
http://english.aljazeera.net/business/2009/11/20091125211621604675.html
The government of the Gulf emirate of Dubai says it will ask creditors of its cash-strapped Dubai World conglomerate to accept a moratorium on debt worth billions of dollars.
The government announced the move on Wednesday as part of a plan to restructure the state-run company and its property developer subsidiary Nakheel.
“Dubai World intends to ask all providers of financing to Dubai World and Nakheel to a ’standstill’ and extend maturities until at least 30 May 2010,” a statement issued by the Dubai Financial Support Fund said.
Nakheel, the developer of the emirate’s palm-shaped residential islands, was due to pay off nearly $3.5bn in maturing Islamic bonds in December.
Wednesday’s announcement pushed up the cost of insuring Dubai’s debt against default and brought down bond prices, the Reuters news agency reported.
Nakheel’s Islamic bond prices fell more than 20 points to 87.
The announcement came just hours after Dubai said separately that it raised $5bn from two local banks, the second instalment of what officials had said would be a $20bn borrowing programme.
The bond programme was unveiled in February, with the federal government of the United Arab Emirates picking up the entire first tranche.
Dubai World has $59bn of liabilities, a large proportion of the Gulf emirate’s total debt.
The company, which owns Barneys New York, hired an advisory firm in August to help it explore options to shore up the US luxury chain’s financial position.
Dubai World had been trying to persuade bank creditors to restructure up to $12bn of its loans, an indication that the emirate is starting to grapple with the challenge posed by its $80bn-plus debt pile.
Dubai accumulated its debt as it expanded in banking and real estate projects before the global financial crisis dried up available financing.
Dubai is showing signs of recovery on the back of global economic optimism.
However, restructuring Dubai’s government-linked debts remains a top priority as the government seeks to assure a rebound for its trade, tourism and services-focused economy and recover from the precipitous property crash.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aoFe12bwzZ2M&pos=1
Dubai World, with $59 billion of liabilities, is seeking to delay debt payments, sending contracts to protect the emirate against default surging by the most since they began trading in January.
The state-controlled company will ask creditors for a “standstill” agreement as it negotiates to extend maturities, including $3.52 billion of Islamic bonds due Dec. 14 from its property unit Nakheel PJSC, Dubai’s Department of Finance said in an e-mailed statement. Moody’s Investors Service and Standard & Poor’s cut the ratings on several state companies, saying they may consider the plan a default.
“Extending the maturity of Nakheel debt is feeding the market’s uncertainty on which debt Dubai will honor in full,” said Rachel Ziemba, a senior analyst covering sovereign wealth funds at New York-based Roubini Global Economics. “They look desperate and the market is concerned that in the long term Dubai’s indebtedness is rising not falling.”
Dubai accumulated $80 billion of debt by expanding in banking, real estate and transportation before credit markets seized up last year. Contracts protecting against default rose 116 basis points to 434 basis points yesterday, the most since they began trading in January, ranking it the sixth highest-risk government borrower, according to credit-default swap prices from CMA Datavision in London. The contracts, which increase as perceptions of credit quality deteriorate, are higher than Iceland’s after climbing 131 basis points in November, the biggest monthly increase since January.
Investor concern is growing because the emirate hasn’t disclosed how it will pay more than $9 billion of debt coming due in the next four months. Dubai said yesterday it borrowed $5 billion from Abu Dhabi government-controlled banks, half the $10 billion Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum said he planned to raise by yearend.
“There is no clarity about what exactly is happening,” said Emad Mostaque, a London-based Middle East equity-fund manager for Pictet Asset Management Ltd., which oversees more than $100 billion globally. “They have to clarify if there is going to be a voluntary rollover or if there is going to be a forced rollover. If there is a forced rollover it will mean technical default. If they don’t clear this up then the whole market will want to sell.”
http://www.bloomberg.com/apps/news?pid=20601086&sid=aHtXKA26xU54
Nov. 26 (Bloomberg) — Brazilian stocks fell the most in two weeks and the currency tumbled after inflation accelerated and Dubai’s attempt to reschedule its debt rattled investors seeking higher returns in emerging markets.
Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, led declines on the Bovespa index as investors boosted their bets for bigger interest-rate increases next year. Vale SA, the world’s biggest iron-ore miner, and smaller rival MMX Mineracao & Metalicos SA dropped more than 2 percent as metals prices fell after government investment company Dubai World sought to delay repayment on much of its debt.
“Everyone remembers the serious problem we had last year, and we don’t still know the real size of this thing. It could be nothing or it could be the beginning of something else that is just starting to appear,” said Guilherme Sand, who helps manage the equivalent of $400 million at Solidus Brokerage in Porto Alegre, Brazil. “And in light of that doubt investors are selling and retreating to the dollar.”
http://www.reuters.com/article/ousivMolt/idUSTRE5AP1L120091126
Dubai struggled to ease fears of debt default on Thursday after its move to delay repayments at two flagship firms shook confidence in the Middle East as a center 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 toward restructuring.
On Thursday, 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 $3.25 billion outstanding bonds, is majority owned by Dubai World but has shares listed on NASDAQ Dubai.
“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.
There was no immediate sign that U.S. banks were exposed, but it was difficult to ascertain, given Thursday’s Thanksgiving holiday.
“It is not so much that Dubai did what they did, but how they did it … with no notice,” said Andrew Brenner, head of emerging markets at Guggenheim Securities. “Spreads on a lot of fixed income products have gotten to very rich levels and the Dubai default will force risk to get repriced downward. Either way, look for a flight to quality scenario tomorrow on a holiday-shortened day.”
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 $12 billion 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.
International banks are seeking to clarify their position as they formulate their response to the standstill request and are assessing the implications for lending to Dubai and the Gulf.
“This is very serious and will have implications across the region,” a senior banker said.
Sheikh Ahmed bin Saeed al-Maktoum, head of a top Dubai financial body, said he understood concerns in the markets and among creditors. “However we have had to intervene because of the need to take decisive action to address (Dubai World’s) particular debt burden,” he said in a statement.
———
this could be real big..in fact i think it is..who is exposed?..ftse down 3.5% and shanghai down the same..we wait to see how far the asx and nikkei fall today..this could be a red run into xmas now
401
Recent Comments