Wednesday, December 9, 2009

Dubai 9/11 debacle: More reports

Here are some key reports from wire agencies on the Dubai World debacle, as it unraveled.

Dubai says not responsible for Dubai World debt
Nov 30 2009
DUBAI: 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. (Reuters)

Impact of Dubai World on banks manageable: IMF
Dec 4, 2009
DUBAI World's attempt to delay debt repayments, while slowing growth in the United Arab Emirates, was ''contained and manageable'' for banks that lent money to the state-run company, an International Monetary Fund official said yesterday. ''We don't see that that's going to be an issue'' for banks, Masood Ahmed, director of the IMF's Middle East and Central Asia department, said. Because Dubai World had assets abroad such as commercial real estate, ''it may well be that some of these assets will be disposed of'', which ''may lead to some degree of re-evaluation of commercial property more generally'', he said. There had been less ''market uncertainty'' since Dubai clarified investors' questions in recent days, Mr Ahmed said. (Bloomberg)

GCC stocks tumble on Dubai World debt concerns
Dec 8, 2009
Amman - The stock markets of five Gulf Cooperation Council (GCC) member states plummeted on Tuesday on ambiguity surrounding talks between the Dubai World conglomerate and its creditors, financial analysts said. The stock exchanges of Dubai, Abu Dhabi and Saudi Arabia were the main losers among Arab bourses due to sell-off mainly by foreigners who preferred to stay out of the market at this juncture, they added. The all-share price index of the Dubai stock exchange sank 6.12 per cent, bringing the total loss in two days to about 12 per cent. Abu Dhabi's benchmark also moved downward, plunging 3.43 per cent, with a total decline of more than 5 per cent in two days. The decline was led by the real estate sector which tumbled more than 9 per cent on the Dubai stock exchange. (Deutsche Presse-Agentur)

Dubai World Crisis Hits Union Square
Dec 9, 2009
The trendy W Hotel in Manhattan's Union Square was auctioned off yesterday for just $2 million. The purchase price is cheap, but the new owner of the hotel, LEM Mezzaine, will also be responsible for any defaulted loans that are in line ahead of its debt. The hotel was owned by Dubai World's private-equity arm, Istithmar World Capital, which paid $282 million for the property in 2006. This fall the company defaulted on $117 million of its debt. As the WSJ (subs req'd) reports the hotel was "the first major property asset of Dubai World to be foreclosed on since the government-owned fund's problems boiled over in late November."

Nakheel had Dh3bn aid from Dubai World
Dec 09. 2009
ABU DHABI: Nakheel, the Dubai property developer, received Dh3 billion (US$816.8 million) in financial assistance from Dubai World in the first half of 2009 as it dealt with a cash flow shortage and mounting obligations, according to a financial statement released today. Details of the support comes a day after Abdulrahman al Saleh, the director general of the Dubai Department of Finance, said that Dubai World had been lent roughly Dh9bn this year from a fund created to help Dubai companies impacted by the economic downturn. (

Dubai Company Bonds Dive as Swaps Show Default Risk
Dec. 9, 2009
DUBAI: The tumble in bonds of Dubai’s state- controlled companies to record lows signals growing concern more borrowers will fall behind on debt payments as Dubai World seeks to restructure $26 billion of obligations. “We are concerned that it’s just not Dubai World that has issues,” said Oliver Bell, the head of Middle East and Africa investment at Pictet Asset Management in London, which has $120 billion under management. “The health of other government- related entities is in question.” Dubai World property unit Nakheel PJSC’s $3.52 billion of Islamic bonds due Dec. 14 dropped 5 percent, extending yesterday’s 10 percent slide, to head for a record-low close at 45 cents on the dollar, according to Citigroup Inc. Bonds sold by Dubai Holdings Commercial Operations Group LLC sank as low as 41.5 cents on the dollar after Moody’s Investors Service cut the credit ratings of six state-run companies. A jump in the cost of DP World Ltd.’s credit-default swaps implied a 35 percent risk that the port operator will renege on debt. Dubai World, a government holding company that owns 80 percent of DP World, said last week it’s in talks with banks to reorganize debt after requesting a creditor “standstill” on Nov. 25. Debt restructurings may almost double to $46.7 billion in the “near term” as more of Dubai’s businesses need help paying debt, according to Morgan Stanley. “The ownership structure in Dubai is like spaghetti,” Pictet’s Bell said. “We’re in the process of sorting that spaghetti out.” (Bloomberg)

Dubai World debacle cancels property expo
Dec 10, 2009
MUMBAI: The Maharashtra Chambers of Housing and Industry that had planned a property exhibition in Dubai today has postponed it indefinitely. The reason is not clear though. While the MCHI say the government of Dubai revoked their permission to conduct the exhibition, market
insiders attribute this sudden change of plans to the Dubai market crash. Strangely a week ago, MCHI's international exhibition co-convener J Augustine had told MiD DAY that they were excited about going to Dubai, as they wanted to tap the emotional Indians who would invest in Mumbai beca-use of the bad market there.

Abu Dhabi to aid Dubai on "case by case" basis: Reuters

Nov 28 2009
ABU DHABI: Abu Dhabi, wealthy capital of the United Arab Emirates, will "pick and choose" how to assist debt-laden neighbor Dubai, a senior official said on Saturday, after fears of a Dubai default sent global markets reeling. "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," the official in the government of the emirate of Abu Dhabi told Reuters by phone. Selective assistance for companies in "Dubai Inc.," a network of quasi-sovereign industries, instead of blanket assistance, would serve a rude awakening to investors who for years assumed that the conservative Abu Dhabi provided a safety net for its racier neighbor. At stake is the $59 billion in debt held by government controlled holding company Dubai World and its property arm Nakheel, builder of palm-shaped islands for wealthy celebrities. Dubai delayed payment on Nakheel debt by six months in a shock announcement, which came on the eve of a long holiday.
Years of chasing business in Dubai's property boom means Abu Dhabi banks have built up an exposure to Dubai-based companies worth at least 30 percent of their loan books, senior bankers in Abu Dhabi said on Friday. In most investors' minds, the question is not whether Abu Dhabi will support Dubai but when and how. Abu Dhabi, which pumps 90 percent of the oil that make the United Arab Emirates the world's third-largest oil exporter, has already provided $15 billion in indirect support for Dubai through the UAE central bank and two private Abu Dhabi banks. How much more support the emirate provides for its cash-strapped neighbor, however, will depend on how Dubai clarifies its stand on unresolved issues. (Reuters)

Dubai 9/11 debacle

Dubai's Nakheel seeks suspension for $5 billion in bonds: Reuters

Dubai's Nakheel asked for three of its listed Islamic bonds worth us$5.25 billion to be suspended pending details of restructuring plans at its parent company, a move likely aimed at dampening speculation on the bonds, reports Reuters (Nov 30 2009).
The request briefly stalled but did not stop trading in the bonds, which are exchanged over the counter and not on the bourse, where the listing is regarded as a technicality. The request also added to confusion that has reigned in the markets since the Dubai government last week said it would seek debt standstill agreements from creditors to Nakheel and Dubai World, briefly sparking fears of a renewed crisis, the report added.
It noted that the three instruments listed on the exchange are a $3.5 billion sukuk due on December 14, a 3.6 billion dirham sukuk ($980.1 million) due on May 13 and a $750 million sukuk due on January 16, 2011.
Nakheel's December bond was trading at 58 on Monday, according to Thomson Reuters data, having traded as high as 110 on Wednesday before the Dubai government's announcement. Its 2011 debt was trading at 55, it added.
Nakheel, developer of a series of created islands in the shape of palm trees off Dubai's coast, said it had asked Nasdaq Dubai to suspend all three of its listed Islamic bonds, or sukuk, "until it is in a position to fully inform the market."
Nakheel's first bond, the $3.5 billion sukuk, was widely expected by the market to be repaid on time.


Dubai says not responsible for Dubai World debt
Nov 30 2009

Dubai's Nakheel asks for suspension of 3 listed sukuk
Nov 30 2009

UAE moves to counter Dubai fallout but markets wary
Nov 29 2009

Abu Dhabi to aid Dubai on "case by case" basis
Nov 28 2009

Abu Dhabi banks have big Dubai exposure-bank execs
Nov 27 2009