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Dubai stalls repayments on $59bn, Abu Dhabi buys $5bn bonds

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Dubai World, the state-owned parent of developer Nakheel, is seeking to delay repayment on debts totaling $59 billion which includes the $3.5 billion Islamic bond due for repayment on December 14, said an official announcement.

All creditors are to be asked for a ‘standstill agreement’ as Dubai World negotiates the extension of its debt maturities.

$5bn bond sale

Meanwhile, the National Bank of Abu Dhabi and the recently formed Abu Dhabi islamic bank Al Hilal have both subscribed equally to a $5 billion tranche of new Government of Dubai long term bonds, part of the $20 billion program announced in February.

According to a statement: ‘The proceeds are managed by and further strengthen the financial resources of the Dubai Financial Support Fund, which was established with the specific purpose of providing liquidity on a commercial basis to Government and Government-Related Entities undertaking projects deemed to be of strategic importance within Dubai that contribute towards the overall economic development of the Emirate’.

The first $10 billion bond issue was fully subscribed by the UAE Central Bank which is located in Abu Dhabi. Al Hilal Bank was opened in June 2008 with a capital of AED1 billion by the Abu Dhabi Investment Council, an investment arm of the Abu Dhabi Government.

Limited support

The news today shows continued support from Abu Dhabi for Dubai and the refinancing of an estimated $85 billion debt mountain left over from the real estate boom which collapsed in the global credit crisis of last autumn.

However, clearly there are limits to the immediate credit available and the $59 billion Nakheel payment suspension is not going to go down well with international creditors. Dubai’s economic crisis has now entered a new phase.

Those who thought the December bond was going to deliver a quick profit have been proven wrong. And projects like Nakheel’s Palm Jebel Ali (pictured above) remain stalled.

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Written by Peter Cooper

November 25, 2009 at 3:12 pm

Posted in Banking, Dubai Property

One Response

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  1. The words “Dubai World, the state owned parent of Developer Nakheel.” Says it all, one would think that “money lenders” would take note of history and realize that: Governments should govern.
    Builders should build, this is the way the free market works. How many examples of Government largess and subsequent default do the Greedy people need to witness in order to evaluate risk?

    Hey Guys, Live and Learn, Greed is Greed! and common sense is obviously out the window.
    Leo T Ollenberger
    Canada

    Leo T Ollenberger

    November 27, 2009 at 2:49 am


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