News Archive
Dubai woes: It’s far, far worse than we thought
Released on 26/11/2009
Dubai shocked investors yesterday by asking creditors for a six-month debt holiday while it works out how to pay back the US$80bn it owes.
The surprise move spells bad news for firms still waiting to be paid hundreds of millions of dollars for work completed in the one-time construction capital of the world.
The government’s request raised fears that the emirate would default, and angered investors who had been assured that the city would honour its obligations despite the dramatic property crash.
A spokeswoman for Dubai’s finance department said the government intended to ask all bondholders to extend until May. But the government said no decision had yet been made on how to deal with investors insisting on repayment in December.
“This will destroy confidence in Dubai, the whole process has been so opaque and unfair to investors,” Eckart Woertz, economist with Dubai's Gulf Research Centre, told the Financial Times.
Nearly $60m of Dubai’s overall $80bn debt is held by Dubai World, the state-run umbrella organ that runs a host of big-name Dubai companies that drove expansion across real estate, ports, leisure, retail, banking and other sectors throughout the boom years.
One of these companies is Nakheel, the property developer behind the three iconic ‘Palm’ island developments off the coast, including Palm Jumeirah, home to the Atlantis hotel (pictured here during its grand opening November 2008). Its obligations include a $4bn loan repayment due on 14th December. Foreign and UAE construction companies, such as Arabtec, are reported to be waiting for an estimated $1bn in total in unpaid invoices.
“Extending the maturity of Nakheel debt is feeding the market’s uncertainty on which debt Dubai will honor in full,” said Rachel Ziemba, an analyst at New York-based Roubini Global Economics told Bloomberg. “They look desperate and the market is concerned that in the long term Dubai’s indebtedness is rising not falling.”
Dubai has appointed a managing partner in corporate finance from Deloitte & Touche as “Chief Restructuring Officer” at Dubai World to work out how the company can carry on.
