Dubai has shocked investors by asking for a debt standstill at Dubai World, the governmentâs flagship holding company that has developed some of the worldâs most extravagant real estate projects.
The move raised the spectre of default in the Middle Eastâs trading hub just as early signs of economic recovery have emerged. During the boom, Dubai rode the wave of easy credit generating phenomenal economic growth but was badly hit by the global credit crisis.
Dubaiâs surprise move angered some investors who had been reassured by local officials for months that the city would meet all obligations on its $80bn (£48bn) of gross debt in spite of recession and a real estate crash.
âInvestors view this as shockingly bad news,â said Rob Whichello of BNP Paribas. Two hours after announcing it had raised $5bn from two Abu Dhabi banks, the department of finance asked for a standstill until May 30 on all financing to the heavily indebted Dubai World and its troubled property unit Nakheel, which is due to pay back $4bn on an Islamic bond on December 14.
Dubai also launched a restructuring of the government holding company, which oversees ports operator DP World, the UK-based P&O Ferries and troubled investment company Istithmar. Nakheel, the developer behind the cityâs Palm Islands that boast celebrity owners such as David Beckham, has had to shed thousands of staff and left contractors out of pocket as local property prices halved and credit dried up.
A symbol of Dubaiâs pre-crunch excess, the government company has had to cancel plans for the worldâs tallest tower and a constellation of reclaimed islands, as collapsing cash flow left the developer on the brink.
http://www.ft.com/cms/s/0/46b4065c-d9f7-11de-b2d5-00144feabdc0.html
The move raised the spectre of default in the Middle Eastâs trading hub just as early signs of economic recovery have emerged. During the boom, Dubai rode the wave of easy credit generating phenomenal economic growth but was badly hit by the global credit crisis.
Dubaiâs surprise move angered some investors who had been reassured by local officials for months that the city would meet all obligations on its $80bn (£48bn) of gross debt in spite of recession and a real estate crash.
âInvestors view this as shockingly bad news,â said Rob Whichello of BNP Paribas. Two hours after announcing it had raised $5bn from two Abu Dhabi banks, the department of finance asked for a standstill until May 30 on all financing to the heavily indebted Dubai World and its troubled property unit Nakheel, which is due to pay back $4bn on an Islamic bond on December 14.
Dubai also launched a restructuring of the government holding company, which oversees ports operator DP World, the UK-based P&O Ferries and troubled investment company Istithmar. Nakheel, the developer behind the cityâs Palm Islands that boast celebrity owners such as David Beckham, has had to shed thousands of staff and left contractors out of pocket as local property prices halved and credit dried up.
A symbol of Dubaiâs pre-crunch excess, the government company has had to cancel plans for the worldâs tallest tower and a constellation of reclaimed islands, as collapsing cash flow left the developer on the brink.
http://www.ft.com/cms/s/0/46b4065c-d9f7-11de-b2d5-00144feabdc0.html
