Special Features
Dubai Unlikely To Need More Financial Aid: Al Suwaidi
Dubai, which is seeking to restructure a $22 billion debt owed by state-owned conglomerate Dubai World, is not likely to need any more help from the UAE Central Bank, its governor was quoted as saying on Monday.“They (Dubai) haven’t discussed this issue with us and I don’t think it will be necessary,” Central Bank Governor Sultan bin Nasser Al Suwaidi was quoted by Bloomberg as saying on Monday in response to a question on whether Dubai will need further federal support.
Analysts have welcomed Al Suwaidi’s remarks as a clear signal that Dubai has almost overcome the challenges with regard to raising funds to support state owned entities in the aftermath of an unprecedented global credit crunch.
The Central Bank governor said Dubai World’s debt-restructuring proposal would treat all banks equally and that local banks will be able to bear the brunt of any “haircuts.”
In 2009, the Central Bank, along with the Abu Dhabi government and two Abu-Dhabi-based banks, pledged $20 billion to support Dubai companies after global credit markets froze.
This included $10 billion bond purchase by the Central in a $20 billion sovereign bond programme launched by Dubai. This was followed by a pledge of another $10 billion financial support by Abu Dhabi government and two banks — Al Hilal Bank and National Bank of Abu Dhabi — in December 2009 to help Dubai avoid default on Nakheel’s $4.1 billion Islamic bond, or sukuk.
The $5 billion support of the banks came in the form of subscription of the $20 billion bond programme managed by the Dubai Financial Support Fund. The two banks originally drew down $1 billion, split equally between a conventional bond issuance to NBAD and a sukuk to Al Hilal Bank, according to banking sources.
Dubai World is in talks to renegotiate debt linked mainly to its property units Nakheel and Limitless World.
The company announced in November 2009 that it would request a six-month delay on repaying the funds.
Representatives of Dubai World have been meeting creditors to discuss the outlines would be tabled this month, but some bankers fear the deadline will slip owing to the complexity of the restructuring. A steering committee of the creditor banks includes Royal Bank of Scotland, Standard Chartered, HSBC, Lloyds TSB and the Bank of Tokyo Mitsubishi.
Recently, during a visit to Dubai, Lord Davies, the UK trade minister, said he saw “signs of progress” in Dubai World’s talks with the banks. “I am hopeful that progress can continue,” he said.
