http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=328717&version=1&template_id=57&parent_id=56
Dubai bid to assuage debt fears
Publish Date: Friday,27 November, 2009, at 12:56 PM Doha Time
Reuters/Dubai/London
Dubai struggled to ease fears of debt default yesterday after its move to
delay repayments at two flagship firms shook confidence in the Middle East as a
centre for investment and a source of capital. Dubai's debt problems, a
hangover from a property boom that produced the world's tallest building, have
shaken trust among Western investors who turned to the oil-exporting Gulf
region for help during the global financial crisis.
The emirate said on Wednesday it would ask creditors of Dubai World, the
conglomerate behind its rapid expansion, and Nakheel, builder of its
palm-shaped islands, to agree a standstill on billions of dollars of debt as a
first step towards restructuring. Yesterday, Dubai tried to revive confidence
by saying its profitable DP World, which runs 49 ports around the world, would
not be involved in the restructuring. DP World, which has $3.25bn outstanding
bonds, is majority owned by Dubai World but has shares listed on NASDAQDubai.
"It might be a move to distinguish the solvent from less solvent
companies in an attempt to shift the weight away from the less exposed
entities," said John Sfakianakis, chief economist at Saudi Fransi bank. But
European bank shares, which had recovered in recent months on hopes that the
worst of a global crisis was over, fell to lows not seen since May on Dubai's
debt delay.
Shares in companies in which Gulf investors own big stakes, including the
London Stock Exchange, UK grocer J Sainsbury and German carmakers Porsche and
Daimler, also fell sharply on concerns the holdings would be cut to meet
obligations at home.
Exposure to Dubai World could be as high as $12bn in syndicated and
bilateral loans, including existing loans for Nakheel and Istithmar, an
investment arm of Dubai's government, banking sources told Thomson Reuters LPC.
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