Leaders in Dubai refuse to ease woe

Dec 1 2009 By The Journal

THE Dubai government has refused to guarantee the debt of Dubai World, which caused panic on stock markets around the world because it cannot pay back creditors immediately.

The government spoke out after stock markets in Dubai and Abu Dhabi saw sharp falls after their first day of trading since its debt crisis was revealed.

"[Creditors] think Dubai World is part of the government, which is not correct," said finance minister Abdulrahman al-Saleh. "Creditors need to take part of the responsibility for their decision to lend to the companies."

Abu Dhabi’s main stock market lost a record 8.3%, while Dubai dropped 7.3% – the most in a year.

The central bank of the United Arab Emirates has tried to calm fears by setting up a facility to provide banks with extra liquidity, as it seeks to battle perceptions that Dubai cannot support its own companies.

On the Dubai bourse, construction and financial stocks slumped nearly 10%.

The debt-ridden Dubai World fell 15% and Dubai’s property developer, Nakheel, asked for the trading of some of its Islamic bonds to be suspended.

News of the city’s woes sent ripples of fear across world markets on Thursday amid worries of a new credit crisis.

A fall in European marekts followed rises on Asian markets overnight, suggesting some markets are feeling more optimistic after last week’s hefty falls.

Dubai World’s investments range from Scotland’s historic Turnberry golf course to Nakheel, the developer behind Dubai’s luxurious Palm man-made islands.

Other assets included in Dubai’s network of sovereign wealth and investment firms include the QE2 cruise liner, the Emirates airline and the Travelodge budget hotel chain.

Deloitte has been appointed as an adviser to Dubai World to help it restructure the company’s huge debts.

The firm had a £2.1bn bond payment due this month december and wants breathing space on all debt repayments falling due until the end of next May.

According to the latest figures from the Bank for International Settlements, UK banks had a £30.5bn exposure to the United Arab Emirates at the end of June, although individual figures for Dubai are not available.