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UAE (1) -- News -- 2010
Emirate Offers to Help Restructure Dubai World
25.03.2010
After obtaining a loan of $10 billion from Abu Dhabi Dubai anounced that the government will
inject up to $9.5 billion into Dubai World and its property subsidiary Nakheel and would seek to repay all creditors within eight years.
It would inject $8 billion into Dubai World’s debt-plagued real estate arm, Nakheel, and $1.5 billion into Dubai World itself,
and convert into equity about $10.1 billion of these entities’ outstanding obligations to the government of Dubai.
The offer makes it clear that these two symbols of the emirate’s heady rise will not be allowed to fail.
Nakheel will now be owned directly by the government, not Dubai World.
Banks with significant exposure to Dubai are
Standard Chartered, HSBC Holdings, Royal Bank of Scotland and Lloyds, might respond to the offer within a month or so.
UAE (1) -- Analyses -- 2010
More about the crisis
25.03.2010
Last November, confusion, uncertainty and a brief spasm of investor panic ensued when the government of Dubai abruptly notified its creditors that it would delay
interest payments on the $23 billion in debt that Dubai World owed creditors.
Nakheel, whose highly leveraged luxury developments — including artificial islands off the coast — came to symbolize Dubai’s brash aspirations, will work on a
restructuring agreement with its banks. It is now expected to fulfill its obligations to the holders of its Islamic bonds, or sukuks, which come due in 2010 and 2011.
While analysts say it is likely that banks will take the deal, as they want to maintain ties with the United Arab Emirates, trade creditors may be less willing to accept
a similar “haircut,” or markdown, on their positions. In the statement, Dubai addressed this issue by saying that trade creditors would be offered a
“significant cash payment and a tradable security.”
According to a Dubai government official who has played a leading role in working with the companies on their restructuring proposals, the reception to the proposal
Thursday from banks so far has been positive.
“We have every reason to believe the discussions are going well,” said the official, who was not identified because of government policy. “I feel we are on the right track.”
Dubai, one of the seven members of the United Arab Emirates, has negligible oil reserves, unlike Abu Dhabi. Under Sheik Mohammed bin Rashid al-Maktoum, its ruler, the
tiny principality has sought to modernize its economy by transforming itself into a regional financial and services hub.
But as in the United States and Britain, property-sector lending grew unsustainably fast, and Dubai had to ask Abu Dhabi for help in renegotiating its debt. On Dec. 14,
Abu Dhabi obliged, pledging $10 billion to help Dubai repay a maturing bond.
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