Abu Dhabi gives $10 bln-emergency funds to Dubai

Dubai's government said it on Monday has received $10 billion in emergency funds fromAbu Dhabi.

Abu Dhabi gives $10 bln-emergency funds to Dubai

Dubai's government said Monday it has received $10 billion in emergency funds from its oil-rich neighbor Abu Dhabi that will help pay debts owed by the struggling Dubai World conglomerate.

Dubai said $4.1 billion of the money received from Abu Dhabi was allocated to property developer Nakheel to repay its Islamic bond maturing on Monday. Nakheel said it would repay the bond over the next two weeks.

State-owned Dubai World had been up against a Monday deadline to repay a pile of debt from its Nakheel property division. Some $4.1 billion of the bailout money will be used to pay off those bills.

The excess funds would be used to help government-controlled holding company Dubai World, which has asked creditors to agree to restructure $26 billion of its debt, up until the end of April 2010, a Dubai government statement said.

"The (agreement is) on condition of the company being successful in negotiating a standstill previously announced with remaining creditors," a government source said in a conference call with journalists.

"The fund will also be used for the satisfaction of obligations to trade creditors and contractors and discussions with contractors will begin shortly," the source said.

Abu Dhabi is the largest member of the United Arab Emirates federation and a big oil exporter.

Sheikh Ahmed bin Saaed al-Maktoum, chairman of Dubai's fiscal committee, said Dubai's government would act at all times in accordance with market principles and internationally accepted business practices and the emirate would remain a strong and vibrant global financial centre.

"Our best days are yet to come," he said in a media statement.

"Beyond expectations"

Dubai's benchmark stock index led a surge on regional markets, jumping more than 10 percent, while Abu Dhabi rose 7 percent in early trading.

The yen fell sharply against other currencies on the news, while the dollar shot up to 88.90 yen and the euro also jumped to 130.43 yen

U.S. S&P stock futures jumped 0.7 percent, reversing early losses, and European shares were also called higher. Hong Kong's Hang Seng index shot up 300 points in the last minutes of morning trade to finish in positive territory, while other markets across Asia also pushed higher.

The move was the least expected of all options Dubai had on the table after requesting a standstill on $26 billion in Dubai World debt on Nov. 25, alarming global financial markets and shaking the image of the emirate as a regional business hub.

Dubai's creditors, along with United Arab Emirates lenders Abu Dhabi Commercial Bank and Emirates NBD, effectively have until Dec 28 to agree to the standstill, when the Nakheel bond's grace period ends.

"This is kind of above and beyond what people expected. It is a crucial and essential lifeline ... at a time when the markets really needed it," said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole. "That should bring in a lot of confidence. Basically Abu Dhabi is footing the bill.

"It will take time for the implications to unfold. I highly doubt this kind of money has no strings attached. There was no other choice for Abu Dhabi but to bailout Dubai, the federation would have been at stake."

"New bankruptcy law"

Dubai also announced a new bankruptcy law that it said could be used in case Dubai World and creditors failed to reach an agreement on debt maturing in the future.

The Dubai government source said the law, which would be in effect from Dec 14, could allow Dubai World to file for bankruptcy if its restructuring was not successful.

Dubai has ring-fenced prized assets such as Emirates airline from the $26 billion debt restructuring of Dubai World.

The government source said the restructuring process could include asset sales, but they would be limited to Nakheel and Limitless, excluding Istithmar World assets, which owns U.S. luxury retailer Barneys, or its port operator DP World

"Dubai will do asset sales and markets will be relieved, said Saud Masud at UBS.

"But we've still got $35 billion due in bonds, loans and repayment over the next couple of years, so this is only one thing. We've got almost 10 times this amount to come. The big question is how are they are going to do this next step?"

The government source said other government related entities such as Borse Dubai, which has $2.5 billion of debt maturing in February, and Dubai Holding, which has about $1.9 billion maturing in the first half of 2010, would be assessed on a "case by case basis" and the Dubai World deal was not an indication of future deals.


Last Mod: 14 Aralık 2009, 12:02
Add Comment