State will not guarantee Dubai World debt
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The government of Dubai has revealed it will not guarantee the debts of Dubai World, the state-owned firm.
Dubai World, a firm owned by the Dubai government that includes property developer Nakheel, last week requested a debt moratorium on a £3.18bn Islamic bond. This led to market fears for the whole Emirate but the Dubai government last night came out and publicly distanced itself from the ailing firm.
Dubai finance minister Abdulrahman al-Saleh told Dubai Television: “[Creditors] think Dubai World is part of the government, which is not correct. Creditors need to take part of the responsibility for their decision to lend to the companies.”
Both Dubai and Abu Dhabi stock markets continued to slide today after record losses on Monday. The Nasdaq Dubai is at 1,858, down more than 200 points since the Dubai World announcement.
The FTSE has not been affected by the continuing debt problems. After a drop on Friday, the market has risen 78 points to 5268.92 this morning.
Dubai World says it is in the midst of a £15.8bn ($26bn) debt restructure with its banks, of which £3.7bn relates to the defaulted Nakheel Islamic bond or ‘sukuk’. It says the restructuring only relates to its Nakheel property business, not its other businesses which include the Dubai port business, DP.
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Readers' comments (2)
Evan Owen | 1 Dec 2009 10:19 am
A state owned company means something different in the Gulf?
Who are the directors and officers of the company?
I read somewhere that RBS was the main lender involved and although most of it will be syndicated they still stand to lose £100m.
So, one of the systemically risky banks has been lending to a company which builds on sand using the credibility of being "owned" by a gulf state which later on decides to wash its hands of it when the camel pooh hits the fan.
Scary or what?
Time for international regulation of these people?
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Anon IFA | 2 Dec 2009 10:46 am
Having lived in Dubai for a period of time, I was concerned at the time that they seemed oblivious of market forces, everyone believing that they lived in some enchanted kingdom that was cushioned from the world (for the ex pats, too which made it such an attractive place to live for them). It was nice while it lasted though. The Emiraties are generally well off and fairly level headed and will not be phased by all this too much (or will try not to show it anyway!). I take my hat off to a small Arab seaside resort that has been able to attract so much money in so short a time. I do think they need to re think their current position however. Running away from their first real international test of courage is not the right strategy at all, does not wash, and will only damage their future ability to attract future investors. Come on Dubai, show us what you are really made of. You have an opportunity to demonstrate to the world that you really are here to stay and not some mirage in the desert, otherwise, your fledgling Emirate and the the whole of the UAE, will simply not be taken seriously and your stockmarkets will continue to slide I am afraid. I know the UK has many faults but I think we do have an inate sense of realism and are prepared to take appropriate measures however unpalateable when needed, especially in the current environment. This has been rewarded by the continued confidence in our stockmarket, something the newly appointed French EU Finance Minister dislikes intensely and I fear will do his utmost to undermine, not being a fan of the 'Anglo Saxon' way (Trust the French to turn it into some nationalistic race issue, absolutely ridiculous!!).
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