Nov. 30 (Bloomberg) -- Dubai’s government said it hasn’t
guaranteed the debt of Dubai World, the state-controlled holding
company struggling with $59 billion in liabilities, and that
creditors must help it restructure.
“The company received financing based on its project
schedule, not a government guarantee,” Abdulrahman Al Saleh,
director general of the emirate’s Department of Finance, said in
an interview with Dubai TV, when asked whether the government
was backing the debt. “Lenders should bear part of the
responsibility.”
Dubai’s government said Nov. 25 that Dubai World would seek
a standstill agreement with creditors and an extension of loan
maturities until at least May 30, 2010. The announcement led to
the biggest declines in Asian shares in three months last week
and Europe’s worst rout since April. Investors were concerned
the proposal risks triggering the biggest sovereign default
since Argentina in 2001
Dubai shares tumbled and Abu Dhabi’s stock index today fell
the most in at least eight years on the first trading day since
the announcement.
Nakheel PJSC, Dubai World’s property unit whose $3.52
billion Islamic bond is due Dec. 14, asked the Nasdaq Dubai
stock market today to suspend its securities “until it is in a
position to fully inform the market.”
Government Prospectus
“The times of implicit support are clearly over,” said
Philipp Lotter, vice-president of Moody’s Investors Service in
Dubai. “In the past entities such as Dubai World certainly
represented themselves as quasi-government entities, whereas
there was no legal obligation on behalf of the government to
support, and that has certainly shifted with last week’s
announcement.”
In the prospectus for its first Islamic bond sale in
October, the government said “certain strategic government-
related entities of the emirate have significant borrowings
which are not direct obligations of the government of Dubai.”
The government raised $1.93 billion from local and international
investors in the sale.
“If any of these entities are unable to, or are
potentially unable to, fulfill their debt obligations, the Dubai
government, although not legally obliged to do so and without
any obligation whatsoever, may at its sole discretion decide to
extend such support as it may deem suitable,” according to the
prospectus.
Lenders “have deemed Dubai World as part of the government
and that is not true,” al-Saleh said.
To contact the reporter on this story:
Vivian Salama in Dubai
vsal...@bloomberg.net
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFxSdvgvqhps&pos=1
