions headed off for a break at their favoured Shangri-la or Kempinski resorts along the coast.

    A little background: everyone knew that Dubai Inc, the mixture of royal and government holding companies that dominate the economy, owed a lot of money, but no one worried because everyone knew it had plans in place to repay them.

    Not so, as it turned out. The brief statement was short but, in the words of one banker, desperate. "Dubai World intends to ask all providers of financing to Dubai World and Nakheel to 'standstill' and extend maturities until at least 30 May 2010."

    In a nutshell, the government was asking banks to let two of Dubai's most famous companies hold off on their mortgage payments. Since they are state-owned, the announcement suggested the city itself was in trouble: governments aren't supposed to default on their debts, and when they do – as Argentina did in 2001 – it causes chaos around the world.

    Yesterday, the creditors didn't know whether to laugh or cry. On the one hand, this is an undoubtedly serious situation. Western banks, and the construction firms that built those castles in the sand, are exposed to serious amounts of money. Dubai's total government owings are officially $80 billion, unofficially twice that, and the cash flow to pay that back is a mystery.

    More to the point, confidence had returned to the city's dealings, its companies were rehiring, precisely on the same assumptions that have seen rising property prices in London and rising stock markets everywhere. The crisis was over, meltdown averted, and growth was back.

    But if Dubai's revival turns out to be fake, perhaps the rest is, too?

    Yesterday, share prices around the world fell as the news was absorbed. One analyst asked whether this was the "new Lehman brothers".

    On the other hand, the opportunity for a spot of schadenfreude is also great. There was always a culture clash between the two halves of Dubai's expatriate face, between the smart financiers, lawyers and other professionals who were putting down the structure of the revamped city, and those for whom it was being built.

    Long-standing residents – none, of course, will be named, as they are ever so discreet – often looked with horror as their clients used the money they had raised to build glitzy villas on Palm Jumeirah, Nakheel's showpiece development, and then give them away in staged publicity stunts to David Beckham.

    When Kylie Minogue performed to invited Hollywood celebrities at the opening of Sol Kerzner's kitsch Atlantis Hotel, the public relations merchants beamed assiduously. Those who didn't have to be there turned up their noses. "Disney Dubai," one British expat said to me later. He prefers to commute from Sharjah, the neighbouring emirate, which doesn't allow alcohol, let alone invite pop stars.

    "It seems odd to have ended up somewhere so full of tackiness, but that's how it is," one of Dubai's most publicly bullish bankers put it, slightly more tactfully.

    One man who could be forgiven for schadenfreude is Christopher Davidson. A writer and academic, his book Dubai: the Vulnerability of Success, warned long before crisis struck that the city had built an unsustainable, hubristic model. He is scathing about the emirate's loyal westerners.

    "This is one of the perils of having a large mercenary population," he said. "They will say what you want to hear to your face. Then when it all goes wrong, they go home."

    Many have indeed gone home, though not in such large numbers as once feared. You can still see cars covered in dust at Dubai Airport, where owners have abandoned them as they flee, anxious that shortfalls in hire purchase payments could land them in the city's notorious debtors' prison.

    "At least I mailed my keys back," said Nicholas Down, an estate agent.

    Mr Davidson is even more scathing of Dubai's latest announcement, partly because he says it is 12 months too late, and partly because it does not show that lessons have been truly learned.

    All year, Dubai's charismatic ruler, Sheikh Mohammed bin Rashid al-Maktoum, has angrily brushed off reports of imminent doom. In September, when asked if he admitted to any mistakes, he said not.

    Earlier this month, he said bluntly that those who talked about much-rumoured strains between Dubai and its sister city Abu Dhabi over the crisis should just "shut up".

    Mr Davidson said that finally admitting to the full extent of the crisis on the eve of a public holiday was such an "obvious trick" it suggested the city thought it could still "get away with it". It was self-evident, though, that investors still needed reassuring.

    "Does anyone in the Dubai government have a grip on the situation?" he asked. "If not, should anyone put their money in the place?"

    The irony is that a large part of Dubai Inc still works remarkably well – the bit that hasn't had anything to do with David Beckham, or Paris Hilton, who filmed her latest television show here, or the British wannabes who bought unbuilt holiday homes for the sun-sea-and-sand lifestyle.

    Dubai's port is the biggest in the Middle East. Emirates Airlines still makes profits. Passengers at the airport are increasing in number. The city's traders – Iraqis and Iranians, Lebanese and Pakistani – wheel and deal with a lot more ease and comfort than they would at home. "Dubai," one Indian businessman replied when asked which was the best Indian city in which to do business.

    Dubai's own business leaders are reluctant nowadays to come forward for interview. For this article, a spokesman for the department of finance – another western public relations consultant – was prepared to defend the system.

    "They have taken this step," he said. "It's a long-term decision which has been taken to restructure the financing. It's a process that has just begun. It will take some time to work through."

    But even supposing the creditors hold off in their demands – and what choice do they have? – they can hardly send Sheikh Mohammed to debtors' prison: it is still anybody's guess as to where the repayments will come from. A frightening proportion of the debts are due to be repaid in the next three years.

    The answer to date has been Abu Dhabi, which sits on a sea of oil and foreign exchange reserves. On Wednesday, its banks said they would stump up $5 billion – though apparently with the proviso that it is not poured down the "bottomless pit" of Nakheel.

    Its own royal family regularly puts on a united front with Sheikh Mohammed – the two houses are tied by marriage. A bail-out is surely on its way, but no one knows what conditions may be attached.

    When the Ferrari owners set off last month, they did not invite the press, and deliberately left before most residents were up. Perhaps there is a new modesty afoot after all.

    But then perhaps they were not going to watch the motor racing at all: maybe they were off to Abu Dhabi to ask for their car loans to be repaid, and their tanks to be filled with petrol.
     
  9. Daredevil

    Daredevil On Vacation! Administrator

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    UAE faces up to $184 billion total debt: BofA-Merrill Lynch

    Fri Nov 27, 2009 8:34am EST

    LONDON (Reuters) - The United Arab Emirate (UAE) has total debt amounting to $184 billion at the end of 2009, according to estimates by Bank of America-Merrill Lynch, which said the region faces a heavy redemption schedule until 2013. Dubai's shock announcement this week that it is seeking to suspend payments on debt of its state-owned conglomerate Dubai World and property subsidiary Nakheel has roiled global markets, raising fears that the emirate which funded a spectacular building boom on a mountain of debt could default.

    BofA-Merrill Lynch said in a report that the restructuring undertaken by Dubai would be a serious blow to the Gulf region's economic recovery prospects, adding that the scale of the region's debt was now the issue.

    "The lack of official debt data may add up to uncertainty and cause higher risk premiums," it said.

    Of the $184 billion UAE debt, Dubai holds $88 billion while Abu Dhabi accounts for $90 billion. BofA-Merrill Lynch said the debt servicing cost will be higher than these estimates as their numbers only include the principal payments.

    The bank said Dubai faces almost $50 billion of debt amortization in the next three years: $12 billion in 2010, $19 billion in 2011 and $18 billion in 2012.

    "We estimate the total debt for Dubai World as $26.5 billion, 80 percent of which needs to be paid back in the next three years," added BofA-Merrill.
     
  10. Yusuf

    Yusuf GUARDIAN Administrator

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    Well well, they spent so much of the borrowed money, that they forgot they had to pay back. Didn't need this just when we are about to recover from recession.
    One peculiar thing was that the dollar rose against the rupee though it fell in the world market. Lucky me that I made my import payment just a couple of days back at a much lower price.

    I seriously don't understand why just an 80 billion default causing the entire world to go mad and markets to crash. Hope it doesn't cause too much of a problem.
     
  11. NSG_Blackcats

    NSG_Blackcats Member of The Month OCTOBER 2009 Senior Member

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  12. Singh

    Singh Phat Cat Administrator

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    Who will come up with the 80bn$ + and who will come up with the money for future investments.
     
  13. NSG_Blackcats

    NSG_Blackcats Member of The Month OCTOBER 2009 Senior Member

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  14. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    Japanese and Chinese have probably reached their limits in US treasuries the interest is .01% on the treasuries and the debt market is more or less frozen where there are no buyers for the sellers this includes US institutions,banks and to some point the US government. China can get a better return investing the money in their own stock market which has been returning 10%+ annually. Chinese are also sitting on 2 bubbles they have created their real estate bubble and their stock market bubble. The real fear from this is if one country like Dubai can default many others are in worst financial positions that have not defaulted yet and may follow suit many European economies like UK have debt exceeding twice their GDP's.
     
  15. sob

    sob Moderator Moderator

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    Reply to LethalForce

    LethalFocre, Both the Japanese and the Chinese, especially have been buying US Treasury Bills and other Dollar dominated assets for primarlily two reasons
    1. To ensure a fixed and safe return on their investments ( created through the surplus in trade)
    2. The main reason for the Chinese has been to keep a control on the exchange rate between the two currencies. A favourable exchange rate has been the driving force for the Chinese to have ramped the huge trade surplus that they enjoy with the US.

    To counter the low retruns the Chinese Govt. has created the Chinese Investment Corporation (CIC) with an initial corpus of 200-300 Billion US $. How they manage the funds and the assets they buy with this is the million or the Billion Dollar question., which we all have to see. Several sources have hinted that they have been buying heavily in stocks of US companies that are engaged in Hi Tech research in Defense Equipments.
     
  16. Daredevil

    Daredevil On Vacation! Administrator

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    Investors face huge losses as Dubai abandons debt company

    David Robertson

    The Government of Dubai said today that it will not stand behind its wholly-owned subsidiary Dubai World, prompting fears that the company’s creditors could lose billions of dollars.

    Today's comment, from Abdulrahman al-Saleh, the director general of Dubai’s Department of Finance, effectively confirms that country does not have enough money to repay Dubai World’s $60 billion of liabilities. Deloitte, the accountancy firm, has been called in to restructure the giant business.

    Last week, the state-owned conglomerate sought a six-month standstill on repaying its debts.

    Dubai World's borrowings include a $3.5 billion Islamic bond that was due to be repaid by Nakheel, the property developer behind the Palm Jumeriah islands, in two weeks.

    Many creditors had assumed that the structure of Islamic bonds implied there was state backing for this type of financing and Dubai’s failure to support the Nakheel debt could have damaging implications for the wider Islamic market.

    UK banks are among 70 institutions to have loaned Dubai World money in recent years as the company grew rapidly and bought foreign assets such as the Turnberry golf course in Scotland and P&O ports. Dubai's Department of Finance said creditors will be affected in “the short term” by the Dubai World's restructuring.

    Royal Bank of Scotland (RBS) has arranged $2.3 billion of loans for Dubai World since 2007, although it is not known how much the bank could lose if the company defaults.

    The Financial Services Authority, the City watchdog, is understood to be discussing possible exposure to Dubai World losses with the UK banks.

    There had been hopes the Dubai government would issue a statement on Dubai World earlier this morning.

    Markets across Europe and Asia had rallied this morning after this weekend’s intervention by the Central Bank of the United Arab Emirates, which will provide an emergency liquidity facility for local lenders.

    Abu Dhabi, Dubai's rich sister nation, also said it would provide support on a “case-by-case” basis.

    However, hours of silence from the Dubai government knocked investors' confidence and the FTSE fell 47.72 points to 5,198.96 in early afternoon trading. US shares opened lower, down 21.09 points, 10, 285.49.

    Dubai’s main stock exchange slid more than 7 per cent and Abu Dhabi markets fell more than 8 per cent. Today is the first time UAE investors have had the chance to react to last week’s announcement following the four-day religious holiday for Eid al-Adha.

    It has also emerged today that Nakheel has requested that all three of its sukuks (Islamic bonds) traded on the Dubai stock exchange be suspended. This includes the $4 billion sukuk due to mature on December 14, which triggered the current crisis.

    The group’s statement said the three sukuks would remain suspended “until it is in a position to fully inform the market”.

    Jebel Ali Free Zone, a division of Dubai World, made an interest coupon payment on its 7.5 billion Dirham (£1.24 billion) sukuk, which matures in 2012. The payment, believed to be around 130 million Dirhams, was confirmed by banking sources in Dubai.
     
  17. RPK

    RPK Indyakudimahan Senior Member

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    Dubai says not responsible for debt crisis

    The Dubai government said on Monday it was not responsible for the debts of Dubai World, dealing a blow to creditors' assumptions that the Arab emirate would guarantee the conglomerate's liabilities.


    "Creditors need to take part of the responsibility for their decision to lend to the companies," said Abdulrahman al-Saleh, director general of Dubai's Department of Finance. "They think Dubai World is part of the government, which is not correct."


    In its first statement since the crisis began, Dubai World, the government-controlled holding company at the heart of the storm, said a restructuring would involve $26 billion in debt and mostly affect its property firms, Nakheel and Limitless.


    Other firms, such as DP World, Jebel Ali Free Zone and Istithmar World would not be included in the restructuring because they were financially stable, it said in a statement released by e-mail late on Monday night.

    The previously unreleased figure of $26 billion may help markets to grapple with the scope of the crisis following estimates that the restructuring could affect $59 billion or more in liabilities.


    United Arab Emirates stocks plunged on Monday as investors waited for clarity on Dubai's request for a delay until May 2010 on repaying billions of dollars in debt issued by Dubai World and its Nakheel unit, developer of three distinctive palm-shaped islands in the emirate.


    European shares fell as investors worried about sovereign financial crises, with the FTSEurofirst 300 off 1.4 per cent. But the US dollar fell against the euro after the United Arab Emirates promised liquidity, easing worries about default.


    Saleh's remarks in an interview to Dubai TV, a station owned by the ruler of Dubai, came after UAE markets closed.


    "They have confirmed there is going to be a restructuring and are doing what they can to differentiate between the government and companies," said Mohieddine Kronfol, managing director at Algebra Capital.


    "It doesn't take away from the fact that you have a major potential event that is unravelling. People's expectations aren't going to be met with this announcement."


    The UAE's central bank pledged financial support, helping to steady global markets.


    The central bank promised additional liquidity to local banks and an official in Dubai's oil-exporting neighbour, Abu Dhabi, said on Sunday it would offer selective support to Dubai firms.


    Without referring directly to the Dubai World debt problems, the UAE's central bank governor said on Monday there was no cause for concern about local banks, which he said had proven themselves able to weather the global crisis.


    "I have advice for foreign investors. They should study available investment opportunities and conduct realistic feasibility studies to make sure they are real opportunities with no risk," the state news agency WAM quoted Sultan Nasser al-Suweidi as saying.


    Michael Ganske, head of emerging market research at Commerzbank in London, said a default, which could ultimately benefit the region, "is becoming more likely.


    "At the end of the day it should be positive for Dubai, Dubai's sovereign risk should go down," he said.


    Dubai World -- which had $59 billion of liabilities as of August -- shocked investors last week with news of the standstill request while it restructures, along with its property developer Nakheel. The agreement would affect about $5.7 billion of debt due to mature before the end of May.


    Nakheel earlier on Monday asked for three of its Islamic bonds, worth a total of $5.25 billion, to be suspended on Nasdaq Dubai until it was in a position to "fully inform the market."


    STANDALONE ENTITY


    Saleh made clear on Monday that while the government owned Dubai World, the conglomerate had long operated as a stand-alone entity and was never guaranteed by the emirate's government.


    "It deals with all parties on this basis and it borrows based on ... its projects and not the guarantee of the government," Saleh said.


    When contacted by Reuters and asked whether Dubai could still repay its Nakheel bond, Saleh declined to comment.


    The head of a Dubai budget committee said the government's own debt was $10 billion. "Dubai government's debts have been declared. They are only 10 billions. There should be no confusion between (the government) and any company," Dhahi Khalfan Tamim, also Dubai's police chief, told ‘Al Arabiya’ television.


    Dubai World Chairman Sultan Ahmed Bin Sulayem also declined to comment on Monday. Other Dubai World officials could not immediately be reached.


    John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group, said the distinction between the Dubai government and the flagship company appeared minimal.


    "What role does the sovereign play? This continues to create uncertainty," he said from Riyadh. "Their motivation is to make a distinction between the two, but the difference ... is nebulous."


    Saleh said he believed the market reaction to last Wednesday's announcement by Dubai World, which initially shook global financial confidence, was exaggerated.


    "The restructuring is a wise decision that is in the interest of all parties in the long-term but might bother creditors in the short term," he declared.
     
  18. Rage

    Rage DFI TEAM Stars and Ambassadors

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    Interesting, this Dubai debt disaster gets more intriguing by the minute.

    Any speculations on how Dubai World will shore up its debts, now that the Dubai Government has washed its hands off responsibility?

    Here's what the ToI's Economic Times seems to be thinking:


    [​IMG]


    The Economic Intelligence Unit of Emirates Business is of the view that "Dubai will be able to tide over its current debt crisis", given the vast resources of its banks and financial institutions, the $26 billion property-firms restructuring plan and the steep increase in their loan-loss provisions this year. But they're apparently also counting on financial assistance from Abu Dhabi and an upsurge in trade and logistics businesses to bail them through.
     
  19. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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  20. Sridhar

    Sridhar House keeper Moderator

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    [​IMG]
    [​IMG] Abu Dhabi bails out Dubai World with $10 billion loan
    [​IMG] 14 December 2009


    The Dubai government today said that it has received $10 billion in financing from Abu Dhabi to help the state-owned conglomerate Dubai World group repay its $4.1 billion Islamic bonds maturing today.
    [​IMG]"We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices," said Sheikh Ahmed bin Saaed al-Maktoum, the chairman of the Dubai Supreme Fiscal Committee in a statement.
    Dubai World's property unit Nakheel said it would repay the Islamic bond obligations of $4.1 billion within the next 14 days and added that it will start talks with creditors and contractors soon.
    The remainder of the funds will be used to finance Dubai World's needs up until the end of April 2010.

    Maktoum said, ''Dubai is, and will continue to be, a strong and vibrant global financial centre. Our best days are yet to come, and Dubai will soon announce a comprehensive reorganization law, based on international standards, for transparency and creditor protection.''
    Earlier, an unidentified official of the Abu Dhabi government had told Reuters that it would "pick and choose" how to assist its debt-laden neighbour Dubai, "We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts. (See: Abu Dhabi to be selective in aiding Dubai World)
    Today's announcement eased the pressure on the tiny emirate kingdom and ended weeks of speculation about whether the state will be able to meet its financial obligations after years of unrestrictive spending.
    The news also had a positive effect on the global financial markets as the Asian bourses rebounded, and the US dollar and the euro rose against the yen.
    Dubai, which is a regional hub for finance, investment and tourism thanks to sovereign funds and investment companies like Dubai World, threw global markets into jitters late last month when it asked creditors to restructure almost half its $59 billion debt and wanted a six-month suspension of all debt repayments. (See: Bank stocks tumble as Dubai seeks moratorium on debt)
    The crisis sent Asian markets reeling with shares of financial institutions and real estate sector worst affected.

    domain-b.com : Abu Dhabi bails out Dubai World with $10 billion loan
     

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