Wednesday, November 25, 2009

Dubai World to Delay Debt, Owes $59 Billion; Default Swaps Soar




One of the Champions of Cheap Credit: From Icon To Moron or from Hero to Zero.

Bubble apparently to pop soon.

Owner Waterfront Cape Town Going Bust?

Nov. 25 (Bloomberg) -- Dubai World, the government-owned holding company struggling with $59 billion of liabilities, is seeking to delay repayment on all of its debt, even after Abu Dhabi banks provided $5 billion for Dubai’s support fund.

Dubai World will ask all creditors for a “standstill agreement” as it negotiates to extend the maturities of its debt, including $3.52 billion of Islamic bonds due for repayment on Dec. 14 by its property unit Nakheel PJSC, the builder of Dubai’s palm tree-shaped islands, the company said in an e- mailed statement today.

The cost to protect against a default by Dubai surged 111 basis points to 429 basis points, ranking it the sixth highest- risk government borrower, according to credit-default swap prices from CMA Datavision in London. The contracts, which increase as perceptions of credit quality deteriorate, are now higher than Iceland’s after climbing 131 basis points in November, the biggest monthly increase since January.

The emirate, home to the world’s tallest tower and the biggest man-made islands, owes $4.3 billion next month and another $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show. Abu Dhabi government-controlled banks, National Bank of Abu Dhabi PJSC and Islamic lender Al Hilal Bank bought all $5 billion of bonds from the government, Dubai’s Department of Finance said in an e-mailed statement today.

“The Dubai Financial Support Fund, working with the chief restructuring officer, will start to assess and evaluate the extent of the restructuring required,” the Dubai Department of Finance said in a statement. “As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least May 30.” The price of Nakheel bonds dropped to 80 percent of face value.

Debt Restructuring

Dubai will draw down $1 billion from the bonds sold to Abu Dhabi to provide funding through a sale of securities to National Bank of Abu Dhabi PJSC and Islamic debt, or sukuk, to Al Hilal.

Dubai’s Supreme Fiscal Committee hired Deloitte LLP to lead the restructuring of Dubai World debt, the Department of Finance said. Deloitte’s Aidan Birkett, managing partner for corporate finance, was assigned.

Dubai, the second biggest of seven sheikhdoms that make up the United Arab Emirates, set up a $20 billion Dubai Financial Support Fund after the credit crisis triggered the world’s worst property crash and hurt its finance and tourism industries. The emirate raised $10 billion by selling bonds to the U.A.E. central bank in February, with some of the money going to property developers.

‘Shut Up’

Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum said Nov. 9 the emirate’s bond program to raise a further $10 billion will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up.” Abu Dhabi, the U.A.E.’s capital, is owner of the world’s biggest sovereign wealth fund and holds almost all of its oil.

Eleven days later, he removed the governor of the Dubai International Financial Centre, Omar Bin Sulaiman, who had led efforts to transform Dubai into a Middle East finance hub. The change came 24 hours after Sheikh Mohammed dropped the chairmen of Dubai Holding LLC and Dubai World, two large state-owned business groups, as well as the head of U.A.E.’s biggest developer Emaar Properties PJSC from the board of the Investment Corp. of Dubai, the emirate’s main holding company.

Home prices in Dubai plummeted 47 percent in the second quarter from a year ago, the steepest drop of any market, according to Knight Frank LLC. Property prices may drop further, a survey by Colliers International showed Oct. 14.

Dubai World had $59.3 billion in liabilities at the end of last year, its subsidiary Nakheel Development Ltd., said in a statement posted on the Nasdaq Dubai Web site Aug. 20. The company had total assets of $99.6 billion at the end of 2008 and total revenue of $14.2 billion.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net

1 comment:

  1. I told lin that Dubai World was going to go bust at least 2 years ago. Big gamblers the lot of them.

    Imagine all those suckers that bought property in Dubai in the last 2- 3 years, Ouch

    That whole Dubai thing was a load of shyte :)

    ReplyDelete