Goodbye Dubai

[Dune]

Chairman of DIFC removed last week.

CEO of Nasdaq Dubai removed today.

5 Billion bond issue bought by Abu Dhabi banks, credit default swaps on Dubai debt rose 111 bips today!

Big government announcement after the market close today (in front of 4 day holiday when markets are closed) looking to sidestep a major bond payment due in December.

It looks like this thing is unravelling at a rapid rate. Hmmmmmm.

I'm looking forward to seeing how the Gulf News and Kaleej Times (aka. Provda Dubai) attempt to put a positive spin on all this given the incredible "vision" HH Sheik Mo has. I recall in the good times when he liked to be referred to as the CEO of "Dubai Inc"........maybe the CEO needs to be fired.

Don't under estimate this.......this is DUBAI DEFAULTING ON ITS BONDS. This will be a major international event; mark my words.



Dubai World to Delay Debt, Owes $59 Billion; Default Swaps Soar
Share Business Exchange*******Facebook| Email | Print | A A A
By Arif Sharif and Camilla Hall


Nov. 25 (Bloomberg) -- Dubai World, the government-owned holding company struggling with $59 billion of liabilities, is seeking to delay repayment on all of its debt, even after Abu Dhabi banks provided $5 billion for Dubai’s support fund.

Dubai World will ask all creditors for a “standstill agreement” as it negotiates to extend the maturities of its debt, including $3.52 billion of Islamic bonds due for repayment on Dec. 14 by its property unit Nakheel PJSC, the builder of Dubai’s palm tree-shaped islands, the company said in an e- mailed statement today.

The cost to protect against a default by Dubai surged 111 basis points to 429 basis points, 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 now higher than Iceland’s after climbing 131 basis points in November, the biggest monthly increase since January.

The emirate, home to the world’s tallest tower and the biggest man-made islands, owes $4.3 billion next month and another $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show. Abu Dhabi government-controlled banks, National Bank of Abu Dhabi PJSC and Islamic lender Al Hilal Bank bought all $5 billion of bonds from the government, Dubai’s Department of Finance said in an e-mailed statement today.

“The Dubai Financial Support Fund, working with the chief restructuring officer, will start to assess and evaluate the extent of the restructuring required,” the Dubai Department of Finance said in a statement. “As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least May 30.” The price of Nakheel bonds dropped to 80 percent of face value.

Debt Restructuring

Dubai will draw down $1 billion from the bonds sold to Abu Dhabi to provide funding through a sale of securities to National Bank of Abu Dhabi PJSC and Islamic debt, or sukuk, to Al Hilal.

Dubai’s Supreme Fiscal Committee hired Deloitte LLP to lead the restructuring of Dubai World debt, the Department of Finance said. Deloitte’s Aidan Birkett, managing partner for corporate finance, was assigned.

Dubai, the second biggest of seven sheikhdoms that make up the United Arab Emirates, set up a $20 billion Dubai Financial Support Fund after the credit crisis triggered the world’s worst property crash and hurt its finance and tourism industries. The emirate raised $10 billion by selling bonds to the U.A.E. central bank in February, with some of the money going to property developers.

‘Shut Up’

Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum said Nov. 9 the emirate’s bond program to raise a further $10 billion will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up.” Abu Dhabi, the U.A.E.’s capital, is owner of the world’s biggest sovereign wealth fund and holds almost all of its oil.

Eleven days later, he removed the governor of the Dubai International Financial Centre, Omar Bin Sulaiman, who had led efforts to transform Dubai into a Middle East finance hub. The change came 24 hours after Sheikh Mohammed dropped the chairmen of Dubai Holding LLC and Dubai World, two large state-owned business groups, as well as the head of U.A.E.’s biggest developer Emaar Properties PJSC from the board of the Investment Corp. of Dubai, the emirate’s main holding company.

Home prices in Dubai plummeted 47 percent in the second quarter from a year ago, the steepest drop of any market, according to Knight Frank LLC. Property prices may drop further, a survey by Colliers International showed Oct. 14.

Dubai World had $59.3 billion in liabilities at the end of last year, its subsidiary Nakheel Development Ltd., said in a statement posted on the Nasdaq Dubai Web site Aug. 20. The company had total assets of $99.6 billion at the end of 2008 and total revenue of $14.2 billion.

To contact the reporter on this story: Arif Sharif in Dubai at [email protected] To contact the reporter on this story: Camilla Hall in Dubai at [email protected]

Last Updated: November 25, 2009 09:24 EST

[jethrotull]

Dubai in the 70s was a smugglers paradise, most of the big business houses were ''hand in glove'' with wanted criminals from the sub-continent.

The Iranian revolution and soviet invasion turned it into a listening post for CIA/MI5. From there on it has tried to use this infuence. The 9/11 terror gang had its money transfered from Dubai and to deflect the attention, EK ended up ordering those massive purchases, which again were fuelled with easy credit from NYC & LONDON. The credit was converted into land/property (Now dubai world), the value of which depended on continued growth. A emirate that did not manufacture anything of value had to end up this way.

I feel vindicated, as i always told my ex-collegues, its Aircrafts for Land. Now the ''EMPEROR (sheikh Mo) stands with-out- his new clothes''.

I am sure the ATMs have been freezed. Come Dec7th there will be a new decree on WITHDRAWLS.

Another bit of personal analysis, Sheikh Mo is the RISK INVESTOR IN THE A380 programme.

[Chewthecrude]

Dubai Wants Billion-Dollar Debt Suspension
10:29pm UK, Wednesday November 25, 2009

Dubai is asking creditors to accept a six-month suspension on debt repayments for its severely cash-strapped conglomerate Dubai World.
The government of the Gulf emirate has also appointed consultants Deloitte to restructure state-run Dubai World's operations.
The group includes property developer Nakheel, which built one of the state's most ostentatious projects, the palm-shaped, man-made residential islands of the Palm Jumeirah.
The conglomerate also includes DP World, owner of the former P&O ports operator.
According to Nakheel, Dubai World has $59bn (£35bn) of liabilities, a large proportion of Dubai's total debt of $80bn (£47bn).
The emirate's government said in a statement: "Dubai World intends to ask all providers of financing to Dubai World and Nakheel to 'standstill' and extend maturities until at least May 30, 2010."
Dubai's economy was hit hard in the past year as the global credit crunch ended a six-year boom in the region and sent its once-flourishing property sector into decline.
Analysts expect financial support to come from deep-pocketed Abu Dhabi, a neighbouring member of the United Arab Emirates.
But most believe Dubai will have to abandon its flamboyant economic model, which focuses on heavy real estate investment and inflows of foreign capital.
Andrew Critchlow, managing editor of Dow Jones newswires in Dubai, told Sky News: "This hit everyone like a thunderbolt."
He explained: "Within five minutes of the story hitting the wires, I had bankers on the phone from London and New York wanting more information.
"No one expected this. People were getting signs that Dubai might be clawing its way out of the global financial crisis and could see a glimmer of hope on the horizon.
"This has really hit confidence. Bankers are very concerned now, they just don't know what to believe."

[Marooned]

"No one expected this. People were getting signs that Dubai might be clawing its way out of the global financial crisis and could see a glimmer of hope on the horizon.

The signs that Dubai might be clawing its way out were unsubstantiated reports in the government owned press and company press releases. It is NO SURPRISE to those living here or those who have taken the time to look at the fundamentals.

Dubai inc is bankrupt.

EK is now being polished up in the press to look like a good investment when it floats to help sinking DXB.

[Dune]

Out this morning......credit rating agencies are looking at the "standstill request" as a notice of default (which it is, just a more subtle word than "default").

Here is the way I see it. Every one of these businesses in Dubai is owned by 1 guy; Sheik Mo. He borrowed billions to fund these businesses and now when he is being asked to pay back his loans he says.........naw; I don't think I want to.

Normally in a default the lenders will go to the courts to seek legal remedy. So in this cae the lenders go to the "law"......the law is the "government"...... and the government is Sheik Mo.

It will be interesting to see how they get out of this one. Hopefully the lenders backed their bond purchases with collateral outside the UAE. Or hopefully they bought a ton of default insurance to cover these bond purchases. Or any chance Sheik Mo will be forced to give up just about the only thing of any real value left; Emirates? Can't see it going to outside interests but can see Abu Dhabi stepping in and paying off the debts in exchange for a controlling interest. It is getting very, very messy.

In any case, this is going to put a hell of a dent in Sheik Mo's ability to borrow in the future. Hence the end of the "Miracle of Dubai".



Dubai World Seeks to Delay Debt Payments as Default Risk Soars Share Business Exchange*******Facebook| Email | Print | A A A
By Arif Sharif and Laura Cochrane

Nov. 26 (Bloomberg) -- 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.

Cut to Junk

Emaar Properties PJSC, the U.A.E.’s biggest developer, Jebel Ali Free Zone, an operator of business parks, DIFC Investments and Dubai Holding Commercial Operations Group LLC. were all cut to below investment-grade ratings by Moody’s. DP World Ltd., the Middle East’s biggest port operator, and Dubai Electricity & Water Authority were lowered to Baa2, two levels above junk.

S&P, which doesn’t rate Dubai Electricity & Water, lowered the ratings on the other five companies to BBB+ or BBB-, three levels and one level above junk, respectively. S&P and Moody’s said they may cut the ratings further.

The debt “restructuring may be considered a default under our default criteria,” S&P said in a statement.

‘No Clarity’

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.”

Dubai, the second biggest of seven sheikhdoms that make up the United Arab Emirates, and home to the world’s tallest tower and the biggest man-made islands, suffered the world’s steepest property slump in the global credit crisis as home prices fell 50 percent from their 2008 peak, according to Deutsche Bank. UBS AG predicted a further 30 percent drop in a report last week.

Abu Dhabi

Sheikh Mohammed turned to Abu Dhabi, the capital of the U.A.E. and holder of the world’s sixth-largest crude oil reserves, in February for a $10 billion bailout. The central bank, headquartered in Abu Dhabi, bought all of the 4 percent, five-year securities that Dubai sold on Feb. 23 and the emirate’s credit default swaps dropped 178 basis points that day, after trading for a record 976 basis points.

Dubai’s ruler said Nov. 9 the emirate’s bond program to raise a further $10 billion will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up.” Abu Dhabi, the U.A.E.’s capital, is owner of the world’s biggest sovereign wealth fund and holds almost all of its oil.

Sheikh Mohammed last week removed the chairmen of Dubai Holding LLC and Dubai World, two large state-owned business groups, as well as the head of Emaar Properties from the board of the Investment Corp. of Dubai, the emirate’s main holding company. He also ejected the governor of the Dubai International Financial Centre, Omar Bin Sulaiman, who had led efforts to transform Dubai into the Middle East finance hub.

Repayment Schedule

Abu Dhabi government-controlled banks, National Bank of Abu Dhabi PJSC and Islamic lender Al Hilal Bank bought all $5 billion of bonds from Dubai’s government, Dubai’s Department of Finance said in an e-mailed statement yesterday.

Dubai will draw down $1 billion from the bonds sold to the Abu Dhabi banks to provide funding through a sale of securities to National Bank of Abu Dhabi PJSC and Islamic debt, or sukuk, to Al Hilal.

Dubai owes $4.3 billion next month and another $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show. The government raised $1.93 billion last month in its first sale of Islamic bonds, attracting more than $6.3 billion of orders.

Dubai World had $59.3 billion in liabilities at the end of last year, its subsidiary Nakheel Development Ltd., said in a statement posted on the Nasdaq Dubai Web site Aug. 20. It didn’t provide a breakdown. The company had total assets of $99.6 billion at the end of 2008 and total revenue of $14.2 billion, according to the statement.

DP World

Some $18 billion of Dubai World’s debt is with units such as DP World that have enough cashflow to service their obligations, two bankers familiar with the group’s finances, who declined to be identified, said last month. The remaining debt amounts to $22 billion, they said.

Credit-default swaps on DP World jumped by a record 163 basis points to 522 basis points, according to CMA data. The price of Nakheel’s bonds fell to 86 cents on the dollar yesterday from 110.5 the day before, according to Citigroup Inc. prices on Bloomberg.

Dubai’s Supreme Fiscal Committee hired Deloitte LLP to lead the restructuring of Dubai World debt, the Department of Finance said. Deloitte’s Aidan Birkett, managing partner for corporate finance, was assigned.

Saudia Arabia, Qatar

“The Dubai Financial Support Fund, working with the chief restructuring officer, will start to assess and evaluate the extent of the restructuring required,” the Dubai Department of Finance said in a statement. “As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least May 30.”

Credit-default swaps linked to Abu Dhabi rose 34.5 basis points to 134.5, according to CMA prices in London. The cost of the contracts increased throughout the Middle East, with Saudi Arabia climbing 11.5 to 86.5 basis points and Qatar rising 5.5 basis points to 99, according to CMA.

The swap contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point is 0.01 percentage point and is equivalent to $1,000 a year on a contract protecting $10 million of debt.

The cost of Dubai’s contracts is 51 basis points more than for Iceland, where the failure of the banking system triggered the collapse of the currency and economy last year.

To contact the reporter on this story: Arif Sharif in Dubai at [email protected]

Last Updated: November 25, 2009 16:35 EST

[Dune]

Hilarious; as Sheik Mo and his "company" Dubai Inc defaults on it's loans the London School of Business "honours" him. LOL.



London Business School chair in honour of Shaikh Mohammad

The dean of School welcomed Shaikh Mohammad for his unlimited support to the programmes and developmental of the college

WAM Published: 15:33 November 25, 2009

WAM London: Sir Andrew Likierman Dean of London School of Business has announced setting up of chair of Shaikh Mohammad Bin Rashid Al Maktoum for Creativity at the college in recognition for his support to education in general and the college in particular.

The announcement was made during the visit of His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai, to the London Business School in London. Earlier, Shaikh Mohammad and entourage were given a warm welcome by Dean of College Professor Sir Andrew Likierman, staff and students.

The dean of School praised Shaikh Mohammad for his unlimited support to the programmes and developmental of the college, indicating that the college has opened its first branch abroad and outside of London at the Dubai International Financial Centre.

Shaikh Mohammad toured the lecture hall and attended part of the lectures and discussions.

London Business School was set up 45 years ago and has set up branch at the DIFC in which about 300 students enrolled for MA in business administration.

Before leaving the School, Sheikh Mohammed expressed his pleasures about this prestigious institution, where he met the elite of staff and students. He pledged to support and encourage the college to achieve its objectives.

Shaikh Mohammad was accompanied by Shaikh Maktoum Bin Mohammad Bin Rashid Al Maktoum, Deputy Ruler of Dubai, Shaikh Ahmad Bin Saeed Al Maktoum, President of the Dubai Civil Aviation Authority, Chairman and Chief Executive of Emirates Airline and Group and the delegation members.

Founded in 1964 and based in the world's best connected city, London Business School exists to develop leaders and insights that have a positive impact on business around the world.

[Dune]

Sheik Mo is about to bounce the largest cheque in UAE history.

Who is going to put him in jail? :rolleyes:

GNTV Single Video Player (4:3 and 16:9) (http://video.gulfnews.com/services/player/bcpid4267205001?bctid=29210590001)

[Marooned]

In an area where loss of face counts for so much the fact that AUH has said enough is enough is remarkable. It will not bail DXB out at any cost but only on it's terms.

DXBs jewels will have to be sold to help pay the debts. AUH knew this which is why they have stood away from EK for so long. Now it can take it on it's terms which is what it always intended.

Change is on the way and with AUH pulling the strings we'll all be singing the national anthem before work and segregated on the busses not just our kids.

[Jet II]

Change is on the way and with AUH pulling the strings we'll all be singing the national anthem before work and segregated on the busses not just our kids.

You have a very bizarre view of life in AD - have you ever been there? :E

[Andu]

For some years now, I've felt that Dubai was not much more than giant Ponzi scheme, with nothing to fall back on if the flow of new investors stopped coming. (I thought the real estate bubble would pop three or four years earlier than it did.) It seems for once I might have been right.

For the sakes of many out there, I sincerely hope Sheikh Mo can pull something rather remarkable out of his proverbial thobe and gutra.

As others have said before me, I think anything he pulls off will involve his losing control, if not all of, EK. (Although the usual Arab face saving might come into play to leave him at least with an office and a title.)

[emratty]

The tip of the iceberg who is going to lend money now to Dubai??? Just watch the property values over the next few months. The world has finally woken up to the Dubai nightmare.

[GlueBall]

When Dubai's inflated, overrated, overpriced property values have come back down to earth, intelligent investors will come in to suck up the real estate bargains. Practical reality. :ooh:

[Marooned]

Jet 2: Have you been to DXB lately? That's what's happening here after recent MoE 'recommendations'.

AUH is more conservative and it's influence will only grow as DXB sinks and holds on to it for its survival.

[ernestkgann]

Not much use owning a house if there isn't an economy to earn a wage in.

[jethrotull]

Marooned said ''In an area where loss of face counts for so much the fact that AUH has said enough is enough is remarkable. It will not bail DXB out at any cost but only on it's terms''

Absolutely, makes you wonder whats in the offing. There is tremendous inter arab dispute in the GCC already.

The Saudis had recently declarded Riyadh as the HQ for a regional Monetary union, to which the AUH govt reacted angrily by pulling out of the monetary union. Can you imagine the state of a UAE currency unpegged to the dollar after this default by Dxb, moodys have downgraded almost all of the Dubai Inc co to BBB-, one grade short of junk.

More interestingly what does AUH have in mind, even if Sheikh Mo and family retire to good ol'England where they have their estates in Newmarket and Windsor along with substantial real estate in Canary Wharf. Does it make sense for AUH to buy all these loss making assets. And as you rightly hinted AUH is far more conservative than Dxb and to attract investors into these garishly extravagant projects of Dxb they will have to dilute their principals i.e Let the worlds flesh trade Mafia (Triads, russians, viets, Dawood et al) in to get the punters.

In short lend your money and dilute your vision.

The EK business model had one objective and survived on a fundemental business fact. The objective was to direct traffic to Dxb as a stopover dest. The fundamental business fact being the whole venture was subsidised by the traffic from the sub-continent (as the T^&£$ in India-Pak can't get their act together), which paid a premium due lack of competition. EY does not need to embrace EK or Takeover, it will die a natural death. Surely some of these downgrading will rub off EK (Shk Ahmed has been doing the round of Lon with Mo, surely the market won't ignore this umbical bond), where suppliers would demand clearance of outstanding payments, if long due. In hindsight Airbus and Boeing might find that they have been wrong on betting on EK-DXB to be a responsible team like SQ-SIN. And in the long run the collapse of EK would be healthy for global aviation. With this default Dxb has lost its USP. Iceland, Macedonia and Georgia have a greater chance of turning into a Financial centre as compared to Dxb.

AUH might pick up the distressed assets, reduce their cost base in a depressed jobs market and propell AUH as the more sound Islamic financial centre cum family holiday destination.

They will let Sh Mo and sons to mop up the damage for generations to come.

[flying lid]

Emratty wrote

The tip of the iceberg who is going to lend money now to Dubai??? Just watch the property values over the next few months. The world has finally woken up to the Dubai nightmare.

Well if Abu Dhabi doesn't, no one else in the west can - We are all broke as well !! Perhaps China, or even India could buy a chunk with its 200 tonns of gold !!

But seriously, the whole "purpose" of Dubai is flawed, especially now the west is in a protracted and serious recession. Nightmare sums it up nicely.

Having been (albeit for short stays only) to both Dubai and Abu Dhabi, the latter seems to have a bit more "brains" in its investment strategy. Dubai went for the "all swank and show" method, fine when tons of (borrowed) money is swilling around, not so fine now it needs paying back !!.

An Arab saying is "My father rode a camel, I drive a Ferrari, my son flies an jet, his son will ride a camel" - Seems to be coming true.

Good luck to you expats (and indeed everyone else) over there, take care and be alert.

Flying Lid

[Fly747]

How on earth can they now manage to pay for that huge fleet of 380s? Airbus must be wetting themselves. Other airlines will be getting their calculators out and wondering how many they can pick up cheap to replace aging 744s. Did EK ever really make money?

[parabellum]

Interesting, Dubai was, as I remember it, always the poor relation. In 1969 it was necessary to be in a Land Rover, in a convoy of four or more, with food and water for four days, before being allowed to leave the Muqta bridge in AUH to attempt the journey, via a thousand sand tracks, to Dubai. Dubai was a distraction but had only a little oil and gas even then.

[ferris]

Does everyone understand the ramifications?

This is huge. It's been moving markets.

IMHO, AUH will have to step in (again, and in a much bigger way). And soon.

[snaproll3480]

Time to bring in the casinos. It may be the only thing that could save this place. Turn Dubai into Vegas with a beach and it may survive.

[fractional]

NO surprises in this news. This was expected despite all the smoke-screening.
I always said that everything would have to change in Dubai (mainly) if all that housing was to be occupied. This meant giving rights to people to feel attracted to buy in Dubai and make it as their own home or than expand exponentially in order to recruit thousands (perhaps 3 to 4 millions) to fill in all those homes.
Now that the debt is here, it'll be interesting to see how Abu Dhabi will flex its muscle in all accounts after bailing Dubai out, including the big businesses which portray Dubai worldwide.

[jethrotull]

Turn Dubai into Vegas with a beach and it may survive.

AQ and Taliban would be here next then, its a absolute no no on the land of Arabia.


Yes it did and still does. Its not only money EK makes huge money


The litmus test for this was the now past heady days of the stock market. EK always mentioned they would list themselves but never did, came out with accts certified by PWC or one of the big 5. I think there will be closer scrutiny of EK now........time will tell.

[LLuke]

Wonder why Abu Dhabi didn't step in with a helping hand? Abu Dhabi is tied a.o. strongly by investments to Dubai. Sounds equally alarming to me...

[Dune]

World stocks dive on Dubai default fears
By Roland Jackson (AFP) – 5 hours ago

LONDON — Global stock markets fell sharply Thursday on mounting fears of a debt default by Dubai and tighter lending conditions in China, analysts said.

London shed 1.95 percent to 5,260.05 points in mid-afternoon deals. The market was earlier forced to suspend trading for three and a half hours due to a technical hitch.

Elsewhere, Frankfurt sank 1.91 percent to 5,692.06 points and Paris plunged 2.04 percent to 3,730.77 points.

In Asia, Beijing nosedived 3.62 percent, Tokyo fell 0.62 percent and Hong Kong closed 1.78 percent lower.

Chinese shares were also hit by the prospect of tighter banking rules and worries about monetary policy next year.

New York markets were closed Thursday for the Thanksgiving Day holiday in the United States.

"We have two major factors weighing on equities and other risk markets: Dubai's call for a moratorium on its debt repayment to May and more stringent capital adequacy requirements for Chinese banks -- but Dubai is bigger," David Morrison, an analyst at financial betting firm GFT, told AFP.

The government of Dubai shocked financial markets on Wednesday when it said it would ask creditors of its Dubai World conglomerate for a debt moratorium of at least six months.

The Dubai government announced that it would revamp the Dubai World group and wanted its lenders to extend its maturing debt until at least May 2010.

Dubai added that it had raised five billion dollars in a new bonds issue aimed at helping meet other debt obligations.

"Dollar weakness ... sent Asian markets plunging, which then took European exchanges with them," said Xavier de Villepion, an analyst with Global Equities in Paris.

In addition, the debt delay request by Dubai "fed a climate of insecurity and crisis of confidence at a time when fears are mounting about excessive public debt."

As equities sank heavily, investors sought safety in the bond market and gold, which struck yet another record high point.

"It's causing a mini flight-to-quality as US, European debt gets bought as a relative safe haven," noted Morrison.

He added: "If (Dubai) had given the debt markets more warning, then there would be less of a panic now."

Meanwhile, ratings agency Standard & Poor's said the development could be considered a default and downgraded a raft of Dubai government entities including Dubai World.

"The rating actions are the result of the announcement on November 25 of the restructuring of the debt obligations of Dubai World and its subsidiary, (property developer) Nakheel," S & P said in a statement.

"In our view, such a restructuring may be considered a default under our default criteria, and represents the failure of the Dubai government to provide timely financial support to a core government-related entity."

Barclays Capital analyst Paul Robinson warned that the issue of Dubai could contribute towards a "serious" pullback in global stock markets.

Others warned that it could take more than a decade for investor enthusiasm for the Gulf emirate to return as a result of this week's development.

"Dubai could not undermine either itself, or global perception any further as a place not to do business in at the moment," MF Global analyst Manus Cranny told AFP.

"Quite literally, this geographic region is now looking as a mirage in stability terms.

"It is the much longer term implications on funding, confidence and capital raising that will take a decade or more to re-establish.

"This last-minute moratorium on debt repayments at Dubai World is unacceptable has all the smacking of an Ireland -- nay worse, an Iceland -- in the making.

"The two regions may be polemic in climate but mirror images in terms of credit and ability to meet their bills."

Elsewhere on Thursday, gold soared to a record high of 1,195.13 dollars an ounce after a purchase of IMF gold by Sri Lanka's central bank, traders said.

The precious metal has also won support in recent weeks from inflationary fears, the weak US currency and increasing moves by central banks to diversify assets into gold.

Copyright © 2009 AFP. All rights reserved. More »

[SOPS]

nearly all european markets are down due to the "Dubai effect" Many FOREX markets are also lower..this is big,,its going to be a hell of a ride:(

[fractional]

Wonder why Abu Dhabi didn't step in with a helping hand?It's a window-dressing or smoke-screening exercise to avoid hurting Dubai's public image and pride, while at the same time Abu Dhabi holds up its breath waiting for Dubai to (kneel) beg for former's much needed help. In doing so, Abu Dhabi will be quietly taking all Dubai's real value assets in a much formal shape and form and portray as being the saviours (Arab botherhood).
Sounds equally alarming to me... Yes it does despite their real wealth. Abu Dhabi is spending huges amounts of money on needless stuff. Will they be able to cope with Dabai's debts plus funding the other Emirates and still fund their own spending spree?:confused:

[Dune]

Watch out girls; this is a game changer. Never, never scare the heavy money guys who you rely upon to fund your "VISION".

IMHO this is a GAME CHANGER FOR DUBAI. I have years in the markets and I see an inferno in the making.

This is not the end.....the business model in it's most basic form "works" without a doubt; it is just the idiot running that model that screwed the pooch.


Stocks Tumble, Bonds Rally on Dubai; Credit-Default Swaps Soar Share Business Exchange*******Facebook| Email | Print | A A A
By David Merritt

Nov. 26 (Bloomberg) -- European stocks fell the most in three weeks and bonds jumped after Dubai’s attempt to reschedule its debt rattled investors seeking higher returns in emerging markets. The dollar dropped to a 14-year low against the yen.

Europe’s Dow Jones Stoxx 600 Index retreated 1.9 percent at 12:02 p.m. in London. The Shanghai Composite Index slumped 3.6 percent, its biggest drop since August. Credit-default swaps tied to debt sold by Dubai rose as much as 131 basis points to 571 according to CMA DataVision. U.S. markets are closed today for the Thanksgiving holiday.

Dubai World, the government investment company burdened by $59 billion of liabilities, roiled markets around the world yesterday by seeking to delay repayment on much of its debt. The dollar’s slump to a 14-year low against the yen prompted Finance Minister Hirohisa Fuji to say Japan’s government is watching currencies “very closely,” while traders said the Swiss central bank sold the franc after it climbed to the highest value against the euro since June 24.

“Dubai isn’t doing risk appetite any favors at all and the markets remain in a vulnerable state of mind,” said Russell Jones, head of fixed-income and currency research in London at RBC Capital Markets. “We’re still in an environment where we’re vulnerable to financial shocks of any sort and this is one of those.”

Sovereign Debt

The Dubai announcement drove up the cost of protecting emerging-market sovereign debt against default. Contracts linked to Saudi Arabia climbed 18 to 108, while Bahrain rose 30.5 to 225, CMA prices show. Debt swaps linked to Abu Dhabi government bonds increased 18.5 to 155, Vietnam rose 39 to 252, Indonesia climbed 27 to 229 and Russia added 13 to 205. Credit- default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

Vietnam’s dong, the world’s worst-performing currency, declined 3.3 percent against the dollar to a record low after the central bank devalued the currency to curb inflation. South Africa’s rand weakened 1.1 percent against the dollar as gold declined. The Turkish lira slumped 1 percent versus the greenback, and Hungary’s forint lost 1.1 percent per euro.

Russia’s Micex Index fell 2 percent as commodities retreated. The MSCI Emerging Markets Index of 22 developing nations fell 1.1 percent.

Property Slump

Dubai, which borrowed $80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world’s steepest property slump in the global recession. Home prices fell 50 percent from their 2008 peak, according to Deutsche Bank AG. Banks around the world have written off more than $1.7 trillion as the credit crisis trashed the value of their assets.

European bonds rose as investors fled to the relative safety of government debt. The yield on the 10-year U.K. gilt dropped 5 basis points 3.58 percent after falling to the lowest level in more than a month. The 10-year German bund yield declined 7 basis points to 3.20 percent, the lowest level in more than three weeks.

Stocks fell from Shanghai to Tokyo and London. The MSCI Asia Pacific Index retreated 0.5 percent as Chinese banks dropped on concern they need to sell more shares to fund demand for loans. Bank of China Ltd., which said this week it’s studying options to replenish funds, declined 2.9 percent.

China Minsheng

China Minsheng Banking Corp. became the first Chinese lender in four years to fall in its Hong Kong trading debut. The nation’s first privately owned lender slipped 3.1 percent after raising HK$30.1 billion ($3.9 billion) this month in the territory’s biggest public share sale since April 2007.

Japan’s Nikkei 225 Stock Average fell to a four-month low as the dollar’s decline against the yen dimmed the earnings outlook for makers of electronics and cars. Canon Inc., the world’s largest maker of cameras, fell 2.1 percent in Tokyo. The company gets 28 percent of sales from the Americas. Toyota Motor Corp., the world’s biggest carmaker, slid 1.2 percent.

European Aeronautic, Defence & Space Co., which is part- owned by Dubai, fell 2.9 percent in Paris. Porsche SE, which is merging with Volkswagen AG, tumbled 6.3 percent and VW fell 2.3 percent in Frankfurt. Qatar owns 10 percent of the voting rights of Porsche and will hold 17 percent of the combined carmaker.

Banks Fall

Dubai World’s lenders include Credit Suisse Group AG, HSBC Holdings Plc, Barclays Plc, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, according to a person familiar with the situation. Credit Suisse fell 3.5 percent in Zurich, HSBC slid 4.3 percent, Lloyds sank 3.9 percent and RBS retreated 4.2 percent in London, where a trading glitch halted trading in many stocks.

Marfin Investment Group SA, the investment fund backed by Dubai Financial LLC, plummeted 8.4 percent in Athens.

Futures on the Standard & Poor’s 500 Index retreated 1.1 percent. The U.S. stock market will be open for a half day of trading tomorrow.

The yen climbed as high as 86.30 per dollar, the strongest since July 1995, before trading at 87.77. The U.S. currency strengthened against all but the yen among its 16 most-traded counterparts, appreciating 1.6 percent to 72.06 cents versus the New Zealand dollar and advancing 1.2 percent to 7.4160 South African rand.

The Swiss franc weakened to as low as 1.5133 per euro, falling from the highest level since June, on speculation the Swiss National Bank sold the currency to curb its gains. The franc dropped 0.4 percent to 99.98 centimes against the dollar after yesterday reaching parity for the first time in 19 months. The SNB declined to comment.

Crude oil for January delivery fell 92 cents, or 1.2 percent, to $77.04 a barrel in electronic trading on the New York Mercantile Exchange after a government report yesterday showed rising inventories. Gold for immediate delivery declined 0.4 percent to $1,186.53 an ounce in London trading, after touching an all-time high earlier today.

To contact the reporter on this story: David Merritt in London at [email protected].

Last Updated: November 26, 2009 07:28 EST

[LLuke]

It's a window-dressing or smoke-screening exercise to avoid hurting Dubai's public image and pride, while at the same time Abu Dhabi holds up its breath waiting for Dubai to (kneel) beg for former's much needed help. In doing so, Abu Dhabi will be quietly taking all Dubai's real value assets in a much formal shape and form and portray as being the saviours (Arab botherhood).Still wonder if they really gain sth with this. Their investments drop in value a lot. I'd expect them to be the main investor in Dubai. It will take ages before they can cash with profit.

[Dune]

http://i49.tinypic.com/e5i3xt.jpg

For those that don't know, that is $534,000 cost of insurance on $10,000,000 bond position........."Guido" mafia loanshark terms.

What a steller bunch Dubai has associatied itself with..... Dubai is pushing Latvia for #5! LOL. Hope Sheik Mo enjoys his weekend in London while his economy collapses.

[Dune]

Dubai Debt Delay Rattles Confidence in Gulf Borrowers (Update3)
Share Business Exchange*******Facebook| Email | Print | A A A
By Laura Cochrane and Tal Barak Harif


Nov. 26 (Bloomberg) -- Dubai shook investor confidence across the Persian Gulf after its proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001.

The cost of protecting government notes from Abu Dhabi to Bahrain rose, extending the steepest increase since February as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors. Its debt includes $3.52 billion of bonds due Dec. 14 from property unit Nakheel PJSC. Dubai credit-default swaps climbed 90 basis points to 530 after yesterday increasing the most since they began trading in January, CMA Datavision prices showed.

“There is nothing investors dislike more than this kind of event,” said Norval Loftus, the head of convertible bonds and Islamic debt at Matrix Group Ltd. in London, which manages $2.5 billion of assets including Dubai credits. “The worst-case scenario will of course be involuntary restructuring on the Nakheel security that brings into question the entire nature of the sovereign support for various borrowers in the region.”

Dubai World’s assets range from stakes in Las Vegas casino company MGM Mirage to London-traded bank Standard Chartered Plc and luxury retailer Barneys New York through asset-management firm Istithmar PJSC. The Dubai government’s attempt to reschedule debt triggered declines in stocks worldwide that had been rebounding from the worst financial crisis since the Great Depression.

Worldwide Slump

The MSCI Emerging Markets Index of stocks headed for the biggest decline in four weeks, falling 2 percent, led by Russia and China. Europe’s Dow Jones Stoxx 600 Index lost 2.5 percent, the biggest decline since July 2, at 2:46 p.m. in London. South Africa’s rand and the Turkish lira weakened 2.1 percent against the dollar. Hungary’s forint lost 1.7 percent per euro. Credit- default swaps on Russia increased to 205 basis points from 192.

The MSCI World Index of 23 developed markets has risen 26 percent this year after banks worldwide recorded more than $1.7 trillion in writedowns and losses and governments committed about $12 trillion to shore up economies.

“The announcement was a shock,” said Beat Siegenthaler, chief emerging-market strategist at TD Securities Ltd. in London. “It is strongly affecting European markets.”

Dubai, ruled by Sheikh Mohammed Bin Rashid Al Maktoum, borrowed $80 billion in a four-year construction boom to transform the economy into a regional tourism and financial hub. The emirate suffered the world’s steepest property slump in the global recession with home prices dropping 50 percent from their 2008 peak, according to Deutsche Bank AG.

Downgrades

Moody’s Investors Service and Standard & Poor’s cut the ratings on Dubai state companies yesterday, saying they may consider Dubai World’s plan to delay debt payments a default.

Gulf region default swaps jumped, with contracts linked to Bahrain adding 29 basis points today to 223.5, the biggest increase since Feb. 18. Contracts linked to Abu Dhabi added the most since February yesterday, climbing 36 basis points to 136.5 and were another 23 basis points higher at 159.5 today, according to London-based CMA. Qatar default swaps rose 13 basis points to 117, adding to yesterday’s 11 basis-point increase.

“Dubai is the most indicative of the huge global liquidity boom and now in the aftermath there will be further defaults to come in emerging markets and globally,” said Nick Chamie, head of emerging-market research at Toronto-based RBC Capital Markets.

Saudi Debts

Saudi Arabia default swaps climbed the most since February, adding 18 basis points to 108. The British Bankers’ Association asked the U.K. government to intervene with Saudi authorities over debts of at least $20 billion owed to as many as 100 banks by Saad Group and Ahmad Hamad Algosaibi & Brothers Co., two family holding companies based in the oil city of Al-Khobar, according to a letter dated Nov. 20.

Default swaps on Dubai World unit DP World Ltd., the Middle East’s biggest port operator, jumped by a record 181 basis points to 540.5 yesterday and were priced another 72 basis points higher today at 612, according to CMA data.

Dubai World had $59.3 billion in liabilities and $99.6 billion in total assets at the end of 2008, subsidiary Nakheel Development Ltd. said in an August statement. Dubai owes $4.3 billion next month and $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show.

“DP World and its debt are not included in the restructuring process for Dubai World,” the government said in a statement to Nasdaq Dubai today.

‘Brink of Failure’

The price of Nakheel’s bonds fell to 70.5 cents on the dollar from 84 yesterday and 110.5 a week ago, according to Citigroup Inc. prices on Bloomberg.

“Nakheel is now standing on the brink of failure given the astonishing amount of cash Dubai would have to inject on it in order to see the enterprise survive,” said Luis Costa, emerging-market debt strategist at Commerzbank AG in London. “Events like this are a perfect storm.”

Dubai credit-default swaps now rank as the fifth most expensive worldwide, exceeding Iceland’s and Latvia’s.

The contracts, which increase as perceptions of credit quality deteriorate, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point is 0.01 percentage point and is equivalent to $1,000 a year on a contract protecting $10 million of debt.

Abu Dhabi Aid

UBS AG, Switzerland’s largest bank, said it expects the U.A.E. will prevent a default by Nakheel. Owners of bonds sold by Nakheel scheduled a conference call today, said an investor and a trader who received the details.

Dubai is one of seven sheikhdoms in the U.A.E. that includes Abu Dhabi, which holds 8 percent of the world’s oil reserves and bought $5 billion of bonds sold by Dubai yesterday through state-controlled banks.

Sheikh Mohammed turned to Abu Dhabi’s central bank on Feb. 23 to raise $10 billion by selling debt. The emirate’s credit default swaps dropped 178 basis points that day, after trading for a record 976 basis points.

Unlike Argentina, which stopped payments on $95 billion of debt eight years ago after yields on benchmark bonds more than doubled in four months to more than 40 percent, Dubai’s announcement yesterday “was a surprise,” said Alia Moubayed, a London-based economist at Barclays Plc.

Standstill Agreement

The government raised $1.93 billion last month in its first sale of Islamic bonds, attracting more than $6.3 billion of orders. The dollar-denominated securities due 2014, which are governed by Shariah laws barring investors from profiting from the exchange of money, dropped to 5.5 percent today to 92 cents, lifting the yield to 8.4 percent from 6.2 percent on Nov. 24, according to ING Groep NV prices on Bloomberg.

Gulf International Bank BSC, a Bahrain-based lender owned by the governments of six Gulf Arab states, postponed a planned sale of bonds in a $4 billion debt program, citing the “unexpected announcement” from Dubai, according to an e-mailed statement today.

Dubai World will ask creditors for a “standstill” agreement as it negotiates to extend maturities, including $3.52 billion of Islamic bonds due Dec. 14 from Nakheel, Dubai’s Department of Finance said in an e-mailed statement yesterday.

‘Brink of Failure’

Dubai World’s more than 70 creditors face the prospect of writedowns on as much as $60 billion of debt if they haven’t unloaded their holdings and the state-owned company fails to win additional support from Abu Dhabi.

The biggest creditors are Abu Dhabi Commercial Bank and Emirate NBD PJSC. Other lenders include Credit Suisse Group AG, HSBC Holdings Plc, Barclays, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, according to a person familiar with the situation. Barclays slumped as much as 6.9 percent, the biggest intraday loss in a month, while RBS sank as much as 8.3 percent. Lloyds and Credit Suisse dropped more than 3 percent.

“Our exposure is immaterial,” said Credit Suisse spokesman Marc Dosch. HSBC, Lloyds and RBS declined to comment when contacted by Bloomberg. Spokespeople at Barclays were not immediately available to comment.

Emaar Properties PJSC, the U.A.E.’s biggest developer, was cut by four levels by Moody’s to Ba2, two steps below investment grade. Jebel Ali Free Zone, an operator of business parks, and DIFC Investments were also lowered to speculative-grade by Moody’s yesterday. DP World and Dubai Electricity & Water Authority were downgraded two levels to Baa2, the second rank above junk. Moody’s and S&P said they may cut ratings further.

The debt “restructuring may be considered a default under our default criteria,” S&P said in a statement.

‘Shut Up’

Borrowing from Abu Dhabi state banks accounted for half the $10 billion Dubai ruler Sheikh Mohammed said he planned to raise by yearend. He said Nov. 9 the program will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up.”

Sheikh Mohammed removed the chairman of Dubai World from the board of Dubai’s main holding company, the Investment Corporation of Dubai, last week.

Contracts on Abu Dhabi National Energy Co., the state- controlled energy producer known as Taqa, jumped 70 basis points to 250, the highest since August. Swaps linked to Mubadala Development Co., a government-backed investor that announced an $8 billion joint venture with General Electric Co. last year, rose 111 basis points to 247, according to CMA. Mashreqbank PSC, the United Arab Emirates-based lender owned by billionaire Abdul Aziz al-Ghurair, jumped by a record 254 basis points to 639.

“It’s very important to resolve this in a way that will minimize contagion across the region,” Matrix Group’s Loftus said.

To contact the reporter on this story: Laura Cochrane in London at [email protected]

Last Updated: November 26, 2009 10:53 EST

[Iver]

Too bad all of this failure and clear stupidity and risk taking won't deflate any king-sized egos in Dubai. The locals will be as cocky as ever....

[5star]

Type in 'Argentina financial collapse' in google. Will give you a realistic idea what's next for Dubai...

This is going to get very very nasty. Not sure about our jobs btw.... I wouldn't be surprised to see a massive drop in bookings due to the uncertainty with Dubai the coming weeks...

Time for another $25M splash over the Palm. :ugh:

[DCS99]

Spot on 5star - if the forward bookings collapse, then it will be big trouble for EK.

Personally I can't see a collapse in bookings, just a temporary decline for a few months.

[flying lid]

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

Sir Winston Churchill, 1942

[RoyHudd]

Here comes financial winter----Serves them right..arrogant people. (By that comment, I mean all associated, not just the local royals.)

[rascott3888]

Ok - I feel better now - the Gulf News says everything is OK !! This is their midnight update for 27 November - I know it has been a holiday but they might want to catch up on the global impact - I love the line that says there has been some concern among investors !

"Investors show trust in Dubai

Al Hilal Bank releases first installment of $500m to Dubai with rest to follow

The Dubai Government successfully raised a further $5 billion from two Abu Dhabi banks on Wednesday as part of its $20 billion long-term bond programme launched at the beginning of 2009.
Mohammad J. Berro, Chief Executive of Al Hilal Bank, said $500 million was released to the Dubai government by Al Hilal Bank on Wednesday. "The remainder will follow," he added.
The $5 billion tranche was fully subscribed equally by National Bank of Abu Dhabi and Al Hilal Bank.
"We have subscribed to sukuk worth $2.5 billion because Dubai has come strongly out of the financial crisis," Berro told Gulf News. "The tenure is five years and the coupon rate is four per cent, which is a good return," Berro added.
Concern
However, there is some concern among investors after Dubai's Department of Finance asked for a ‘standstill' until May 30 on all financing to Dubai World and its property unit Nakheel, which is due to pay back $4 billion on an Islamic bond on Dec-ember 14.
"The market expects Dubai to raise another $5 billion soon which will take care of some of Dubai's debt and lift the confidence of the investors," said Tariq Qaqish, fund manager with Al Mal Capital. In February, Dubai raised $10 billion through the first tranche of the bond, which was entirely subscribed by the UAE Central Bank.
DP World unaffected
International port operator DP World and its debt are not included in the restructuring of Dubai World, the Dubai Government said yesterday, after announcing it will seek a debt delay for its two flagship firms.
On Wednesday, the government said it will ask creditors of Dubai World and property group Nakheel to agree to a debt ‘standstill' as it restructures the Dubai World group.
"The Government of Dubai has confirmed that DP World and its debt are not included in the restructuring process for Dubai World," a statement said.
Analysts said excluding DP World may be an attempt to shelter the profit-making company and ease shareholder fears it will could be used to sustain less healthy companies.
DP World in October reported a six per cent fall in third-quarter container volumes and said its 2009 results would be in line with market expectations
Dubai World is one of the emirate's three big holding firms, along with Dubai Holding and Investment Corporation of Dubai.
In addition to Nakheel, its affiliates include DP World and Istithmar, an investment company with a portfolio of over 50 firms in the financial services, consumer, industrial and property sectors...."

[Sir Donald]

Just how really informed are you guys? Copy/paste news reports just shows how you can read things. Read and not grasp.

What's wrong with debt restructuring talks? Are those the only talks in the world going on right now? What do you call Obama's Asian tour? Buy our debt please so we can spend our selves out of debt?
Who are the rating agencies again? The rating agencies who gave us the AAA ratings that preceded the recent financial meltdown.
The ratings that preceded Enron, Worldcom and the dot com.

How much?59-billion....... a drop in the ocean compared to the trillions borrowed, yes borrowed by the US. The UK could not borrow so they came up with a money printing solution instead. Ingenious.But restructuring debt is now called a default. And who's got the right credibility to make that call?

But as always, informed journalism will prevail.
No mention that no one is buying US debt anymore, unemployment topping 10%, Obama begging Asian support for US debt. But that is not getting enough attention as it should. It is no news that the US can't borrow itself out of debt, but Bloomberg will really shed true light on that reality. Even Sri Lanka is buying gold instead of the worthless greenback. The sovereign fund behind Dubai, what is their capitalisation again, and wouldn't the US love some of it? Just get Bloomberg on the story to scare scare everyone and in the process halve ones assets.

If Bloomberg were truly independent they can focus on what really matters, reporting on just how bad the US economy really is and its ramifications that still lie ahead.Argentina had rocks not a sovereign wealth fund behind them.

[Wiley]

Time to bring in the casinos.I understand that's why the Burj was built 300 metres offshore - so it could operate as a casino, but technically, not be in the Holy Land where such things are forbidden.

However, on the day the (old) sheikh was to sign the papers making it so, one of his sons was killed in a motorcycle accident, and he saw that as a sign from You-Know-Who that he should not go ahead with the casino.

(I'm standing by to be told that I'm totally wrong by Sir Donald or one of the other company 'plants'.)

Dubai is / was a snowball system, an economy based on property investment with the hope, that when you invest you will find another guy to pay you even more in the future.As someone has said before me = Ponzi Scheme, of grand proportions.

[rascott3888]

The easy answer to that Sir Donald is transparency.

Everyone knows that the US is neck deep in debt - and that China holds most of it. But they hold that as government debt. The trouble with Dubai's debt is that it is held by global banks - and they are in enough of a mess already.

What happened yesterday caught everyone in the markets by surprise. And it was done after markets close before an extended holiday - and with very little clarification. One look at the market reaction globally is a pretty fair indication of the level of concern.

The only positive is that there is a (belated) recognition of the problem - even though the local newspapers appear to be in denial.

What happens next is a mystery - but Dubai Inc presumably will need to raise cash - selling foreign assets may be preferable to selling domestic assets (eg EK). It might hasten a listing of EK - pure speculation.

Bests.

[pzu]

Quote:
Time to bring in the casinos.
I understand that's why the Burj was built 300 metres offshore - so it could operate as a casino, but technically, not be in the Holy Land where such things are forbidden.

However, on the day the (old) sheikh was to sign the papers making it so, one of his sons was killed in a motorcycle accident, and he saw that as a sign from You-Know-Who that he should not go ahead with the casino.


Back in the early '70's, RAK had a Casino in an Abela run hotel - though I seem to recall one the RAK hierachy closed it down by throwing a couple of 'Thermite' grenades into it - the rumour was that he owed the 'House' a few million riyals (as the dirham was then)

PZU - Out of Africa (Retired)

[Desert Diner]

I don't see any of this in Dubai.

Dubai still is the "service center" for the rest of the Middle East.

And by "service", this also includes hosting the regional offices of most multinational companies supporting all the regional industries, from oil to banking.

And unless they all move to Bahrain, which won't happen, Dubain will continue to generate "value".

[Dune]

Just how really informed are you guys? Copy/paste news reports just shows how you can read things. Read and not grasp.

What's wrong with debt restructuring talks? Are those the only talks in the world going on right now? What do you call Obama's Asian tour? Buy our debt please so we can spend our selves out of debt?

This is in essence a notice of sovereign debt default (as the companies linked to the bond repayments are government and not private companies). If the U.S. suddenly told China they would not honor their pledge (a.k.a. "bond") to pay the Chinese back when their bonds came due, it would result in the end of the U.S. to ever borrow a dime again from any country. This would result in the end of the U.S. to exist as a country.

Who are the rating agencies again? The rating agencies who gave us the AAA ratings that preceded the recent financial meltdown.
The ratings that preceded Enron, Worldcom and the dot com.

Love them or hate them, the ratings agencies still determine the rate of interest any entity (government or company) will pay as interest on their borrowings (via bond yields linked to credit rating). This is not going to change.

How much?59-billion....... a drop in the ocean compared to the trillions borrowed, yes borrowed by the US. The UK could not borrow so they came up with a money printing solution instead. Ingenious.But restructuring debt is now called a default. And who's got the right credibility to make that call?

It is not the amount (debt), it is the debt-to-GDP. Dubai's GDP is rapidly decreasing due to the worldwide recession and their lack of any assets of substance other than real estate, tourism and a small financial services unit (DIFC). The problem is not the "assets"; the problem is level of debt they accumulated to leverage those "assets".


But as always, informed journalism will prevail.
No mention that no one is buying US debt anymore, unemployment topping 10%,

It is you that is uninformed. The unemployment rate in the U.S. is discussed daily and U.S. debt continues to be issued almost weekly and the bond auctions have been well subscribed.

Obama begging Asian support for US debt. But that is not getting enough attention as it should. It is no news that the US can't borrow itself out of debt, but Bloomberg will really shed true light on that reality. Even Sri Lanka is buying gold instead of the worthless greenback. The sovereign fund behind Dubai, what is their capitalization again, and wouldn't the US love some of it? Just get Bloomberg on the story to scare scare everyone and in the process halve ones assets.

Bloomberg (and other independent news sources) have well documented the debt problem in the U.S. so it appears you are again misinformed.

If Bloomberg were truly independent they can focus on what really matters, reporting on just how bad the US economy really is and its ramifications that still lie ahead.Argentina had rocks not a sovereign wealth fund behind them.

Bloomberg continues to do so ("reporting on just how bad the US economy really is and its ramifications that still lie ahead").

If the sovereign wealth fund was the savior of Dubai, why would Dubai be attempting to default on their debt as opposed to having their sovereign wealth fund pay off the debt?

[Dune]

This event is referred to as a "black swan" event. It can rapidly get out of hand (as can be seen by the worldwide market reaction to the event). It is serious.

Having said that, I agree with the analyst at the end of the article who mentioned Abu Dhabi stepping in. They have the cash to do so; the question is why haven't they done so yet?

Many think it is because they want to "punish" or "embarrass" Dubai. I don't. I think there are very interesting meetings going on this weekend between Dubai and Abu Dhabi to work out exactly how many of Dubai's assets are going to be handed over to Abu Dhabi in exchange for a bailout.

Dubai Ports and Emirates are two excellent assets that I am sure Abu Dhabi would love to get their hands on. Dubai is being squeezed between "the world" (to pay it's bond debt) and Abu Dhabi (to hand over it's financial "crown jewels").

In either case it is a disaster for Dubai and an embarrassment for Sheik Mo. I hope I never have to read about his incredible "vision" and "wise leadership" in the Gulf News for a very, very long time.




November 27, 2009

Dubai in deep water as ripples from debt crisis spread
Patrick Hosking and David Robertson

Work has been halted on the artificial islands
Fears of a dangerous new phase in the economic crisis swept around the globe yesterday as traders responded to the shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill.

Shares plunged, weak currencies were battered and more than £14 billion was wiped from the value of British banks on fears that they would be left nursing new losses.

Nervous traders transferred the focus of their anxieties from the risk of companies failing to the risk of nation states defaulting. Investors owed money by Mexico, Russia and Greece saw the price of insuring themselves against default rocket.

Although the scale of Dubai’s debts is comparatively modest at $80 billion (£48 billion), the uncertainty spooked the markets, with no one sure who its creditors are. Several banks rushed out statements to reassure investors that their exposure was small.

The FTSE 100 plunged by 171 points to 5,194 — its biggest one-day fall in eight months in one of the most jittery days in the financial markets since the depths of the banking crisis.

The Treasury, the Bank of England and the Financial Services Authority were monitoring events closely and are demanding figures from UK banks on their loan exposures to Dubai.

According to a senior government official, Dubai’s crisis is regarded as modest and manageable for Britain, but there were growing fears that Abu Dhabi, the oil-rich neighbouring emirate that has in the past given rescue loans, would leave Dubai to its fate.

Dubai World, the state-owned corporation that began the panic on Wednesday by demanding a standstill on its interest payments, worsened the mood when it postponed a teleconference for its bond holders, saying the phone lines were overwhelmed.

Gerard Lyons, chief economist with Standard Chartered, said: “The market reaction shows how vulnerable some economies are to the aftermath of the debt binge. This highlights how fragile confidence is.”

The Eid al-Adha religious holiday in the Middle East, and the closure of financial markets in the United States for Thanksgiving, exacerbated the sense of uncertainty in markets that were open for business.

A computer crash at the London Stock Exchange, which by coincidence is 21 per cent owned by the Dubai Government, left dealers unable to trade for three and a half hours.

Shares in HSBC slumped by 5 per cent, wiping £6.2 billion from its value. According to the United Arab Emirates Banks Association, HSBC has £11 billion of loans outstanding to the UAE, of which Dubai is one of seven emirates. HSBC declined to comment.

More than £2.6 billion was slashed from the value of Barclays, while Lloyds and Royal Bank of Scotland, both partly owned by the taxpayer, saw their values fall by £1.7 billion and £1.5 billion respectively.

One analyst said that the fears were overdone because Abu Dhabi would eventually come to the rescue to save the UAE from embarrassment. Dubai World has liabilities of £36 billion, about three quarters of Dubai’s total state debt. Its subsidiary Nakheel built The Palm Islands development, but the property bubble in the emirate burst a year ago, leaving buildings unfinished, debts unpaid and paper fortunes erased.

[Dune]

Emirate has a lot of explaining to do
By Roula Khalaf, Middle East Editor, Financial Times

It came in a short statement about the restructuring of Dubai World, one of the emirate’s biggest and best-known companies, with the big news buried near the end. But the decision to ask bondholders of the company and its most troubled subsidiary, Nakheel, to extend maturities from December to May 2010 was a bombshell. And the Middle East’s most glamorous and creative emirate will pay the price of its decision for a long time to come. For months, all indications in Dubai were that the heavily indebted city-state, symbol of the rise of the region as an economic powerhouse as much as of the excesses of the pre-financial crunch days, would meet the obligations of the companies in which it has stakes, and that Nakheel’s $4bn debt due in December would be repaid. Only a few weeks ago, bankers in the region were so upbeat some had suggested that Dubai might not even need to raise more funds to pay debts due this year. It helped of course that the emirate was showing signs of recovery, with fewer expatriates packing their bags than expected, retail sales on the rise and the real estate sector beginning to stabilise. The government itself looked confident too, raising $2bn in Islamic bonds last month.

As always, though, the problem in Dubai is that no one had all the facts, and perhaps some in the financial community had made all the wrong assumptions. The whole affair, one analyst told me on Thursday, was “typical of the way things work in Dubai – top down and in a vacuum – and that makes it very difficult for investors”. True, top officials had indicated repeatedly that Dubai would not default on its debt – and Nakheel, the Palm real estate developer, was assumed to be too important for Dubai’s image. But officials did not explicitly say that the repayments would be made on time. Moreover, the recent prospectus to test market appetite for government bonds said the government was “not legally obliged” to meet the obligations of related entities – what is commonly referred to as Dubai Inc – but might at its sole discretion decide to extend such support. Most of the funds raised in the past year – including from Abu Dhabi banks on Wednesday – were by the government itself, rather than individual companies.

So what was Sheikh Mohammed bin Rashid, Dubai’s ruler, up to on Wednesday? Was he indicating, as some suggest, that the government would allow Dubai’s bad companies to suffer in order to save the good ones? Was he simply trying to force the hand of the Dubai World bondholders to buy some time and leave open the option of repaying the debt next month if he had to? Perhaps Dubai is convinced that as the government of the emirate raises fresh funds and restructures companies related to it, the emirate is consolidating its creditworthiness. Farouk Soussa of Standard & Poor’s says that lending to the government now arguably becomes less risky because it is putting the funds to better use. But he also says this is cancelled out by the lack of transparency.

Whatever the Dubai ruler’s intention, the way Dubai has gone about its financial business has hugely damaged its standing. Bankers and investors are furious, feeling they were led on the wrong path. Analysts, meanwhile, have been scrambling to reconsider the assessments they had recently made about Dubai. The assumption that Abu Dhabi would always stand by Dubai and its flagship companies is now suddenly seen as unsustainable. Was this perhaps Abu Dhabi’s way of taking its revenge on Dubai for the excesses of the boom years? I doubt it. The rivalry between the two emirates is less important than the implications of Dubai unravelling. The cost of insuring Abu Dhabi debt went up on the Dubai announcement.

It has to be remembered that many of Abu Dhabi’s companies are exposed to Dubai, having been some of the most enthusiastic investors. Whatever Dubai is up to, assuming there is some big strategy, it should have explained itself before raising the prospect of default – and it needs to do a lot more explaining now.

[noflare]

Some very interesting reading however I cant help but think some of the authors have never been out here and have no idea of the culture/mentality that exists.
Expect AUH to help out but not indefinately, there are a a lot of locals who think they got themselves onto this mess so they should sort it out.

They will never see recovery to previous levels and for sure there has to be major restructuring in all areas (EK included), this cannot start until the face saving crap disappears and those at the helm accept what a serious problem they have created.......hmmm that could be the biggest problem of all :ugh:

lets hope no more visions appear in the meantime! :=

[Jet II]

This is in essence a notice of sovereign debt default (as the companies linked to the bond repayments are government and not private companies). If the U.S. suddenly told China they would not honor their pledge (a.k.a. "bond") to pay the Chinese back when their bonds came due, it would result in the end of the U.S. to ever borrow a dime again from any country. This would result in the end of the U.S. to exist as a country.


Oh do stop getting hysterical :rolleyes:

First the DW debt is not Sovereign debt - there was never any explicit contract to support it, the markets simply assumed that it would be covered.

And as for this idea that even if you do default of sovereign debt it is the end of existence of the country, well many countries over the years have defaulted but they are still here and still borrowing.

Yes this is serious but please keep a a bit of proportion - I would remind you that even though the cost of CDS has risen it still is far below the rate it reached in January - and the world did not end then.

Thats it - I'm off down the beach :ok:

[Jet II]

They will never see recovery to previous levels and for sure there has to be major restructuring in all areas (EK included), this cannot start until the face saving crap disappears and those at the helm accept what a serious problem they have created.......

I would agree - and it possibly has started.

Last week several of the old crew of local advisors to Mo were sacked and the top guy from Deloitte's brought in to oversee the financial reorganization of DW - perhaps they coming to the conclusion that Nakheel cannot be saved and as they are responsible for most of the debt it might be better to let them fold and concentrate the new money that has been raised on boosting the balance sheets on the the rest of Dubai Inc.

Bankruptcy was a the best thing for GM - it might be what is needed for Nakheel.

[Dune]

Oh do stop getting hysterical

First the DW debt is not Sovereign debt - there was never any explicit contract to support it, the markets simply assumed that it would be covered.

Hysterical I am not; deeply concerned and watching closely I am.

You are technically correct but incorrect in your interpretation. DW is a government owned company. So if DW default on their bond obligations, while technically it will not be called a "sovereign default", investors will treat it as such given the relation DW has with the Dubai government. The outcome will be the same for the government of Dubai (increased borrowing costs going forward).

And as for this idea that even if you do default of sovereign debt it is the end of existence of the country, well many countries over the years have defaulted but they are still here and still borrowing.

You misinterpreted what I said. I was not referring to the Dubai situation; there is no question the UAE would survive. I was referring to what would happen if the U.S. ever reneged on repayment of their bond commitments to China. No payment = no further credit = the end of the U.S. as we know it.

Yes this is serious but please keep a a bit of proportion - I would remind you that even though the cost of CDS has risen it still is far below the rate it reached in January - and the world did not end then.

Here is what I believe could happen if Dubai defaults. This worldwide economic recovery is on very shaky ground. Only recently have market participants begun to invest in riskier asset classes, and they have done so strictly on the belief things are "getting better" worldwide.

Part of that risk capital has been coming back into Dubai. The reason why is because the government gave every indication that all was well here and there is nothing to worry about. So, based upon the government telling me all is well, I as an investor (lets say I have a hedge fund) agree to invest in Dubai businesses owned by the government. Meanwhile, the government knows things are terrible but, due to lack of transparency, they choose not to tell the market participants.

Suddenly they decide to pull the rug out from under these participants by way of announcing their intent to default on their debt obligations (timed perfectly to coincide with Eid and the U.S. Thanksgiving holidays when markets are closed).

If I am a hedge fund looking to invest my capital, I look at what happened in Dubai and start wondering what might be going on in other "risky" areas that are also telling us "all is well". I know it is too late for my Dubai investments (the intended default has already been announced so now I would be hiring legal firms to foreclose on various worldwide assets DW has in an attempt to get some of my money back on their eventual sale) but I start thinking......whats going on in Ukraine; whats going on in Argentina, whats going on in Latvia, etc, etc. Then I start thinking maybe all is not well in the world. So I start pulling my risk back, sell my risky assets, pay off my dollar borrowings (that I got at 0% interest through the USD carry trade) and put the whole thing back into U.S. short term treasuries.

Net result:

1) Stock prices worldwide collapse (may have started today; still too early to tell).

2) Credit default swaps on all "emerging markets" skyrocket, sending cost of borrowing for these countries to the moon.

3) Unlike Dubai who has a sugar-daddy that can bail them out (Abu Dhabi), who bails out the Ukraine, Latvia, Argentina, Pakistan, etc. The IMF steps in but how many holes in the dike will they be able to plug......how many holes in the dike will there be?

The net result could be a worldwide collapse in this recover (the dreaded "double dip") with stock prices retesting the Mar/2009 lows. If that doesn't hold, watch out below. This is the problem with Black Swan events; it is impossible to estimate how far their effects will translate all the way down the investment line. That is why this has the potential to be such a serious event.

In any case, this DW bond default will have huge long term repercussions for Dubai. They are now known as fiscal "dead-beats" who cannot be trusted to pay their debts. This was well know among the construction industry (ask the companies who are still waiting payment for their dredging services to build the Palm Islands), but now it is known to the Investment community.

No FDI (foreign direct investment) and DIFC becomes a ghost town. The entire Dubai plan was to diversify out of oil (as there is next to none left) and into tourism, banking, commerce, etc. Who in their right mind would put their MENA operations in Dubai when it is known they cannot be trusted? Not me and my hedge fund or business; I'd look to Bahrain or Qatar, or even Abu Dhabi. Certainly not Dubai.

End of story.......

-Dubai declines substantially with no growth for decades due to lack of FDI,
-built up real estate inventory (apartments, villas, malls) sits empty for years/decades (think ghost town).

Emirates as an airline will still do ok because it really has nothing to do with Dubai other than being based there. It has 1 huge advantage that other airlines do not have and that is GEOGRAPHY. The business model works because it is not dependent upon Dubai doing well for the airline to do well. However, it will be interesting to see what this government default does to affect the credit rating of Emirates. If the airline is painted with the same brush as other Dubai government entities; watch the funding costs to pay for all those shiny aircraft to skyrocket. Of course, this in the end would reduce the profitability of the airline as a consequence.

[Dune]

Asking for extension is Technically a default. It logically follows then, Technically the US is bankrupt.

There has not been any time in the history of the U.S. where the U.S. government did not repay the original capital on a U.S. bond back to the investor.

In addition, there has never been a request for an extension of repayment as per above.

However, you are correct that technically the U.S. is bankrupt....depending upon how you define "bankrupt":

-if it is assets - liabilities......bankrupt.
-if it is defaulting on a repayment.......not bankrupt as there has never been a default.

[5star]

Jet 2.
credit ratings have dropped massively as a consequence of this move. And this + the distrust in any Gulf company will impact EK big big time.

The puppets of Dubai stuffed the western banks this week(and there's gone be many who will bite the dust, some experts already see some parallels with the 08 banking crisis).

The thrust of the western financial world in Dubai is shocked after yesterday's revelation and it will take lots of time to correct this. In the mean time what has Dubai on offer? Right : just 1 airline and a few hotels and a government which scares away tourists and business. That's it! Good luck them. Quite different than your comparison with the US and GM I would think.

I ll join you on the beach. Could be the only thing to do in a few months time while we are on unemployment insurance. Hang on...I guess not.

[Wannabe Flyer]

Darn

Those gunning toting fundamentalists will need to find some other Haven to do their Laundry.

Dubai was and Ponzi scheme no 2 ways about it.

Darn back to January 2008 where all my stocks went down the tube!!! :{

Sorry guys will now need to move back to coach for a while

[lpokijuhyt]

Maybe Dubai should bring back the Cyclone club. That could possibly raise some cash and peoples' spirit:}

[Jetjock330]

Gulf News is absolutely quiet today about this, like it never happened!

[Dropp the Pilot]

If you look at the business section "briefs" from the wire services you will find that they are almost all about the issue and the resulting ripple effect throughout the Gulf - some of them quite shrill.

Looks like someone forgot to cull that section.

Pay no attention to the man behind the curtain....

[5star]

Indeed. Just one line, our boss making the headlines trying to calm things...

Well we know the saying and I guess there is enough of it to stick their heads in and that is exactly what they are doing right now. Pathetic. :ugh:

Especially their attitude towards this is very worying if you ask me.

[Vercingetorix]

Excellent enlightening discussion:ok:

[flying lid]

THE OKEY-COKEY song
Traditional Party Song

You put a million in
You take a trillion out
In out, in out
You sheik it all about
You look to Abu Dahbi
And you turn around
That's what it's all about

Oh, Abu Abu Dhabi
Oh, Abu Abu Dhabi
Oh, Abu Abu Dhabi

Knees bend, arms stretch
BAIL US OUT !!!!

Lid

[LLuke]

Oh, Abu Abu Dhabi

Knees bend, arms stretch
BAIL US OUT !!!!

Funny song.

Question remains: why didn't they? Pretty sure there has been a lot of talking going on between Dubai and Abu Dhabi. Abu Dhabi is damaging its own investments big time?

Credit ratings of Abu Dhabi went down. Guess there are more people in the financial world waiting for a clear explanation. For the moment we only see smoke.

[jethrotull]

In all of these discourses has anybody given a thought to

1)The cost of untilities in UAE.

2)The fallout on the Locals.

3) Subsequently the cost of doing business in the Dubai.

4) The worst case scenario effect on traffic originating from DXB i.e. EKs breakeven feed.

As we know Dubai was the magnet for locals from other emirates except probably AUH. These guys are paid fancy wages for doing effall. In the next phase of this default, there will be, revenue generation to offset the cost of credit. Cost controls are the first and easy steps to follow.
It will start with deferred wages and then revised wages, which reflects on the retail sector of the economy, another major area of employment.

Next area of revenue generation is Utilities. To start with the utilities in DXB are imported or locally generated - not natural- i.e Gas from Qatar, Water desalinated and Electric generation from oil & gas again imported from Doha or AUH.
These costs will increase, as the supplier will be reducing the credit period and also the quantum of credit. This will lead to higher costs to the Utility producers which get transferred to the local populace, add to this the need to generate higher revenue - yield- rates just ballon.

Now with the decrease in state benefits to the locals, will lead to further demands from the locals for jobs in pvt sector - a la Bahrain since 90s - here then you have a drop in productivity of the pvt enterprise as they have to make do with less skilled and motivated workforce.

All of the above will lead to a rethink, on the part of many corporates housed there to look at alternatives like DOHA or MUSCAT. Leading to further drop in premium traffic travelling in and out of DXB. Construction was the largest employer, with it coming to a standstill, all the indentured labout from the sub-cont stops leading to drop in high yield traffic.

In a depressed global economy, fuel will see a drop which also increases prospects for other sub-cont airlines to start ops atleast to SHJ or RAK. There are plenty of eqpt and crew avail at depressed prices. Further expansion into these markets will be more difficult now, as most of these routes were like a quid prop quo for the labour from the sub-cont getting employment in DXB, Infact with the likely drop in employment there will be greater pressure from the Govts. especially of India, to revise the bilaterals. Now the geography might be the very threat that was seen as an advantage.

EK has a dispropotionate dependence on connecting traffic, as mentioned above the base traffic will see steady drops.

And to top it all, quoting a the chairman of PIMCO on CNBC '' The continued drop in house prices will effect the ability of people to spend on the local economy',' as we all know noe DXB was a purely real estate economy.

Personnally, we all are likely to be affected. I have been unemployed for 2 months now and ME was one of the areas for jobs.

Its only human to feel Schadenfreude at the state of Dubai. There was this overt arrogance that we all have seen and experienced in that part of the world. I only hope all of this leads to a fair and just world for my children.

[Capt Groper]

So please explain, where has all the oil renenues gone since the first barrel was sold.

I thought that by now,
50 yrs later, there would have been trillions in the bank!!

[5star]

Thank God they linked their currency to the USD. If we wouldn't have that we would all be earning peanuts from today on.
And as mentioned above: it will be very interesting to see how the locals in Dubai react now that the full extend of this f*ck-up by their leaders is surfacing and their glittery economy goes full belly up...

[SOPS]

This is getting very serious, markets all around the world are down today, the Dow has fallen 200 points on opening, all markets in Asia are down. Even the South Koreann currency is down because of it. Next week is going to be very rocky..fasten your seat belts!!!

[rascott3888]

There are so many questions....and no one with answers.

The authorities are on vacation; the local media is cowering in silence.

One part (or many) that I do not understand is why the need to announce a planned deferral now?

In February Dubai raised $10bn in bonds from the UAE central bank as the first half of its $20bn sovereign bond programme in an effective bail-out from the oil-rich capital. The on Wednesday, Dubai raised $5bn of the second $10bn tranche from National Bank of Abu Dhabi and Al Hilal Bank, two institutions with strong Abu Dhabi government holdings.

Separately Dubai's department of finance managed to raise almost $2bn in Islamic bonds last month in a move that had also shored up confidence.

So with US$ 17bn raised - why is there an issue about repaying Nakeel's US$3.5 bn sukuk in December.

Where did the money go ?

[Jet II]

One part (or many) that I do not understand is why the need to announce a planned deferral now?

Deloittes have only just been brought in - until they come up with a plan for the future is there much point in throwing more money at DW?

After all they may suggest that letting Nakheel go bust is the best option....



So with US$ 17bn raised - why is there an issue about repaying Nakeel's US$3.5 bn sukuk in December.

Where did the money go ?

I understand that most of the money raised is for continued infrastructure development - metro, tram, Al Maktoum airport etc.

[LLuke]

After all they may suggest that letting Nakheel go bust is the best option....

Not a very good idea in a debt loaded environment. Plenty of debts need renewal. If they can't get new loans it will all collaps.

I am curious about how those new A380's are planned to be financed...

[Desert Diner]

Now with the decrease in state benefits to the locals, will lead to further demands from the locals for jobs in pvt sector - a la Bahrain since 90s - here then you have a drop in productivity of the pvt enterprise as they have to make do with less skilled and motivated workforce.

Big difference between the two. There was massive unemployment in Bahrain amongst the Shia in the 90's with very few benefits. The 94-95 riots were due to the Sunni getting preferential treatment and government jobs. In addition Bahrain has a substantial population.

Dubai has a relatively small native population and I would hazard to guess almost no native unemployment as there are more than enough public sector jobs to keep all of them employed.

All of the above will lead to a rethink, on the part of many corporates housed there to look at alternatives like DOHA or MUSCAT. Leading to further drop in premium traffic travelling in and out of DXB. Construction was the largest employer, with it coming to a standstill, all the indentured labout from the sub-cont stops leading to drop in high yield traffic.

There are no alternatives tr Dubai. The only potential alternatives would be Abu Dhabi or Bahrain, but neither one of them has the current infrastructure to support them nor would the have the intentions to start another building bubble to support them.

[Jet II]

Not a very good idea in a debt loaded environment. Plenty of debts need renewal. If they can't get new loans it will all collaps.


Will it? - Nakheel/DW are responsible for the majority of the country's debts. Nakheel will never turn a profit so if it goes to the wall what will be left will be companies that are capable of being successful and profitable.

Letting the dead wood go to the wall has been what the rest of the world has been doing all year.


I am curious about how those new A380's are planned to be financed...

Airbus will finance them for anyone who wants to buy - they are desperate to get shot of the things.

[jethrotull]

Big difference between the two. There was massive unemployment in Bahrain amongst the Shia in the 90's with very few benefits. The 94-95 riots were due to the Sunni getting preferential treatment and government jobs. In addition Bahrain has a substantial population.

Dubai has a relatively small native population and I would hazard to guess almost no native unemployment as there are more than enough public sector jobs to keep all of them employed.


Surely DXB has a far smaller population however relative to the Bahrainis they are less literate and consequently paid far more for their skills. Alot of this high wages was sustained by the excessses that have come back to bite.
In the resulting economic contraction, it is these locals that are going to be hit hard. Landlords will be chasing a smaller population of tenants, so part of the extended family that previously lived off rentals will be in the jobs market. And when i talk about DXB i mean all the emirates north of DXB. The beauty of AUH is that it is south of DXB and hence insulated from the less fortunate northern brothers.
To put the whole thing into perspective the future size of the economy is likely to be the size of Sharjah for the rest of UAE (minus AUH) and they will have to share it among themselves, EK, AA, RAK et all.


There are no alternatives tr Dubai. The only potential alternatives would be Abu Dhabi or Bahrain, but neither one of them has the current infrastructure to support them nor would the have the intentions to start another building bubble to support them.


Right now DOHA has the most sound position to be a regional trading hub. It has the US Centcom for security, Largest proven reserves of natural gas in the world and a strong infrastructure with adequate capacity to accomodate any influx from Dubai. DOHA has been attracting EU stock exh in to stimulates its finance sector, in light of little or no competition they might win the battle. AUH might end up doing a deal with DOHA to extend support to it to be a Intl finance centre while retaining a-itself as a regional culture cum political centre i.e. Brussells of ME. Bahrain was the poor cousin emulating DXB, its CDS spreads reflect the market position. Saudi and Kuwait are ruled out.
Muscat has the most affordable economy, to sustain the expat lifestyle in this era of ltd or no credit globalised world. It has some of the most beautifull beaches in Salaah region. In a era of Digital economy and LCC, i see expats rediscovering OMAN.

[nolimitholdem]

umm....ok.

Any comments now from anyone who actually lives here?

[stormin norman]

It was only a matter of time before this happened,what ever happened to that nice arabic trading port we knew in the 70's.

The OMAN has the right idea, slow development and sustained growth.

One can liken Dubai now to Benidorm in the early 80's -tacky

[dubaiwilli]

Shaik Mo ! Well done ! All your local friends will love you about your dream.

They have to go to work now and can t take the money from expats for doing nothing:::::

Sorry guys but you have been to greedy!

[cargosales]

umm....ok.

Any comments now from anyone who actually lives here?


I used to.

Even when I left, 4 years ago, certain clever people were talking about how the smart money was working hard in Dubai but how the really smart money was sitting waiting in Abu Dhabi, ready for the time that the profligate, corrupt and utterly self-serving 'Vision' hit the buffers.

I think that time has now arrived.

[GoreTex]

I am not a rocket scientist but was saying years ago these idiots overdo it, way too much spending and greed, its just not normal that every local drives a super expensive car, somebody has to pay for it, you can only milk the expats till they are dry and then what, beg abu dhabi?

[Wiley]

One aspect of the current crisis that hasn’t been mentioned is the level of credit card debt among the Locals, even before Dubai’s financial meltdown occurred. I had a friend who was quite senior in one of the major banks in Dubai who quoted me the figures of how much the average Local owed on his credit card (or more correctly, in most cases, credit cards).

I can’t recall the figure, but it was staggering – an amount that the vast majority of them would never be able to repay given the interest rates that most of those cards attract. The banks just sat back raking in the (substantial) minimum monthly repayments. (And from what he said, even in those good times, the number who didn’t even keep up the minimum monthly payments was not inconsiderable.)

To a far lesser degree, the same problem exists among the expat population, particularly amongst the young single Western females (and also many of the males), who have to have the latest model of everything and have it now to keep up the Dubai Dream. (If you’re an EK pilot, as an experiment, ask the L1 on your next trip [if you’re game] what her credit card balance is and you might be surprised.) Quite a few EK cabin crew remain in Dubai only because they’re trying to pay off their credit card bill. But suggest to any of them that they take to their card with a pair of scissors and see what answer you get!

Which leads me to the question: how is this debt, particularly with the Locals, ever to be repaid, particularly if the Golden Goose stops ‘laying’ all those nice public sector jobs and very generous pensions, which it may well do?

[GAGing in Bahrain]

To be honest, it seems that the credit card (and personal loan) debt is excessively high throughout the GCC, much like it was in 07'-08' and still is to a certain extent now, in the U.S. and Western Europe.

Here in Bahrain personal debt is at an all time high. Many locals I know are using up to 40% of their monthly pay packet to service their interest alone.

Very worrying....:confused:

[Fox3snapshot]

Presenting a list of the more colourful names understood to have invested in Nakheel’s Dubai Palm development (Source: tabloids and press).

* David Beckham (footballer, international fashion icon)
* Michael Owen (footballer)
* David James (goalkeeper)
* Joe Cole (footballer)
* Andy Cole (retired footballer)
* Kieron Dyer (footballer)
* Brad Pitt and Angelina Jolie (actors)
* Michael Jackson (king of pop)
* Naomi Campbell (model)
* Denzel Washington (actor)

Britons, meanwhile, accounted for about 25 per cent of the buyers with the rest from 75 different nationalities, including several Americans, according to the Daily Mail.As for banks, the Emirates Bank Association lists the following institutions as being the largest foreign banks invested in the UAE:

* HSBC $17bn
* Standard Chartered $7.8bn
* Barclays $3.6bn
* RBS $2.2bn
* Citi $1.9bn
* BNP Paribas $1.7bn

# Lloyds $1.6bn

[felipe56]

Fox3
Do you really think Beckham and rest actually 'paid' for their properties?
I am pretty sure that they were given the properties to entice others to buy and become nieghbours of the rich and famous.
They should have given one to Tom Hanks because he could then relive his movie 'Castaway' because nobody else will be there!

[fractional]

All is not well and Dubai rulers managed to hold their ground up to this crisis. Old Shk Maktoum must be "very upset" wherever he is.
Abu Dhabi rulers no longer believe in the usual "brotherhood" and now will "pick and choose to help" Dubai. Now, it'll be anyone's guess what they'll do and how.
Just a hint about aviation in the UAE in the last 25 to 30 years. In the late 80s or early 90s, Abu Dhabi rulers wanted to quit GF and asked the Dubai rulers for EK to be based in Abu Dhabi, and Dubai refused. Dubai's (little) concession was the DXB-AUH-LGW-AUH-DXB flight (not daily, I think) which had little result. Remember how Abu Dhabi quit GF and asked them to cut by 80% their movements through AUH? I'm sure there are more.
For those who have lived here for some years, do you remember the saga of the Burj Al Arab silhouette on the Dubai car registration plates and how it was solved? The fittest rules. These little things have a price and yes, Abu Dhabi will pick and choose "their help" to Dubai. The mutual back scratching is over, but it won't be noticed clearly in public or in the worldwide media.

[SOPS]

BBC just reporting AUH will look on a case by case basis what they will provide money for...things are changing.

[Jet II]

FWIW :hmm:

ABU DHABI (Reuters) - Abu Dhabi, capital of the United Arab Emirates and one of the world's top oil exporters, will "pick and choose" how to assist its debt-laden neighbor Dubai, a senior Abu Dhabi official said on Saturday.

"We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts," the official told Reuters by telephone.

The government official declined to be identified because he is not authorized to speak to the media.

"Some of Dubai's entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist," he said.


On a separate note I'll bet that some people are making an awful lot of money out of this panic - I thought that Short Selling was supposed to be illegal? :E

In a reflection of how sure investors were that Dubai would meet these payments, the bonds were trading at a 10 percent premium to face value earlier this week. They are now trading at around half of face value.

[Jet II]

The markets today were in a bit of a tizzy because the Dubai World Group, a holding company owned 100 percent by Dubai’s government, and Nakheel, a wholly owned subsidiary of Dubai World, imposed a debt restructuring and debt service standstill - failed to perform on their debt or, in ordinary if not legal language, defaulted on their debt. The combination of the Islamic holiday of Eid and the Thanksgiving holiday in the US boosted the magnitude of the financial market kerfuffle.

I don’t see what the big deal is. Dubai has experienced for most of this decade the craziest construction boom seen in the Middle East since the construction of the Great Pyramids. That boom turned to bust - as booms invariably do. Property developers tend to be highly geared and very procyclical in their revenue flows and access to the capital markets. During construction slumps they drop like flies. Because the property sector is risky (ask Donald Trump), its creditors tend to get better interest rates than the sovereign rate. Dubai is no exception to this rule. If you earn a risk premium during good times, you should not moan when the borrower defaults from time to time when the going gets tough.

The debt of the Dubai World Group and of Nakheel was not Dubai sovereign debt or sovereign-guaranteed debt. The sole shareholder may be the state of Dubai (indistinguishable from its ruling family), but limited liability applies to governments as well as to private entities. The government of Dubai is under no legal or moral obligation to provide an ex-post guarantee of the debts of the Dubai World Group and Nakheel. The creditors will have to manage this contingency the way God meant them to: hoping for the best, but living with the restructuring and taking their losses. Requiring the debt holders to live with their losses will not damage the reputation of the Dubai sovereign. The only way a bail out by the Dubai sovereign of the debt holders of Dubai World and Nakheel would enhance the sovereign’s reputation would be by enhancing its reputation as a sucker.



Iteresting view from the FT (http://blogs.ft.com/maverecon/2009/11/polite-sugggestion-to-the-dubai-sovereign-that-creditors-of-dubai-world-not-be-bailed-out/#more-7946)

[Geebz]

Ironic how a little over a year ago oil was $147/ barrel. Back then every aviator I know in the Gulf (and I know a few) would brag about their great fortunes as a result fo the Arab World's new wealth.

Meantime, those same govenments (Saudi, Emirates, Kuwait et, al) were warned time and again to bring oil down (many employed the speculators that forced oil higher) or they risk severly undermining the world economy... which as we all know is now what happened. Now all Arab debt is being brought to question.

I have no sympathy for the investors, caveat emptor. Nor do I have any concern for the governments whose arrogance acted as the catalyst to bring this whole mess about.

I don't believe the rulers will learn much from this either. When a kid can have his parents bail out his poor financial decisions, he'll never learn. His spending habits remain more or less unchanged. Same goes for Dubai. AD has been bailing them out time and again. Why wouldn't they expect yet another bailout, just as Lehman Bros arrogance that the US Gov't would do the same for them, ala Bear Sterns and AIG?

Read about Shumpeter: "Creative Destruction." While not excactly the same here, IMO, it's basic premise must be allowed to occur in order to allow markets to efficiently become more transparent. So long as bailouts are provided, very few learn any lessons. Corruption and fiscal sloppiness continue. Dubai is no exception.

[flying lid]

Breaking news on Al Jazeera

Abu Dhabi is moving to bail out on a selective basis the state-owned Dubai World, whose debt default led to a sharp drop in global markets, a senior official has said.

The unnamed official told news agencies on Saturday that the United Arab Emirates' wealthy capital would "pick and choose" how to assist its debt-laden neighbour

Al Jazeera English - Business - Abu Dhabi to 'assist' Dubai World (http://english.aljazeera.net/business/2009/11/20091128144913644499.html)

Lid

[Dune]

Tons of divergent views out there because of the "info vacuum" created by Dubai.

I think this is a well balanced analysis:


This post is a guest contribution by James Pressler* of The Northern Trust Company.

Over the past few years, Dubai has built a reputation not just locally but worldwide. As the fastest growing of the seven emirates making up the United Arab Emirates, it has become known for its astonishing creations - the largest manmade islands (three at latest count), one of the world’s largest ports, and the Burj Dubai - the tallest manmade structure in the world. Unfortunately, its latest creation is not receiving the same kind of oohs and ahhs. The announcement on Wednesday requesting a six-month payment freeze on the $59 billion in debt issued by Dubai World, a state-run conglomerate behind all this grand development, made markets shudder at another prospect - the largest sovereign default since Argentina in 2001.

While technically this week’s announcement does not yet constitute a formal default, international markets are treating it like one. Credit default spreads have broadened to what one analyst called “Icelandic” levels, investors have cut back positions and headed for the safety of the US$(?), and everyone is reconsidering just how safe some safe bets are. If a shamelessly-wealthy Gulf country could potentially default, what about countries with rising debts, huge deficits and shaky recoveries?

The complexities of the UAE’s governmental structure make the situation difficult to grasp at first glance, but the problem can be captured by a few basic points. First, Dubai is the second-largest emirate in the UAE next to Abu Dhabi, but Abu Dhabi is also the power of the national government and has been challenged by Dubai’s meteoric rise. Next, the UAE has a sovereign wealth fund estimated at one half-trillion dollars in case of emergency, so money is clearly available at the national level to bail out Dubai if that route is chosen. Lastly, the national government wants to emerge from this situation with international markets assured that a state-run entity has the backing of the government and will be subsequently subject to reform and accountability. Taken together, these points plus an appreciation of the politicial undercurrents suggest a scenario that avoids outright default.

In our base case, Abu Dhabi offers support from a national level so Dubai World can meet its financial obligations and implement some debt restructuring, all in exchange for ownership of significant Dubai-owned assets - Emirates airlines has been suggested in recent reports. In addition, Abu Dhabi forces Dubai World to restructure its business model from the dysfunctional “build it and they will come” ideal. These conditions would satisfy Abu Dhabi’s emirate-level interest in retaining dominance while also securing the national interest of retaining some international market confidence, all while avoiding a formal default. We will be monitoring events for key markers suggesting this scenario is playing out - replacement of Dubai World board members by more technocratic people favored by Abu Dhabi, the transfer of Dubai’s assets, and a general humbling of the indebted emirate in a way that places Abu Dhabi firmly in charge.

However, it would be irresponsible to not also mention what worries us looking forward. Aside from the off-chance that Dubai and Abu Dhabi are unable to converge on a cohesive recovery, what are the chances that Dubai World is just the first of more possible defaults to come? Since the UAE does not release public debt figures and estimates are sketchy at best, there is a chance that another public company could announce an excessive financial burden and a need for bailing out. This applies not just for the UAE but for any of the fast-developing Gulf countries experiencing an asset bubble collapse. With widening credit default spreads throughout the region and even into emerging Asia, any entity dependent on the recent flood of cheap money to roll over its debts could easily find itself out of options. Few would be as singularly vulnerable as Dubai World, but a significant default could set forth a vicious cycle of contraction and collapse that could take a number of victims.

The first sign of things to come could be as early as the first week in December, when Gulf markets re-open from the Eid al-Adha holiday (Dubai World announcing its debt postponement plans just before Eid celebrations was in all likelihood not a coincidence). This will mark the first chance for officials to state positions and make confidence-building claims, with the further interest of calming international markets. Between that time and the December 14 due date for Dubai World’s next debt payment, we expect to see a concrete plan laid out for bailing out the conglomerate and some pressure taken off the credit markets. However, if no settlement can be reached, it would not surprise us if another major entity started talking about restructuring or a debt freeze before year-end – and not necessarily a company in the UAE.

* James Pressler is an associate international economist at The Northern Trust Company, Chicago.

Source: Northern Trust - Daily Global Commentary, November 27, 2009.

[Desert Diner]

Good article. You have to wonder though if Abu Dhabi may negotiate more favorable terms with the creditors before it actuall "bails" Dubai out.

[jethrotull]

UAE has a estimated population of 1million. A soverign fund of $500billion is equivalent to $500,000 per person.

Most of this soverign fund would be invested in extremely low interest bonds with the likes of Japan or Germany.

What would you reckon is the average debt/person in UAE ?

Can you imagine any of the 7 Emirs thinking of touching this soverign fund to bail out Dubai, possibile, though i would say extremely difficult.

Another thing to bear in mind is the UAE currency that is locked to the $. However this converstion rate is within UAE. I have didly squirt knowledge of currency, however i believe if the spreads on CDS have increased then that would increase the amount of dirhams they would have to pay externally to get $1, surely it would be more than Dhs3.67. The intl currency market would have revalued this exchange rate, which again is heavily dependent on AUHs oil reserves.

If i was living in UAE the first thing i would do is convert my dirhams to dollars.

[grizzled]

A few points, after a couple of days of reading and reflecting.

For many expats who live and work in the UAE this is no surprise. Those who still insist that Dubai is financially sound -- or viable, or sane, or even “real” – must be shopping, driving, working and living whilst wearing glasses so rose-coloured that even the brown Dubai air looks pink. Perhaps it’s a natural human trait to ignore, or at least compartmentalise into some deep recess of the brain, any signs or signals that might force one to question one’s environment (or one’s self) when the place appears so bright and blissful. But that view of Dubai is one-dimensional; under that happy shiny Disney surface lives a nasty troll of a reality. Dubai is George Orwell’s 1984 alive and unwell in 2009.

The “Life is good” mantra that flows from the pages of the Gulf News, through the malls, and bars and golf clubs -- from Deira, along Jumierah all the way to the Marina – is real alright. In the same sense that movie dialogue is real, and Las Vegas is real, and Disneyland is real. That is to say they exist, but only in their own context.

As one sips a nice cold $10 beer at Barasti on Thursday night, laughing and joking with one’s peers, one doesn’t tend to dwell much on the enigmas that might dampen the warm dry desert evening: If all those apartments in the Marina, The Palm, and even The Lakes, are all sold out, why are most of them empty? (Clue: They are indeed “sold out” as soon as they come onto the market. Sold to “Royals” by Emaar or Nakheel, or whomever. Then to someone else. Then maybe to you. But more likely held. It has to do with money. Big money. Money made. Money transferred.)

And that “no swimming” at the beaches thing. Interesting what one might learn if one were inclined to talk (quietly) to one of those sewage truck drivers. You know the ones I mean; lined up for up to 12 hours to dump their “load” at the world-class treatment plant. The plant that can only process 25% of what’s generated. So where does the rest go? No! It can’t be true in this world-class City-of-the-Future.

Which brings us to the word “infrastructure”. In Dubai, companies and governments use that word when they really mean “superstructure.” Dubai has “world-class” buildings and highways and malls and bridges and airports. That is not what is missing. What is missing is the infrastructure to support all the concrete “stuff”. Meaning a truly functional bureaucracy. (Anyone who lives there, or has lived there, can describe the farce that passes for services, rules, regulations, forms, queues, etc.) Most importantly, a few years hence, the world will find out what happens to “world class” structures when real infrastructure is absent: i.e. enforcement of construction standards and regulations by inspectors that really do ensure concrete meets the specifications.

The real Dubai – the one seen through the eyes of the waitresses, cashiers, and bartenders from South East Asia and Africa – is a place of racism, little hope, and a few dirhams a month left over to feed family back home.

The real Dubai – as seen through the eyes of all those born there, but not of Emirati parental origin -- is a place where one is, and forever will be, Stateless. No rights, no citizenship, no place to call home.

The real Dubai – as seen through the eyes of the servant girls and maids from Who-Knows-Where (because they haven’t been hired, but “purchased”) is a place where one lives in either constant fear, or simple resignation.

The real Dubai – as seen through the eyes of the construction worker from Sri Lanka, the cab driver from India, or the hooker from Nigeria – is a place of servitude. A 21st Century receiver and user of slaves. No rights, no respite from 12-hour work days, no advocates. Lies, a huge loan to pay a trafficker for a visa, or even outright kidnapping got you there. And no hope of ever being able to buy your way out. God have mercy on those who get desperate enough to speak out about working or living conditions (as some poor souls have). One first gets physically punished, then sentenced to three months in prison. A real prison; a somewhat mediaeval prison some would even say. Followed by deportation home; to face the “businessman” one stills owes thousands of dollars to, for the visa to the promised land. Many realise suicide is the only real exit from the nightmare.

The real Dubai – as seen through the eyes of Emirati “royals” – is a place of joy. The joy that can only come from absolute power. And absolute control. A place of multi-million dollar aircraft, cars, homes and horses. And servants of course, in all the worst senses of that word.

Lastly, anyone who still has faith in the ability of the world’s financial markets, and financial regulators, to adequately assess risk, and reasonably predict outcomes, hasn’t been paying attention. And that includes any supposed valuation of UAE reserves and sovereign funds.

Suggested Reading: Ozymandias, P.B. Shelley, 1818.

[B. Bonga]

..........it's really amazing how many pilots out there are financial gurus ! I think the Dubai govt and other nations on the brink/in financial meltddown should hire some of the "Economic Boffins" that are dolling out advice on the forum.............

[Capt Roo]

Grizzled - excellent post. Well written and fairly balanced.

I have been a Dubai-sceptic for many years. Passed through many times in the old days, when it was a lovely seaside town. The 40 kilomoetre beach from the Hyatt to the Aluminium factory was always stunning. The offshore building, which was what bankrupted Nakheel, has desecrated a wonderful treasure.

Was tempted by a DEC job at EK a couple of years ago, now am relieved that I didn't take it. The frenetic construction boom and the naked greed shown by every person I came across reminded me of BKK before that crash.

Hope for the sake all my friends in Emirates that it sorts itself out. Surely a merger of sorts between EK and EY is now inevitable? There is no room for two companies with the same product, chasing the same market, in the same country.

[Ndicho Moja]

B. Bonga, what is your take on all this?

[5star]

Well Mr. B., if you are working in Dubai may I recommend you to widen your scope to not only reading the cr@p of GN. Again complete misinformation in today's issue btw... :yuk:


Well... most of the jockeys here will be no specialists but in a vacuum with no information like here in the UAE, it's only natural that people share their views on forums like this one and Xpatw etc...; If you don't like what you read then why are you visting this site in the first place?

But as 7days states it nicely: Lets see what happens on the DFM tomorrow. It's gone get very ugly...:E

[ferris]

Whilst all of what grizzled wrote is true- I wouldn't call it balanced.

Moving on...
I see the actual problem is in the way forward. This pending default is not on an interest payment- DW has been unable to refinance that particular bond. It is not the first time, it is just the first time that they have had to tell everybody that AUH might not come to the party. So, as more bonds fall due, the emirate clearly doesn't have the income to repay them (there is no real tax base). How does Dubai intend to proceed in the future? This is what all the ructions are about. Not that a govt owned enterprise can't repay a $3 billion debt (which is small potatoes in the govt debt world).You have four options when a debt falls due:
1. Use income (that you have accumulated) to repay the debt in whole
2. Refinance all or part of the debt
3. Sell asets, either the security for the debt, or other assets to repay the debt in whole
4. Default on the debt (and let bankruptcy run it's course- which will naturally involve asset sales).
*sovereign nations have other options, but Dubai is not a 'nation' in that sense.

It appears that a lot of people think that AUH is going to act as a 'bankruptcy trustee'. Clearly the recent statements indicate this is what is going to happen- but they are warning that they are not going to cover all the paper, and that some entities will fail. Which ones? It seems obvious- and it is going to get very ugly. As to addressing this ongoing problem of lack of income- here is where it gets particularly gruesome. Widening of tax base (income) and trimming outgoings; this is going to be a very painful exercise, and a big cultural change. Weening a govt (and populace) addicted to credit growth.
I can't see any other way forward. Hence the ructions (especially as this process will by revisited every time another bond falls due).

[LLuke]

Here's my opinion.

1. Use income (that you have accumulated) to repay the debt in wholeThe income is consumed by the debt burden. If it was that easy they already would have done it. they are digging holes to cover other ones, waiting for better times, that are away for a (too) long time. I guess they could impose income taxes, - in a way fair to those who enjoyed the benefits of Dubai- but the effect could be devastating on the long term and will never be enough, just have a look to the debt/inhabitant ratio.
2. Refinance all or part of the debtThey'll have a hard time refinancing a debt if they don't have the money to pay the interest of the current debt. Conditions for a new loan will never be as good as they were, the problem will just become bigger.
3. Sell asets, either the security for the debt, or other assets to repay the debt in wholeIn Dubai, there are no assets. It is a Brit/Arab dream. A paradise in the desert with no purpose. Empty buildings will stay empty. Its value is simply unknown. What is the value of a Boris Becker tower? Foreign assets are likely to be sold when defaulting, although a lot of this will depend on legislation. To what extent is the owner in Dubai liable? If lost money can't be recovered by selling assets, confidence of investors will drop further/ become 0.
4. Default on the debt (and let bankruptcy run it's course- which will naturally involve asset sales). Then they won't be able to refinance. Nobody, no bank, is ever going to borrow a Dubai owned company a EUR,USD,RMB again if DPW/Nakheel defaults. Unless there is a written bank guarantee from Abu Dhabi or etc.... A short term resolution that will hurt in the near future. Abu Dhabi cannot be counted on. Western investors will demand guarantees for future loans that can't be given.

What -imho- they should do is confess and communicate, contain the situation by making very clear what is available, icw transparent books. I don't think they will be able to provide enough clarity to calm down the markets. If people start dumping Dirhams on monday for EUR/USD/etc it may make things worse. Possibly only EK has transparent bookkeeping for dealing with foreign agencies regarding fair competition. Unfortunately it has the same owner as Nakheel who couldn't / doesn't want to pay its upcoming commitment for Nakheel. Would anyone here borrow mony to a company with a unreliable owner?

[oryxbollocks]

"The Dubai government has proposed a delay of debt repayments after property developer and investment company Dubai World requested a ‘standstill agreement’ with its creditors.

Dubai World owes $59 billion of Dubai’s $80 billion debt and has assets including stakes in MGM Mirage and Standard Chartered Bank. The debt is material enough to the Dubai economy for the government to intervene and propose the delay.

Dubai is one of the seven emirates that make up the United Arab Emirates (UAE) in the Gulf region. Abu Dhabi is the strongest financially as it holds 8% of the world’s oil reserves and they have already begun supporting Dubai by buying $5 billion in bonds yesterday.

Dubai has been running a ‘build it and they will come’ approach to developing their economy. There have been major developments such as a palm tree shaped island and the world’s tallest building proposed (which usually means that a country or company is heading toward a downturn).

As you would expect, the largest creditors of the company are other UAE banks although Bloomberg reported that a number of European banks such as HSBC, Barclays, Lloyds and Royal Bank of Scotland have an unspecified exposure. Shares in these European banks were down heavily overnight.

Credit markets up to this point have assumed that Abu Dhabi would step in if required. However, Abu Dhabi has made it clear that they are not going to bail out Dubai World. We expect that Abu Dhabi will not allow Dubai itself to default as this would destabilise the country politically.

As a further undercurrent, apparently there has been considerable pressure from Abu Dhabi and the US on Dubai to fall in line with their trade polices with Iran (Iran is a major Dubai trading partner). There is no doubt Abu Dhabi will be using the crisis as a lever and will make Dubai absorb considerable pain but we expect at some point they will back Dubai.

We expect that Dubai will enforce sale of Dubai World offshore assets. There will also be pressure on Dubai to sell other assets such as the global portfolio of port operators owned by company DP World.

It will take some weeks for the markets to digest this development and investors will be looking for confirmation that Abu Dhabi will back Dubai." Ord Nexia Financial Services Newsletter 27 Nov.

[ferris]

In Dubai, there are no assets. That's not true.
I think that AUH signalling support for "selected assets" means legitimate govt infrastructure. Power, water etc. are legitimately "debt entities" (ie. it is usual for a govt to build a power station or a dam etc, funded by debt which is paid off long term by charging for electricity, water etc at an appropriate rate, and you are talking 10, 20 30+ year time frames). Building islands off the coast in an orgy of property speculation- i think these sorts of debts will be allowed to sink. The 'asset' doesn't cover the debt, and the activity itself is questionable on so many levels. The quandary is the intertwined nature of the govt and these enterprises. AUH have clearly signaled they are not going to cover everything. Hence, DW wont be able to borrow money anywhere for a long long time, so AUH will be the only available banker. It's going to be an interesting process. It's going to work out great for AUH. Im certain the sovereign fund managers will be eying various assets with interest.
A heady mix of bargain hunting and politics. Interesting times indeed.

[Jet II]

Nobody, no bank, is ever going to borrow a Dubai owned company a EUR,USD,RMB again if DPW/Nakheel defaults.

What makes you think that Dubai is any different to any other country in the world? - I've lost count of the amount of countries (and nations) around the world that have defaulted on loans but life has gone on.

Mexico, Russia and Argentina all defaulted on sovereign loans (Nakheel is not even sovereign), yet the worldwide banks soon went back to loaning money to them. GM defaulted 6 months ago - are you saying that nobody would ever loan to them again?.

there is an awful lot of hysteria around this weekend - must be Eid or something ;)

[LLuke]

I know your opininion is as valuable as mine and I know that there are assets in DXB, just the value will be difficult to predict. In an empty city the value of a powerplant is zero. Expected future drop in value will be taken into account.

It won't only be DW that can't get loans. Any company from the same owner will be marked contaminated and have major difficulties renewing loans. Anything related to estate in Dubai will have major problems obtaining/renewing a loan. Anything that doesn't represent a clear asset can be used for guaranteeing a loan. Again just my opinion.

[ferris]

What makes you think that Dubai is any different to any other country in the world? The big difference is that Dubai isn't a country.

the other big difference is that Dubai has already done the rounds of trying to get finance, and the result of that was the recent announcement. It is a statement that already no one is lending them (DW) money (in the quantities required).

LLuke- I agree with your second paragraph, as I have clearly stated. AUH is the only available (large) lender.

[LLuke]

Only thing I just don't get; why did Abu Dhabi let this happen? They did calculate loss/win with all scenarios? Short of liquidity? Historical background?

There will be a lot of uncertainty for everybody in Dubai upcoming weeks.

[Jet II]

The big difference is that Dubai isn't a country.

the other big difference is that Dubai has already done the rounds of trying to get finance, and the result of that was the recent announcement. It is a statement that already no one is lending them (DW) money (in the quantities required).


So then they do a GM and liquidate Nakheel - I agree that would have a negative effect on the other property companies but the idea that after that nobody would lend a cent to anyone in Dubai is a bit far-fetched.

As the boss at HSBC said today - “I am confident that the leadership of Dubai and the UAE will overcome any short-term issues they face – which appear to have been somewhat sensationalised”

[ferris]

but the idea that after that nobody would lend a cent to anyone in Dubai is a bit far-fetched. A straw-man argument. I'm not going to repeat myself over and over, but what do you think the "debt holiday" request was all about? The bosses were widely reported as doing the rounds in London last week trying to garner a loan to cover this bond falling due in December. They failed. That means NOBODY WAS PREPARED TO LEND them money in the required amounts. Will individuals in Dubai be able to lend a cent? Of course. Can DW loan billions in the world markets? Clearly not.

As to quoting the opinion of the head of HSBC- why bother? What would you expect him to say? :rolleyes:

[Marooned]

As the boss at HSBC said today - “I am confident that the leadership of Dubai and the UAE will overcome any short-term issues they face – which appear to have been somewhat sensationalised”


He has to be confident as HSBC is one of if not 'the' most exposed... what else would he say, "we're scr*wed!"

AUH have the same problem of assessing and identifying the assets worth salvaging from those that need to fail. To give a blank cheque as many expected would have been to give money to the thieves and corrupt who created the mess.

[Jet II]

A straw-man argument. I'm not going to repeat myself over and over, but what do you think the "debt holiday" request was all about?

What do you think any business who cannot pay its debts does? :rolleyes:

What did you think GM did before they went bust?

Nakheel is bankrupt everyone knows that but this daft idea that if it is allowed to go to the wall nobody would ever lend to Dubai ever again is plain fantasy.




As to quoting the opinion of the head of HSBC- why bother? What would you expect him to say? :rolleyes:

You dont think that all this has been sensationalised? - all the postings here and in the media about Dubai sinking into the desert?

You are joking surely? :rolleyes:

[SOPS]

wow............interesting thoughts

[Dune]

Jet II:

The one thing you are not understanding is not the issue of whether Dubai would or would not be able to get credit.......you can always get a loan. The key is how much is it going to cost you?

Since you referenced Argentina as a "model" of success following default previous, here is what happened there in late 2001 when they defaulted:


Argentina bond yields hit 42pc

By David Litterick
Published: 12:01AM GMT 11 Dec 2001

ARGENTINA'S MerVal stock index fell 7.58pc to 235.12 last night as the country's risk premium on bonds jumped amid growing concerns about a possible default on debt payments.

The yield on Argentine bonds is now 42.06pc above that of comparable US Treasury bonds.


The yields on Russian bonds during their default in 1998 went to similar levels and took down Long Term Capital Management in the process.

I am not suggesting the UAE would be in default; however, because of the "close association" the government has with these companies, it would be natural to assume if the government does nothing to alleviate this situation the markets will use a very "broad brush" when loaning funds to any entity in the UAE.

Companies would get hit very hard on bond issues but also banks (and therefore mortgages rates, car loans, personal loans, etc).

I would hate to see the UAE property market with 30% mortgages rates; if you think the decline so far has been spectacular......you ain't seen nuthin yet! :eek:

[jethrotull]

What did you think GM did before they went bust?



For heavensake GM manf cars and also has interests in high end technology, one of which is alternative fuels. GM has assets worldwide that have credible value.

Nakheel is a CLEVER BY HALF boiler room operation. They have created, don't know how many 100s-1000s of sf-ft of real estate in the sea that nobody is interested in buying, except for corrupt politician from the 3rd world, single-mum sallys from liverpool/munchester and the worldwide mafia.

Has anybody considered, if DW is declared insolvent, the cost of ensuring that the PALM, WORLD and whatever, does not turn into a geo-biological (my term) disaster. The Island have some huge maintenance costs.

And don't equate USA and UK with DXB. USA and UK have their currency - reserve currency of the world- to fall back upon, they can print to deflect some or all of their debt, ofcourse at a cost, but then still print money. DXB has diddly squirt.

Pray AUH does not exit the union. I am sure that is one of their main bargaining chips against the northern paupers.

[Wiley]

What might save Dubai is the old saying (I think) first coined by Rupert Murdoch when he was going through a rough financial patch (and when a million dollars was a LOT of money). "You owe the bank a million and can't repay it, you've got a problem. You owe the bank a hundred million and can't repay it, the bank's got a problem."

[Ali Baba]

DUBAI WILL SURVIVE,59$ BILLION IS NOTHING TO DUBAI, keep talking.

[grizzled]

Ali Baba,

I take it you're neither an economics major nor a student of history.

[Brenoch]

It will be one massive ghost town. On the positive side though, maybe the traffic situation will improve slightly.

[Dune]

For those who might be interested, here is the link to the Dubai exchange. Markets open @ 0600 UTC.


Market@Desktop (http://www.dfm.co.ae/marketwatch/default.aspx)

[Dune]

Interesting geopolitical view on all this.

Note the analysis is from the U.S. so it is somewhat bias as well as some of the info might not be 100% accurate (do we really have 300 flights/week to Iran LOL!). Having said that, the "angle" is interesting.


The Geopolitics Of The Dubai Debt Crisis: It's Iran vs. The United States
John Carney|Nov. 28, 2009, 6:36 PM | 8,217 |26
PrintTags: Financial Services, Dubai, Financial Crisis, Markets, Wall Street, Economy, Banks, Asia, HSBC


The role of Iran may be the most overlooked in the Dubai debt crisis.

Of all the states of the United Arab Emirates federation, Dubai has maintained the closest ties to Iran. Indeed, as international pressure has built on Iran over the past decade, Dubai has prospered from those ties. It provides critical banking and trade links for Iran, often serving as the go-between for European or Asian companies and financial firms that want to do business with Iran without violating international sanctions.

Abu Dhabi, the wealthiest member of the UAE and a close ally of the US, may be pressuring Dubai to limit its links to Iran. Indeed, this pressure may be behind statements coming from Abu Dhabi about offering “selective” support for Dubai. Companies or creditors thought to be too linked to Iran could find themselves shut out of any bailout.

The United States government, which has remained somewhat taciturn throughout this crisis, is no doubt encouraging Abu Dhabi to apply this pressure. In part because of Dubai’s connections to Iran, US financial institutions are not among the biggest creditors to Dubai World.

It’s not all Iran, of course. The problems in Dubai, the member of the United Arab Emirates that has found itself in a dire financial crisis, closely mirror those behind the global financial crisis.

Over the past decade, the country attempted to diversify its economy away from dependence on its declining oil reserves—and largely succeeded. But, like a Wall Street investment bank attempting to overcome the decline of its traditional businesses by becoming heavily invested in leveraged real estate products, Dubai accumulated huge debt obligations—estimated to amount to some $80 billion. Much of Dubai’s assets were dependent on tourism, shipping, construction and real estate—which have been in trouble during the global economic downturn.

Like its fellow members of the UAE, Dubai is ruled by an expansive royal family. In this case, they are called Al Maktoum family. Exactly what counts as the personal property of ruling family and what is government owned in Dubai is more than a bit fuzzy. The Dubai government owns three companies: the Investment Corporation of Dubai; Dubai Holding, which is run by Mohammed Al Gergawi; and Dubai World, which is run by Sultan bin Sulayem.

Abu Dhabi has been trying to put pressure on Dubai to cut ties to Iran. The split between Abu Dhabi and Iran is in part rooted in an older territorial dispute, fear of Iran’s nuclear ambitions, religious differences between Shiites and Sunnis, and—importantly—Abu Dhabi’s close ties to Washington, DC.

The UAE is close to reaching a nuclear power cooperation deal with Washington, a move that many regional experts say would challenge the traditional Saudi hegemony in the Gulf. One sticking point in the negotiations with Washington has been concerns that Dubai could share US nuclear technology with Iran.

This power struggle between Abu Dhabi and Saudi Arabia is also playing a role. In May, the UAE May pulled out of a proposed Gulf monetary union over Saudi insistence that it would host the regional central bank.

Dubai, which is a very open and tolerant place compared to Iran, is viewed by many Iranians as a place to let their hair down. It has a thriving Iranian ex-pat community. Iran is Dubai airport's top destination, with more than 300 flights per week.

More importantly, Dubai is a major exporter to Iran and a major re-exporter of Iranian goods. The trade between Iran and Dubai is one of the principal sources of Tehran's confidence that it can survive US-led sanctions. Iranian investment in Dubai amounts to about US $14 billion each year. US intelligence officials have long suspected that the Iranian government uses Dubai based front companies to get around sanctions.

Some of the banks said to have the largest exposure to Dubai debt have in the past been linked to Iran. Notably, HSBC, BNP Paribas and Standard Chartered came under investigation and pressure from US authorities in recent years to cut ties to Iran. Some US officials have quietly protested that these banks just shifted to doing business with Iran through Dubai. The US may want to see these creditors take losses from their Dubai exposure.

Make no mistake: the US government does not want to see the financial ruin of Dubai. Apart from its ties to Iran, Dubai is widely viewed as a model Islamic country. It has a relatively clean government, and there is a remarkable level of religious tolerance and progressive attitudes toward women for the region. American diplomats have held up Dubai as their model for a new Baghdad—progressive, tolerant, and capitalist.

What is most likely happening is more nuanced. The US and Abu Dhabi are hoping to use Dubai’s financial troubles as a way of finally severing the close ties to Iran. For years, Dubai has enjoyed the benefits of walking the line between its military and economic alliance with the US and economic benefits from banking and trade ties to Iran. The price of a bailout from Abu Dhabi may be having to finally choose to give up the Iran connection.

[Marooned]

Interesting angle as you say but perhaps not that far fetched. Just coincident that Iran has announced that it will increase its Uranium enrichment program?

Dubai has been under pressure for some time to provide account details of individuals and companies in the past that have been suspected of terrorist links. The UK foreign office even increased the security threat in Dubai last year which was seen as a tit-for-tat response to Dubai's lack of cooperation.

The timing of the debt default announcement, the computer problems on the FTSE limiting the fallout... there is more to this than we know but Dubai is going to be cut down to size one way or another.

[Dune]

Things looking up a bit this morning. The UAE finally announced it would provide support to local and international banks exposed to this:

U.A.E. Eases Credit After Dubai World Debt Delay (Update1) Share Business Exchange*******Facebook| Email | Print | A A A
By Arif Sharif

Nov. 30 (Bloomberg) -- The United Arab Emirates’ central bank eased credit for lenders and said it “stands behind” the country’s local and foreign banks as they face losses from Dubai World’s possible default.

Markets from Asia to the U.S. fell last week after Dubai World on Nov. 25 announced that it was seeking to delay loan repayments. Dubai’s stock markets will trade on Monday for the first time since the news. Banks will be able to borrow money from the regulator for half a percentage point above the three- month local benchmark interest rate, the Abu Dhabi-based Central Bank of the U.A.E. said in an e-mailed statement yesterday.

“This is a timely pre-emptive move from the central bank,” Ahmet Akarli, an economist at Goldman Sachs Group Inc. in London said in a note to investors. The central bank is “ensuring that local markets are operational” and banks “have access to ample liquidity.”


In addition they just announced a coupon payment that was due today from JAFZA will be paid as scheduled:

Debt-laden Dubai World's unit Jebel Ali Free Zone Authority, or Jafza, faces on Monday a coupon payment on a 7.5 billion U.A.E dirham ($2.04 billion) Islamic bond in the first key test of whether it will default.

The Islamic bond, or sukuk, was issued in November 2007 through a Cayman Islands-registered company called JAFZ Sukuk Limited and pays 130 basis points over the six-month Emirates Interbank Offered Rate, according to Zawya.com.

The coming coupon payment is estimated to be between AED125 million and AED135 million, according to analyst calculations.

It appears to me Dubai/Abu Dhabi "tested the waters" on the timing and method they used to begin this unwind process. They watched the response over the past 4 days and it obviously has become apparent to them they are not going to get away with a "stand back and watch it happen" strategy.

I would guess Abu Dhabi is going to backstop the bank losses as they need the banks to provide lending facilities going forward. However, it appears to me they are "culling" the crap companies from the Dubai portfolio and are going to put the losses on investors in these companies. Selective but actually not a bad strategy at this point.

It will be interesting to see how the DFM does today and how much FDI is removed.

In any case, in my opinion this is a game changer for the future of Dubai. The next 6 months will be VERY interesting.

[SOPS]

Dubai market is down 6% on opening. I think, though I could be wrong, if it drops 10% that trading has to be stopped.

[Dune]

Make you wonder if these clowns will ever learn:


By ANDREW CRITCHLOW

DUBAI -- The Sunday London Times newspaper was removed by authorities from shelves in the United Arab Emirates on Sunday amid intensive reporting of Dubai's debt problems, an executive at the paper said.

The National Media Council ordered the paper blocked by distributors without providing a reason, an executive at the paper in Dubai told Zawya Dow Jones.

The Sunday Times edition available in the U.A.E. on Nov. 29 featured a double-page spread graphic illustrating Dubai's ruler Sheik Mohammed bin Rashid Al Maktoum sinking in a sea of debt. The Times wasn't given a reason for the block, or a timeframe when it will be lifted, the executive said.

A government official in Abu Dhabi, the capital of the U.A.E., said that the picture of Sheik Mohammed, which accompanied a story entitled: The sinking of Dubai's dream, was "offensive."

Under the U.A.E.'s media code, publications are prohibited from criticizing the sheikdom's rulers. Local media and government officials have criticized international press coverage of Dubai's debt crisis. Markets around the world fell last week after the government requested a debt standstill for one of its biggest conglomerates.

Earlier this month Dubai's Sheik Mohammed told reporters gathered at an investment conference in the city to "shut up" and stop criticizing the emirate and its crucial relationship with Abu Dhabi.

Dubai is struggling to deal with it debts estimated to exceed $80 billion.

The Sunday Times is part of News International, a unit of News Corp., owner of Dow Jones & Co. The Times and The Sunday Times are published in the U.A.E. through a local partner SAB Media.

Write to Andrew Critchlow at [email protected]

[GMDS]

by Ali Baba
DUBAI WILL SURVIVE,59$ BILLION IS NOTHING TO DUBAI, keep talking.


by grizzled
Ali Baba,
I take it you're neither an economics major nor a student of history.

Well, as UBS was going down the drain, it needed 60 billion US. The Swiss governement provided guarantees for that and the bank is afloat again, paying bonusses and now threatening to leave Switzerland because of stricter banking laws (so much for gratitude).
During that time no one was considering Switzerland as going bancrupt, allthough factual owner of a corrupt bank for a limited time.

The same applies here. 60 billion seems like a lot, but its just one company that can be left to die miserably. With empty islands slowly giving themselves back up to the sea as a reminder of local megalomania.
Dubai will survive. It will shrink and its rulers will have to kiss other rulers back sides, but it will survive, because the region can't afford to let it go down. They know they'd join the party sooner than later.


1. Suffering will be burdened on investors of DW, not on the rulers themselves (any one invested in property from Nakheel lately?).

2. The rulers kissed today will be the ones kissing back sides in the future (they are all megalomaniacs and as such incapable of learning)

[Vercingetorix]

Grizzled
Thoughtful posting.
P.S. I take it that you are up to date re the GCAA infighting?

Dune
Insightful posting.

:ok:

[grizzled]

Verc: check ur PMs

Dune: Agree with verc. Appreciate your posts.

[toby320]

hi, pruners very interesting posts but does some one here knows what does this afect for those that we are waiting for interview in emirates??:bored:

tks
toby.

[newscaster]

They are paying for their greed, its a wake up call for change, raping the sea was their worst crime.

[Jet II]

The intrinsic unimportance of Dubai World and the important wider message it conveys (http://blogs.ft.com/maverecon/2009/11/the-intrinsic-unimportance-of-dubai-world-and-the-important-wider-message-it-conveys/)

Probably not of much interest to some posters as its not hysterical enough ;)

[fractional]

...raping the sea was their worst crime.You right newscaster! These guys should have gone inland and make it greener and liveable instead.
However, this next statement as reported by the FT today really surprised me if at all true:
Abdulrahman al-Saleh, director general of Dubai’s department of finance, said in an interview with Dubai TV that creditors had to take responsibility for their own lending decisions and differentiate between advances to companies and the state. He also said global markets had overreacted to the news.

[OrryFace]

London Evening Standard 30 Nov 2009:

In a statement which spooked investors, Abdulrahman al-Saleh, director general of Dubai's department of finance said: “Creditors need to take part of the responsibility for their decision to lend to the companies.

“They think Dubai World is part of the government which is not correct. The government is the owner of the company but since its foundation it was established that the company is not guaranteed by the government.”[:ugh:]

“The form of the proposed debt restructuring [at Dubai World] could increase the likelihood of downgrades of bank financial strength ratings for the UAE banks are already on review.”

Moheiddine Kronfol of Algebra Capital said: “They [the Dubai government] have confirmed there is going to be a restructuring and are doing what they can to differentiate between the government and the companies. It doesn't take away from the fact that you have a major potential event that is unravelling.

“The fact that you still don't have the facts means this is a fluid situation.”

Mohammad Ali Yasan of Shuaa Securities said: “We shouldn't expect anyone to bail anybody out.
“The banks that are the debtors need to come and sit with the government,” he added.

[trimotor]

Where is it cast in stone that taxes can't be inroduced?

I rather thought the opposite - the mechanism exists, but is unused, no?

[crewmeal]

How many more upmarket 4x4's will be dumped at the airport car park? Saw an news clip from Sky yesterday showing '6 months dust' on a jeep, complete with graffiti

[Neptune262]

LR3 - Like it!

They always talked about building an artificial reef just for surfing - who would have thought it could be one of the Palms!

Lets have the public take back all the beaches that have been lost for development!

On a more seriousness note - it should be an interesting couple of weeks ahead as they try and save face and sort this mess out!!

Cheers!!:ok:

[donpizmeov]

Dubai holds out as debt crash nears

DUBAI, GLOBAL FINANCIAL CRISIS, NAKHEEL

Glenn Dyer writes:

Dubai's government has told banks owed money by its major business arm, Dubai World, and its property group, Nakheel, to go jump.

It wasn't so much an act of defiance, more telling banks the reality of the situation into which they lent money. Dubai World and Nakheel may be government-owned, but they are not government-guaranteed.

And like grown-ups, Dubai World and Nakheel have started restructuring talks with their banks covering $US26 billion of debt, including the $US4 billion Islamic loan due on December 14.

The proposal involves Dubai World and subsidiaries including Nakheel World and Limitless World while excluding units such as Infinity World Holding, Istithmar World and Ports & Free Zone World, "which are on a stable financial footing", Dubai World said in a statement. The amount includes about $US6 billion of Islamic bonds sold by Nakheel. They are the ones Nakheel halted trading on earlier on the local exchange.

"It is envisaged the restructuring process will be carried out in an equitable way for the overall benefit of all stakeholders," Dubai World said in the statement, reported on Reuters, Bloomberg and Dow Jones wires.

Of course, there's a downside for the government and the Royal family that owns Dubai (the Maktoums) in that their grandiose visions for the emirate as a financial centre and entrepot will be dead for a year or three, or until the next generation of eager bankers arrive with no memory and oodles of money and a need for bonus-boosting deals.

The Dubai government said after markets had fallen by about 7% on Monday that it was not responsible for the debts of its flagship conglomerate, and offered nothing much else on last week's call for a six-month standstill on billions of dollars in debts owed by Dubai World and Nakheel.

The government's defiant stand came in a TV interview by Dubai's leading finance official who said:

"Creditors need to take part of the responsibility for their decision to lend to the companies. They think Dubai World is part of the government, which is not correct," said Abdulrahman Saleh, director general of Dubai's department of finance. He said that banks did not need extra liquidity and that the market reaction to Dubai World's restructuring had been overblown.

The Dubai World statement came later, but hasn't been posted on its website.

Indeed, other commentators have pointed out that the 2006 prospectus from Nakheel for a near $US4 billion Islamic bond raising did point out that the offering was not guaranteed by the Dubai government.

The Financial Times blog, FT Alphaville had a post last week with the structure of the Nakheel Islamic loan (called a sukuk). It’s a structure that would not be out of place in Barry Jones' now-famous Knowledge Nation Spaghetti special of a few years ago. Anyone who leant on something so complicated and claimed to understand it, deserves to lose money.

DB World and Nakheel are private companies whose share capital is owned by the government, which therefore limits the government's obligations to the capital of the two groups.

The Dubai government could have also reminded banks that they had a duty to "know their customer"; a banking adage that was jettisoned years ago, but again has been made relevant by the rorts and frauds in the subprime markets in the US and other markets (Bernie Madoff, for example).

Nakheel's move to halt trading on $US5.25 billion of its bonds has trapped investors who couldn't sell last week because the markets have been closed. That will further annoy the nervous nellies among the banks who believe they should have a free "get-out-of-jail" pass by being paid out by the government.

But if you lend money, you have to be prepared to lose it, no matter who owns the borrower. For years no one thought that Lehman Brothers would go bust, or Fannie Mae or Freddie Mac would be taken over by the federal government, which most investors though already owned them.

In fact some commentators have pointed out parallels between Dubai World, Nakheel and Fannie and Freddie.

The Financial Times assessed the response in these terms in its Lex column:

"The problem is is that global investors see the borrowers' woes as a microcosm of the emirate’s. The latter’s failure to communicate decisively and promptly with the capital markets on which it relies has dented its chances of becoming a credible financial services hub over the coming decade. Still, the United Arab Emirates central bank’s liquidity support for local and foreign lenders should give regional banks a lifeline for now."

Dubai is now just an isolated outbreak, but watch Greece for a much bigger blow. There's lots of talk of the European Commission and ECB refusing a bailout, except on tough terms, and eventually the International Monetary Fund coming to do the dirty work. More losses for banks. Greece needs to roll over and raise close to $US70 billion of loans in 2010. Fat chance. More problems for banks.

[Dune]

Of course, there's a downside for the government and the Royal family that owns Dubai (the Maktoums) in that their grandiose visions for the emirate as a financial center and entrepot will be dead for a year or three, or until the next generation of eager bankers arrive with no memory and oodles of money and a need for bonus-boosting deals.

Dubai is now just an isolated outbreak, but watch Greece for a much bigger blow. There's lots of talk of the European Commission and ECB refusing a bailout, except on tough terms, and eventually the International Monetary Fund coming to do the dirty work. More losses for banks. Greece needs to roll over and raise close to $US70 billion of loans in 2010. Fat chance. More problems for banks.


In my mind these are the 2 issues that everyone must understand and the reason why I titled this thread "Goodbye Dubai" (and why I chose to contribute way more than I normally do to Pprune). I chose that title carefully as I hope it is a wake up call for those who have been asleep the past 2 years.

1) Irrespective of the "negotiated settlement" Dubai does with this first default (remember this is just the first of series of approximately 8 huge upcoming bond repayments due over the next two years), if neither Dubai or Abu Dhabi doesn"t provide a backstop (which they have stated to this date they will not do), I expect further FDI (Foreign Direct Investment) funding to the UAE (mostly Dubai but also Abu Dhabi as a fallout) will come at a VERY steep cost in the future. No funds (or extremely expensive funds) = no growth.

"Dubai" as we have come to know it over the past decade (based upon growth, GDP, real estate, Emirates expansion, etc, etc, etc ) is finished. Plain and simple. Goodbye Dubai. I can't be any more clear.

2) Irrespective of the above, the world economy still teeters on the head of a pin. The Dubai story is just small potatoes as to what might come if risk aversion kicks in and everyone withdraws their risk capital. There are probably 6-8 markets I could list that are many times bigger than Dubai that could be next to fall from the catalyst of the Dubai default. Note the Dubai/Abu Dhabi markets have detached themselves from the rest of the world the past 2 days (world market up, UAE markets collapsing). Watch the next 2 weeks; it will be the "tell" as far as I am concerned.

Having said that, I want to make it clear this is not the end. Dubai will survive/ the UAE will survive/ Emirates will survive. What I am saying is for those of you who have come to Dubai over the past 6 years.....do not expect anything like you have experienced to date as being "normal".

I have lived here for a considerable time; I am looking forward to the empty roads, empty beaches and half full flights on EK to get my wife on board for the occasional flight outstation. Many of you might not be in a similar financial position depending upon how you have conducted your "fiscal life" during the good times here the past few years. Those who have been "savers" while living here will relish this as the future "good times" in Dubai. Many will suffer; those that have huge CC debt and drive new Range Rovers.....good luck to you, I have no sympathy.

Those that are hard working EK F/O's who brought their families here looking for the "promise land" and have been frugal; I salute you. It is you who I most fear for and discuss this issue with as we go through the next few years (if you've flown with me; you know who I am).

I expect I will have little to do with this thread going forward unless I feel I have something to offer. Everything here has been just my opinion.....for what it is worth.

[S.F.L.Y]

Don’t moan, look closer to home

by Andrew White ([email protected]?subject=ArabianBusiness.com:%20Don%E2% 80%99t%20moan,%20look%20closer%20to%20home)This email address is being protected from spam bots, you need Javascript enabled to view it on Tuesday, 01 December 2009 John Meynard Keynes had it about right. “If I owe you a pound, I have a problem,” he once said. “But if I owe you a million, the problem is yours.”

Nowhere has that been more starkly illustrated than in the announcement this week that the Dubai government won’t guarantee the debts of Dubai World. The conglomerate owes around $59bn to a string of creditors around the world, and international institutions are scrambling over themselves to try and reclaim cash they presumed was covered by the emirate’s ruling family.

The UK is in a particular panic, as evidenced by the stream of hysterical media reports that have spewed forth over the last few days. Dubai has variously been referenced as an island, a country within its own right, and a landlocked desert oasis. Meanwhile, one esteemed publication speculated that the sovereign state of Qatar was set to sell its stake in carmaker Volkswagen, in order to bail out its ‘fellow emirate’.
Geographic gaffes aside, the Fourth Estate has gone feral. Denigrating Dubai as a “monument to vanity and greed” (The Daily Mail), it is attacking the emirate with the kind of venom previously reserved for the ‘fat cat’ banking executives accused of pocketing huge bonuses even during the worst days of the credit crunch.

Such vitriol can perhaps be attributed to the fact that thousands of Brits have lost their jobs in Dubai as a result of the downturn. It has been a brutal 2008, and there won’t be a Dubai-based reader who has yet to see a friend or colleague booted back to Blighty.

This aside, the feeding frenzy may also be attributed to the fact that UK banks have the largest exposures to the UAE from among international banks, estimated at $49.9bn. This represents no less than 40 percent of foreign banks’ total exposure to the Emirates.

HSBC and Standard Chartered are the most exposed, with $17bn and $12.3bn in loans to Dubai World Group, respectively. And not far behind come Barclays and RBS, each of which has extended significant credit to the conglomerate.

If you would believe the more splenetic coverage, each of these venerable finance houses has been duped by a mean-spirited state-owned conglomerate that implied government support but never really intended to settle its debts. Sucked into the sandpit, the noble Brit bankers have been robbed blind in the desert and left for the crows.

Except some of the aforementioned institutions have previous form; it’s not been a vintage couple of years for the bastions of British banking.

In March, HSBC absorbed losses estimated to be somewhere between $30bn and $62bn as it closed down the branch network of its HSBC Finance arm in the US.

Standard Chartered and Barclays will each have written down billions of dollars of toxic debts before the year is out. And in the case of RBS, we should not forget that a series of hideous errors of judgment have left it all but nationalised – the UK government presently owns an 80.4 percent stake in the troubled lender.

So rather than wail in the direction of Dubai, why doesn’t the UK’s enraged establishment take a closer look at why its banks were happy to take risk after risk, ploughing money into a series of ventures that – as with any investment – came with promises of vast returns, but no cast-iron guarantees?

Dubai World is in the process of taking responsibility for its loss-making operations; it’s a process that will be painful, drawn-out, and humbling. So why don’t the UK banks that have so over-exposed themselves take a little responsibility too? They came here to make money – and mountains of it – while ignoring the risks inherent in an emerging economy such as Dubai’s. How’s that for greed?

The Dubai debt story pales in comparison to the global exposure readily accepted by British institutions as they hunted for profits in the good times. At such levels as are at stake in Dubai, international banks’ exposures are easily manageable. They are a drop in the ocean compared to the toxic assets wiped out during the global crisis.

A look at the ticker will tell you that the share price of HSBC has already started to recover, with Barclays and Standard Chartered already recording smaller losses than they did during the previous week. Dubai might have held the headlines this week, but equity markets outside the region have already settled.

Unlike its counterparts in the UK, The New York Times has moved on, and is looking for the next ‘debt bomb’ to explode (its tip is Russia). The Dubai World announcement may have proved a PR problem, but the emirate isn’t the first to have caused ripples in the global economic pond, and it won’t be the last.

It will be interesting to see if the UK press marches on Moscow with quite so much glee as it has stuck the boot into Dubai.
Don?t moan, look closer to home - Politics & Economics - ArabianBusiness.com (http://www.arabianbusiness.com/574958-dont-moan-look-closer-to-home?)

[rascott3888]

I have been trying to find an appropriate word for credibility suicide.

So much has been written in the media over the last 6 days. Some of it nonsense - Mr Liddle in the Times and Charlie Brooker in the Guardian on one side and on the other side the Crisis, What Crisis local media.

But, wouldn't it be nice if just one person in the Dubai hierarchy could simply say - yes, we could have handled this better....and we will do better next time.

I liked the Economist's line - "In an autocratic regime like Dubai, bad news acquires an extra coating of sugar with each step it takes up the hierarchy."

[S.F.L.Y]

"In an autocratic regime like Dubai, bad news acquires an extra coating of sugar with each step it takes up the hierarchy."

This shows they are good learners. During the past 10 years Dubai only incarnated what the capitalist world was dreaming about. Those who are criticizing today were the firsts to believe in this model, they just don't like today's picture as it's nothing else than their own reflection. Everyone has to pay its share of irresponsibility.

[hot 'n dusty]

Good luck telling an Arab, leave alone a Royal Family member, that he was wrong!!!:yuk:
( you will be on the next plane out with a few pages missing from your passport!):mad:

Everything in the Logic Free Zone is about saving face!!!
And as you rightfully said the recovery WILL be messy and long fought.

Dubai is, and has been for a long time, in S^&T!! because Abu Dhabi has been bailing them out for a lot longer than the average guy realises.....It has only now come to be big news because they can no longer hide the fact... all the world banks are realing under the pressure of the world economic crisis and can no longer allow the "Fat Cats" to make empy promises of paying $Billions in debt by keeping the oil price low...instead of just paying up!

This is the tip of the Ice burg and the sand castles are going to come crashing down soon!

[S.F.L.Y]

Good luck telling an Arab, leave alone a Royal Family member, that he was wrong!!!http://images.ibsrv.net/ibsrv/res/src:www.pprune.org/get/images/smilies/pukey.gif

Especially when you were the one guy who advised and encouraged him for years.

[ferris]

Quoted from the news wires today "...Sheikh al-Maktoum criticised investors reaction saying "they do not understand anything" & the UAE minister of economy said "the UAE has already taken concerted efforts to meet the challenges arising from the financial crisis". "

On the same wire report "...DUBAI & ABU DHABI BOURSES fell heavily again Tue (ahead of the National Day break), losing 5.6% & 3.5% resp adding to the 7.3-8.3% declines noted Mon as the fall out from the Dubai World repayment 'standstill" persisted...." and "..Dubai's real estate sector fell 9.2% & finance & investment sector lost 7.5% (9.8% & 5.6% in Abu Dhabi resp)..." especially interesing as the bourse has artificial 'chokes' to limit single day losses to 10%.

[grizzled]

Anybody wannna buy a few thousand acres of sand in Jebel Ali? Complete with six very long parallel paved strips of land. Dragstrips perhaps? RV/Caravan park (world's largest of course)?

The possibilites are as endless as the sand. ;)

[PHAROH]

this SAND "LAND" is not ours never will be , i think many of us share the fact that we are here as a step on the way,we know it they know it , thats why there is no real Infrastructure Planning ,
No matter what they do to avoid the financial crisis depression nothing will change ,
the laws here should be changed to fit everyone & protect everyone they should think building a real community where everyone share the responsibility & share in the profit as well ,
if they want to present this place as a modern module"the one & only"
a lot has to be changed.

[S.F.L.Y]

if they want to present this place as a modern module"the one & only"
a lot has to be changed. Do you think Nevada indians are responsible for developing gambling and prostitution in Las Vegas? The economical model that you see in DXB is all but an Emirati cultural product.

[millerscourt]

Saw the following letter in the Mail from Maurice Flanagan.Emirates Airline

I spend a lot of time at Dubai airport and have not seen any abandoned cars- and the Embassy here tells me more British are arriving than leaving. Dubai has many substantial, profitable businesses which,whether or not government owned,operate as unsubsidised,unprotected,private sector enterprises. Dubai hotels and Emirates aircraft are full.

Construction workers here are protected by legislation which serves them better than the truly appalling conditions afflicting thousands of immigrant workers in England.

Its British-curriculum schools are equal to the best in England,its Christian churches flourish,on land given by the Government. In Dubai's malls we will soon see Christmas trees,hear carols and be able to buy Christmas cribs-try that in Birmingham.

Maurice Flanagan


Guess his last paragraph is true certainly.Don't know about the rest as have not been in Dubai for a few years now.

[Wiley]

The ski run at MoE is importing a Santa Claus from Australia (where it's near 40 degrees at the moment in places).

(Dare I say it, "...as you do.")

[145qrh]

I doubt the nursing home let Maurice into the car parks at Dubai T1 2 or 3, still plenty of dusty autos there, same in most neighbourhoods.

Dubai polis admitted to several thousand cars at the impound lot a few months ago. Good deals to be had on auctioned cars.


Workers protection does not bear comment, unless I say "wibble"

Don't get me started on the British Curriculum.

The local authority ,the KHDA (?), now want to interfere in the running of all schools.

Arabic and Islamic Studies to be taught as core subjects, all at he expense of existing tried and tested main subjects.

The reason given is to improve standards, only problem is the schools that are struggling are the local ones, poor standards, large dropout rate before higher education...so the best way to sort it is to bring the other schools down to their level. Pure F@@king Genius.

[Schibulsky]

Hi dude,
do you smoke the same stuff that Maurice is having or do you just copy/paste from Gulfnews:ugh:

If its running well its because of their visionary leaders:ok:
If they fcuk it up...there is always somebody else to blame!! :{

Taking responsibilities was never a part of the "Emirati culture"
That "culture" is defined by greed, slavery, corruption and bigotry :yuk:

[Jet II]

Taking responsibilities was never a part of the "Emirati culture"
That "culture" is defined by greed, slavery, corruption and bigotry :yuk:

So no real difference from your culture then Schibulsky - hey you dont think that makes people all around the world pretty much the same then :rolleyes:

[Schibulsky]

Last time I checked, some responsible leaders in "my culture" were officially blamed in the free press and after admitting the errors they made, most of them got elected out of office. :eek:
Does sound a bit different from Dubai...dont you think?
Better stop comparing an autocracy/cleptocracy with the first world systems:=

[S.F.L.Y]

Taking responsibilities was never a part of the "Emirati culture"
That "culture" is defined by greed, slavery, corruption and bigotry http://images.ibsrv.net/ibsrv/res/src:www.pprune.org/get/images/smilies/pukey.gif

Don't you think those who threw money in insane speculative prospects aren't to be blamed as well? All these debts are based on the failure of developments which were only supported by foreign speculators.

Banks and greedy speculators are not less responsible than the Emiratis in this collective dream. Real Estate speculators demanding crazy ROI are also fueling the big slavery. Do you really think money is growing on trees and that the government owes you the "promised" profits you didn't make in your JBR apartment?

[Jet II]

Better stop comparing an autocracy/cleptocracy with the first world systems:=

So your 'culture' doesn't have 'greed, slavery, corruption and bigotry' then - you really are barking :p

[Schibulsky]

So your 'culture' doesn't have 'greed, slavery, corruption and bigotry' then
Did I say that?:eek:
Greed, slavery, corruption and bigotry is also somehow present in "my culture" but in Dubai its the daily program!
Whereas the crisis in the first world is discussed and somehow dealed with,
the Emiratis are in complete denial and as I said before they will NEVER admit making mistakes...was probably Allahs will anyway :ugh:
Do you really think money is growing on trees and that the government owes you the "promised" profits you didn't make in your JBR apartment?
Did I say that as well? :eek:
Au contraire, my clueless friend, I worked hard for my money that I invested wisely (Whats JBR?:confused:) and I am enjoying it now semi-retired in my own real estate far away from the sandy sh!thole :ok:

[Jet II]

I worked hard for my money that I invested wisely (Whats JBR?:confused:) and I am enjoying it now semi-retired in my own real estate far away from the sandy sh!thole :ok:

must be right boring dump if you feel the need to keep coming onto forums about places you dislike. :ugh:

[MrMachfivepointfive]

I have to agree with you that greed, slavery, corruption and bigotry are somewhat rooted in human nature. But I also have to agree with Schibulsky: While major parts of the world have found ways to deal with these vices and at least marked them as undesirable, the UAE went in the opposite direction and developed them into a form of art - very much like what the Indians did with the British concept of bureaucracy.

[ekpilot]

Greed, slavery, corruption and bigotry

Don't forget arrogance, and above all "incompetence to the highest level". Now we can feel the abuse, threats, disrespect, pressure, and total lack of support from our management. When there was money to cover for all of the mistakes all was good. There is no more money, and they are broke begging for people to bail them out. Today we don't have to say anything anymore. It speaks for itself and shows the real side of the way things are done around here. And even then they tell you it's not their responsibility. So then they can blame someone else for all the collapse. Forget it! From now on it's going to be pay check to pay check because it can all finish tomorrow. That's the new reality now:D Of course they will tell you all is good. But watch your T&C going down the drain. They will remind you that you are lucky to have a job while they abuse you and pocket the bonuses while you get less and less.

Keep discovering:ok:

[S.F.L.Y]

very much like what the Indians did with the British concept of bureaucracy

Of course the Indians are to be blamed when they can't manage to adopt the British concepts... just like in UAE.

Few years ago the greedy expats were fighting like animals to get the best real estate investments only to realize their is no money in the end... of course it's again the Emiratis' fault.

Since it's so famous that Emiratis are irresponsible I wonder how the banks will explain to their clients that they placed their money in the wrong place...

[MrMachfivepointfive]

SFLY,

I arrived in the UAE a long time ago. I rented that wonderful 4 bedroom villa for AED 40k.
When I asked the landlord about future rent increases, he was insulted. An Arab's word is an Arab's word. Shake hands, deep look into each other's eyes, bonding between males and so on.

Something must have happened in between, because just before the real estate furball he was asking for AED400k ( I moved out at 78k) .

I was raised in a city that is considered one of this world's hedonism centrals. Its population dwars that of the entire UAE. Nevertheless the amount of hookers in my home town is about 10% of what I find in DXB alone. Now, draw your own conclusions.

My conclusion: UAE nationals are no better and no worse than any other homo sapiens on this planet. But they have lost the plot. I hope they learn and emerge as better people.

[S.F.L.Y]

Nevertheless the amount of hookers in my home town is about 10% of what I find in DXB alone. Now, draw your own conclusions.

My conclusion is that this place has been made very attractive to all greedy (often corrupted) minds. The morality of its inhabitants equals the morality of its economical system. Don't tell me Bedouins discovered unleashed capitalism on their own...

Otherwise I fully agree with you, human nature is the same everywhere.

[Balthazar_777]

I have been night stopping in Dubai for 15 years. I have many friends living there.

I only mention this so that my comments dont appear naive.

There has always been prostitution in Dubai. As much as most places i have been. CYCLONE, is a good example. But, in the old days, it was at least subtle.

2 weeks ago i was walking from my hotel to the shopping mall, and the main street (one that has a metro station) was full of chinese prostitutes, aggressively selling their wares and in front of families and children. I was shocked.

Sodom and Gomorrah.

Now, we have a place of confusing virtue. The west is despicable. Sex is ubiquitous and greed is rampant. (Oh ****, doesn't that sound like Dubai?)

There is nothing like religion to make a bigotted idiot self righteous.

Dubai will probably survive. But the arrogance may will subside.

[grizzled]

My God.

Logically there are only two possibilities: Either Maurice Flanagan is mentally unstable, i.e. removed from reality somehow, or he is lying. I know those are the only possibilities because I know that what he said in that interview isn't true.

As with many posters on this thread, I know Dubai and the UAE very well. I would say "intimately" but that word is no more appropriate in reference to knowing Dubai than it is to knowing a hooker.

I will leave untouched his utter crap about the hotels and flights, the malls and the schools. I cannot leave unchallenged his comments about workers and their rights. To suggest that “construction workers here are protected by legislation” and that their conditions are much better than “the truly appalling conditions afflicting thousands of immigrant workers in England” is worse than a lie; it’s a denial of the servitude and slavery that are an integral part of what makes Dubai work (or made it work). I use the word “slavery” in a most intentional and considered way. The terms under which construction workers are brought to Dubai, and the conditions under which they live and work, meet the definition of slavery in every way. The fact that the UK, the US, Canada, Australia, Western Europe etc, all refuse to take the UAE to task is both telling and abominable. (And, like it or not, we as ex-pat workers from those more privileged places, must acknowledge our own part in this 21st century slave business.)

The correlation between the USA of the early 19th century, for instance, and the UAE of today is unequivocal. The conditions under which slaves lived and worked on Southern plantations back then can be summarised this way: Landowners and slave-owners treated those people as poorly as they could get away with, whilst obeying what laws there were, and not having their workers die off from disease or injury. Which meant that only basic food, shelter and clothing needs were met. If some workers had better conditions than that it was not because of legislation, it was because of one person’s own morals and decisions. In essence slavery means, in this case, treating people as badly as one can get away with; denying whatever human rights one can successfully deny in a given jurisdiction. The business owner provides only as much of the basic human needs as are minimally required without running afoul of whatever “law enforcement” or authorities that may exist.

In the case of modern-day Dubai what that means is, specifically:
· Twelve hour work days (that’s 12 hours on the job, plus whatever travel time in that big old non-a/c-equipped bus) for a minimum of six days per week, often seven days per week.
· Fifteen to thirty men per three to four bedroom “apartment”. One kitchen. Many little gas stoves on the floor for cooking. One toilet. Which also means sewage lines that back up (yes I’ve seen it, smelled it, walked through it).
· Starting wage of approx 800 AED per month, rising to 1200 after a year or two, and as much as 2000 after 3 or 4 years. Minus a deduction of 10 AED per day for the above accommodation. So, a net income of 500 to 1700 AED per month. (For those not familiar with the “pegged-to–the-US Dollar” exchange rate, it’s roughly 3.7 AED dirhams to one US dollar.) Do the math.
· An up-front payment to a “visa arranger” in the home country of between 3000 and 5000 USD, to be one of the “chosen” who gets to pursue the dream of a better life. Not for one’s self but for one’s family back home. To be paid back in installments whilst working in the UAE. Again, do the math.
· If one is accused of inciting unrest in the labour force, such as a complaint about the above mentioned living conditions (and here it must be emphasised that an “accusation” is all that is required, not any kind of process, or conviction, or even proof) one is deported, after a mandatory three-month incarceration (to ensure that others don’t see it as a way out). After deportation, one must face that “visa arranger” who one still owes a (relative) fortune to. So the only way out of the desperation for these fathers, brothers and sons trying to support their family back home, is often suicide. In which case the family back home is pursued for the money owed.

Compare that to whatever standard you choose – including 19th century USA – and tell me it’s not slavery.

Those conditions are much better in many ways than the desperate lives of the African, Chinese, or East European “working-girls”. Under-age, brought to the UAE under promises of work as cashiers or maids, or office workers.

Lastly, those immigrant workers in the UK, or the US, Canada, etc, can and do get exposure of their situation, and innumerable advocates on their behalf. And thence hearings and investigations. If you tried that same “saviour” role in the UAE you would be very lucky indeed if you were simply jailed for a few months before being deported.

I know whereof I speak. And I would be the happiest ppruner in the world if Mr. Flanagan would debate me publicly. But the chances of that happening are about the same as the Maktoum family giving up their Magic Kingdom to democracy and responsible government.

In conclusion I have to say that I have tried very hard to rein in my emotions whilst typing this. If Mr. Flanagan is of sound mind, yet said those things, he disgusts me.


grizz

[Wiley]

The real story about Dubai (http://www.brasschecktv.com/page/740.html)

You have to wait until 9 min 24 sec into the clip before you get to the meaty bit.

It was filmed a year or two ago, but I think most people living in Dubai would say that the narrator's closing comments, saying that improvements in workers' conditions were just around the corner, would not be true.

[Thridle Op Des]

Saw this in the Daily Telegraph, just to cheer us up.....!

"The bosses of Dubai World have agreed to meet its main creditors next week. The bondholders, which are being represented by Ashurst, are also thought to include some of the world's biggest pension fund managers including Blackrock, Pioneer and Fidelity"

[S.F.L.Y]

The correlation between the USA of the early 19th century, for instance, and the UAE of today is unequivocal.

Then we might have an idea of where this economical model comes from...
There is still a difference between slaves brutally brought in and "volunteers".

What other options do you recommend to these guys whom aren't welcome in our western world (always ready to give morals)?

Don't tell me there aren't "white" architects, project managers CEOs in this slavery industry. Are they also forced to accept their high wages against the poor conditions of their workers?

[MrMachfivepointfive]

SFLY: I get your point. But I don't think it is brown skin against white skin. Every ethnical group in existence had its little 'Auschwitz' over the course of history. And its true: We all drove to work day after day, seeing those labourers and knowing exactly what their living conditions were. What did we do about it? F.A.
My personal mantra: Everybody in Dubai, as miserable as he may be, is just a little better off than he would be at home.
In the end we were all hoping that the Maktoums could pull it off and utopia became reality.

Well ... maybe there is still a chance for lessons to be learned and course corrections to be made in time. Just maybe...

[S.F.L.Y]

Just give it up buddy.
You are trying to defend the indefensible.

Unlike you I'm not trying to defend anybody, I'm not Emiratis and doesn't feel concerned by your attacks. Still, I find really silly to hear people complaining and blaming the UAE for the big troubles some foreign banks will face very soon.
Don't you think it's part of your bank's job to manage your money wisely? Do you think these banks acted responsibly by playing with people's savings? Those bankers enjoyed bonuses and comfortable expat salaries, they loved closing big deals with Sheikh Mo. All the big show-off stuff (Airshow, cityscape etc.) is organized from abroad by foreign companies, all the big projects like the Dubai Metro were advised by foreign companies (UK rail) and financed by foreign banks. And you're trying to tell me it's UAE's fault if those guys didn't check where they were stepping in with other people's money? You must be kidding.

[Pitch Up Authority]

I do 100% agree with he locals.

A lot of expats are running business in the UAE some of them are state holdings.

If these expats do not perform as required they should be removed.

This does not happen.

Not wanting to loose face is a big problem and the root of problems with integration.

We all know its not always difficult to admit to a mistake. Certain cultures have it easier that others.

[hey bert]

So is now a good time to move out to the UAE with a falling housing market and plenty of 4 x 4's soon to be readily available at auction. Not wanting to take advantage of others miss fortune, but the offers there.:confused:

Or is there much worse to come, should we steer well clear!!!

[Wiley]

Maybe just a teensy bit o.t.t. with your outrage, Roy? The guy was just trying to say no culture doesn't have some sort of dirty washing in its past it would prefer not to be aired today.

For those who think this crash came as a bolt out of the blue, could I suggest they take a look at an old Pprune thread from 2006? http://www.pprune.org/middle-east/234098-dubai-property-prices.html Some, (including moi), thought it was going to happen considerably sooner than it did.

Check out my post #9 from 11 July 2006. For those not inclined to look, I said then: A mate in banking in the Sandpit told me about 6 weeks ago that the smart money boys in Abu Dhabi are standing by in the wings waiting for "the correction", which they expect to be quite large, when they plan to swoop and "buy Dubai" (his term, not mine).

If he turns out to be right, it would seem that quite a few people will be left with 2 million Dirham mortgages on properties that won't, (in the short term anyway), be worth anywhere near that amount.

Shades of London in the early 90's.

[cargosales]

A mate in banking in the Sandpit told me about 6 weeks ago that the smart money boys in Abu Dhabi are standing by in the wings waiting for "the correction", which they expect to be quite large, when they plan to swoop and "buy Dubai" (his term, not mine).

If he turns out to be right, it would seem that quite a few people will be left with 2 million Dirham mortgages on properties that won't, (in the short term anyway), be worth anywhere near that amount.

Shades of London in the early 90's.


Wiley,

Snap!!

Check out my post. # 80 on this thread


S.F.L.Y
You aren't doing yourself any favours at all. Silly Boy. Nuff said.


Anyone who knows
Cyclone is no more? Tell me it isn't true :{

CS
wots glad to have been there and actually experienced the reality of the 'Dubai Dream' but who is infinitely gladder to have been able to bug out back to this Green and Pleasant Land. Unlike the poor sods 'employed' to build that 'dream' on foundations of sand.

[ironbutt57]

Gulf Daily News » Business News » ABU DHABI'S 'BACKING TO REMAIN SELECTIVE' (http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=265931)

there is the official stance of AUH

[S.F.L.Y]

Shiek Mo said in the paper its all the western banks fault for investing here as I never guarenteed anything from the government.

Since the money was not borrowed to the government I don't see what should make it liable.

Few years ago my wife was offered a pension plan with two options: the first a 6% and the second at 12% which of course was more "risky". For F*** sake why the hell people were stupid enough to take risks on their pension?!!? If you decide to go for a pension plan it's probably because you'll need it later, how could people gamble it for insane promises? If you want to secure more money then work more instead of gambling on other people's labor. Some people were commenting on the Dubai slavery, they just forgot to mention this was the masterpiece of thousands of expat's investments in Dubai. Same for the pension plans, where do you think these 12% would be coming from? At some point someone has to produce some labor in order to leverage these 12%. Isn't it slavery?

You want Sheikh Mo' to pay for the mess? Then give the good example and bring back Madoff's $50 billions.

It's not just a matter of few bankers, all the banks in Dubai were giving credit cards to anyone without any guarantee. I've seen some guys barely earning 4000AED holding over 10 different credit cards! Is it Sheikh Mo's responsibility to cover this mess?

As expats we were the first to mess up the place, everyone wanting to invest in some apartments to cash in some quick profits while most couldn't technically afford it, again supported by foreign banks. Because of being such idiots rents have been raising like hell while occupancy decreased! It should be the contrary!

Anyway as somebody already said, these arrogant foreign banks always counted on the Abu Dhabi's backup to cover the money they were throwing at Dubai and I really hope this will not come up too quick as they might learn a good lesson.

[LLuke]

Ofcourse banks don't just gamble, they take calculated risks. If no agreement is reached with the banks, assets will be sold due to bankrupcy. This will be interesting because the whole legal system reg. the ME financial world will be tested. What contracts were signed, which courts will be used. If the legal challenges will provide unexpected, unlogical answers, life in the ME will become interesting.

So far the disaster I expected/predicted didn't happen, curious to see what the future will bring.

[Praise Jebus]

SFLY, I don't think banks, foreign and local would splash out cash to Dubai entities with out a little homework of their own. If their homework concluded that the government was behind these companies when in fact it wasn't, then the waters surrounding 'Dubai Inc' must be very muddied. Ultimately it is the Government which establishes legislation to provide transparency and clear water to give confidence to financial markets. If that legislation has failed then they have to carry some of the responsibility. In Democratic countries this would cost a Government its rule. Sh. Mo is the Government, where else do you want the buck to stop? It is well known that Mo has (had) his hands well and truly on the levers of Nakheel, Limitless etc. The audacious plans don't go anywhere without a rubber stamp from his dream works. The Government let these developers run too hard for too long with apparently little over site and the consequences are for them to accept.

You can't laud praise on an individual for achieving rapid growth in Dubai and then look for someone else to blame when the wheels fall off. If the Government (Mo) is not financially obligated to these companies then they should not be effected by their demise. But did any one see a single firework for national day or the ten year anniversary of the Burj Al Arab? Indeed the Financial Times today observed that regulars at the Tattersalls thoroughbred sales held yesterday could not remember a time when Sh Mo was not there buying everything in sight. Except yesterday...

[h3dxb]

Ofcourse banks don't just gamble, they take calculated risks.

Hear hear......


I don't think banks, foreign and local would splash out cash to Dubai entities with out a little homework of their own.


Thats why, with so little homework, this w?nkers (w@nkers) set billions and billions into sand and brought the world near ruin.

To shout out, we need a delay in repayment, in this money sensitive time is clever. With the whole world as a hostage, they can blame later AUH . Thats why AUH has to and will pay. Has something to do with this can't lose my face BS.

[S.F.L.Y]

did any one see a single firework for national day or the ten year anniversary of the Burj Al Arab?

Fireworks were fired every evening last week over the creek. Some others took place at the Burj Al Arab couples of days ago. What are you on?

[Jet II]

Shiek Mo said in the paper its all the western banks fault for investing here as I never guarenteed anything from the government.
How about a bit of responsibilty,PLEASE


The prospectus for Nakheels bond issues specifically stated that they were not guaranteed by the government - so surely the 'responsibility' is on those who invested on those terms?

[Praise Jebus]

did any one see a single firework for national day or the ten year anniversary of the Burj Al Arab?

Obviously what ever I'm on is not enough. It was a question SFLY which you answered for me in a rather odd way. I'm beginning to see why you struggle to gather support here. Thanks for the feed back all the same.

[Jet II]

SFLY, I don't think banks, foreign and local would splash out cash to Dubai entities with out a little homework of their own. If their homework concluded that the government was behind these companies when in fact it wasn't, then the waters surrounding 'Dubai Inc' must be very muddied.

I think you credit the banks with too much intelligence - these were the same outfits who were investing in AAA rated subprime junk bonds.

And we all know how successful that strategy was :ugh:

[S.F.L.Y]

The prospectus for Nakheels bond issues specifically stated that they were not guaranteed by the government - so surely the 'responsibility' is on those who invested on those terms?

Alleluia! You can't blame LR3 for not being aware of these terms since a wise guy like can't have invested in such bonds.

It was a question SFLY which you answered for me in a rather odd way. I'm beginning to see why you struggle to gather support here. Thanks for the feed back all the same.

I don't think I'm posting to gather support, my opinion is mine and I never asked anyone to share it. I still didn't get your fireworks activities analysis. I'm sure many economists would like to know how you link the Burj Al Arab fireworks to Sheikh Mo's abuse of foreign banks investing in Nakheel bonds. I'm from now on HSBC, RBS and Barclays' guys will have a different look at fireworks.

[Swear_in_GIN]

Despite the Media and Finance houses now conceding that Dubai's problems are a "blip", and not the start of another recession (see Bloomberg and CNN), the proof will be in 6 months, when this deferred debt becomes due.

Dubai is borrowing, to pay for borrowing. Or is it selling to pay for borrowing?

In May next year, if the debt cannot be paid,(and I'm not saying it won't be), the real situation will become apparent.

[Jet II]

Along with bernie and his 50 billion, Dubai has another first.
The have even betten him for losing other peoples money.

The banks have lost around $3 Trillion so to be honest, Bernies $65 Billion and Dubais $50 Billion are peanuts in the great scheme of things.

[Time Traveller]

the proof will be in 6 months, when this deferred debt becomes due.

Actully the debt is due this month. Creditors seem in little mood to accept a 6 month deferment; From the Sunday Times again...

Bondholders will this week write to Dubai World demanding repayment by December 29 at the latest of a $4 billion tranche of debt due for repayment next week. If that does not happen, they will take legal action in New York and London to get their money back. Last night, one of the investors said: “We’re not afraid to push the nuclear button.”

[Jet II]

Actully the debt is due this month. Creditors seem in little mood to accept a 6 month deferment; From the Sunday Times again...

Given the warnings they had before they invested it will be interesting to see if they get anywhere if they go to court.

Apart from it not being sovereign debt, the prospectus also warned that Nakheel, “is not required to, does not, and has no current intention in the future” to publish any financial accounts or statements under UAE law. The company was “a newly formed entity and [had] no operating history.”

Investors were also told that the strategy of the company is premised on the idea that property prices will keep going up.:uhoh:

Actually when you read what was in the prospectus it's a surprise anyone invested in it at all.

[harry the cod]

Is it any wonder prices kept rising when artificial demand was ever present at Nakheel.

Last week a close friend of mine (local) let slip that one of Nakheels sales staff, who happened to be a girlfriend of one of the directors, had been asked to pay back over 700 million dirhams in ill gotten gains. Let me repeat that figure. SEVEN HUNDRED MILLION.

This was 'aquired' using friends as bogus buyers who would reserve prime plots before being released to the public. These would then be offered at a premium to prospective clients who were desperate to buy. She and her friends would pocket up to 10 million a pop for selling something that they hadn't legally bought in the first place. This took place over a 3-4 year period and she was not the only one guilty of such behaviour.

When her and many like her can do things such as this, yes, The government must take responsibility. Responsibility for not having rules and regulations that prohibit practices like this. Not only that, but laws that would send this person to jail, not simply ask for it to be repaid. Being a local though, I guess sums up what's so wrong with this sodden place.

Harry

[MES Drvr]

That's a good one WARLOCK.

[mensaboy]

That was beautiful Warlock.

[woodja51]

Warlock - maybe without realising it you have just described what actually happens with regard to the theory of money supply and velocity - which in its various forms is called things like M1/2/3.... or in your example about M10!!

This is exactly how western banks actually operate - money only exists as a mechanism to exchange goods and services and has no inherent value in itself as your example demonstrated so well..

in a similar example lets assume that an object ( car what ever) worth 100 dollars exists and owned by B. A buys the car from B for $100.

The bank makes an entry into A's account that puts him into 100 overdraft, then it makes an entry in Bs account that he has 100 in surplus when he deposits the cash.

It then charges A interest at 10% and pays ( if he is lucky) B interest at 5%.

At the end of the year A pays back his $110, B withdraws his money - $105 and the bank has , voila... made $5 for doing..... nothing.

But where is the extra $5 created from... it actually doesnt exist... except as a figment or purely as 'a numerical 'entry for bookkeeping purposes.

There is actually insufficient physical money in the world to cover all the 'numerical ' entries in IT systems..banks and such are just manipulating information .. and this is what folks are starting to realise now and hence the potential return to real money such as gold and silver ( which cannot be 'created ' by politicians..

That is why islamic financing has made a move forward over the last few years to try and address this creation of profit or return from risk and interest etc.
Of course the nakheel sukuk/bond etc has just set that programme back several decades as the confusion of where 'bond holders' sit in the line of creditors is somewhat blurred..

anyway .. I like your ponzi scheme example...!!WJA:ok:

[Pitch Up Authority]

woodja 51

You guy's must be flying on fumes nowadays

[grizzled]

Warlock

Excellent :ok:

grizz

[Blackbirdman]

it's a global thing that will have repercussions for all....kinda like that ABCP stuff the banks were selling here until it went down the ****ter....there is a funny spoof (I think it is on you tube) with two british comedians explaining how it all works....("Subprime crisis explanation by The LongJohns") just glad I got ALL MY MONEY out of the middle east.....

[Pitch Up Authority]

It is all very simple. Dubai belongs to Sh Mo so he does what he wants with it.

Question is; how much money does he have left for himself and who will support him in the future. My guess is the chinese will have a go but I do not think they will be successful, thats were Saudia Arabia will come in.

I am convinced that Sh Mo does not know what happened below him. He too needs to be able to thrust people.

Thrust is of great value, that is why treason is so severely punished in the Arabic World.

To a certain extend they live from the greedy West and that gives Sh Mo the moral ground to say: "I will not pay out of my own pocket".

Do not forget he is a poet as well.

[Devils Advocate]

ShMo's poet eh... is that as in:

Here's to the cut that never heals
The more you stroke it the softer is feels
You can wash it in soap
You can wash it in soda
But you'll never get rid of that Billingsgate odour!

Does it not seem a rather fitting epithet?!

[Funk]

Just to add a bit of balance to the debate (and as an antipodean I love stickin it to the old country!) a relevant article from today's National :}

The National Newspaper (http://www.thenational.ae/apps/pbcs.dll/article?AID=/20091208/BUSINESS/712089946/1058&template=columnists)

[Vercingetorix]

Funk
As they say about the 'Old Country', "try writing history without us".
Australia is famous for inventing the Rotary Clothes line and , er, that's it?

Cheers:ok:

[Funk]

you forgot the Victa lawnmower and more importantly refrigeration using vapour compression for making beer cold after you've mowed the lawn :}:}:}:ok::ok::ok:.......you can get it mowin....matter of fact i got it now..a big strong thirst..

thread creep sorry

I see the Palm is now sinking according to Al Jazzeera English

[vbrules]

Driving around MoE and Barsha today noticed roads being turned into one way system. One way instead of two way equals half way. Apply it to 'wits' and it is exceedingly appropriate to these clowns.

[fjordviking]

Don`t forget the T-VASI, what a clever piece of equipment? How many light bulbs does it need to serviceable?

[Cpt. Underpants]

Talking of great Ozzie inventions...

Don't forget Budgie Smugglers!

[ANFA]

Hill's Hoist you idiots, not "rotary clothes line"...

[SIUYA]

Vercingetorix............

Comprehensive list of Oz inventions is here:

Australian Inventions (http://www.whitehat.com.au/Australia/Inventions/InventionsA.html)

And as ANFA correctly points out, it's the Hills Hoist! :ok:

[Ndicho Moja]

Dynamic Lifter, (chicken manure), yes the Aussiea are good at that one. :)

[Getzo]

Vercingetorix (http://www.pprune.org/members/49350-vercingetorix) , you have been dually flushed:E

[SIUYA]

Ndicho Moja.......

You forgot to add that it (DL) is also.......

........now widely used in the USA, Europe, the Middle East and Asia

So, the point that you were trying to make was?? :p

[Vercingetorix]

GETZO, SIUYA, et al.
Thanks for the entertainment (& the info).
Have to say Aussies are a decent, if somewhat prickly, bunch.
Merry Christmas to one and all.:ok:

[EGGW]

Right, enough about our antipodean cousins contributions to mankind :} Any more, gets binned.

Better??

Back to the thread please

EGGW.

[Vercingetorix]

EGGW.
Certainly, Sir.
However, would it be too much to ask that you use proper grammar in your edicts, i.e. commas, etc.

Cheers:ok:

[ByeByeDubai]

I doubt Dubai can and will repay any debts.

Untitled Document (http://www.rickackerman.com/wp-content/uploads/2009/12/Dubai-Wipeout.htm)

All over the UAE people are owed money by companies, developers and quasi government entities. Nothing can be done to claim the money. It is part of the business ethic to not pay until forced to. But who here can force a local to pay?

I have watched individuals and companies go under as they are not paid or given whatever they purchased. In many cases they had loans to buy materials or properties. As they buckle under the weight of those loans they default and are sent to jail. A great way to deal with people you owe something to!

It is sad as they hang on in hope not understanding or believing that this could happen. It is unheard of where they come from so they rely on the hope that they will wake up from their nightmare and reality as they know it, will return.

They cannot turn to the courts. The legal system is set up to protect the rich. If a company does something illegal to its customers, creditors etc. they each have to fight their own case. No-one says to the company "You broke the law before, and told to make good, so why are you back in court with the same complaint against you?". For this reason class action is prohibited. A company can rob 1000 people in exactly the same way and if 100 go to court and win their money back the thieves still get away with robbing 900. Good returns, good business and who cares what happens to the UAE reputation. Sadly the UAE leaders do not stop this as they use the same vehicles themselves. Businessmen first, Leaders second.

The press says very little. Local press are gagged from reporting the injustices that are all around. BBC, Sky, CNN are all after lucrative contracts in Abu Dhabi so say very little about the real rot.

Dubai is just the beginning. Abu Dhabi will go the same way too. Many have come to even more grief there. It has nothing to do with the money they have (or more correctly the world hopes they have!)

This is about the very same same systems of class, exploitation, lack of law, and general lack of development that caused wars and reform in Europe centuries ago.

Massive reform is needed for the UAE to survive. They must show the world they have changed and all are equal in the eyes of the law. They must show they have law to protect against systematic robbery or exploitation of the citizens and visitors alike.

The UAE is a 15th century trading post for the worlds nomads, most undesireable. It is awash with con-artists, fakes, the outlawed, the unqualified. They are here because the UAE is ideal for humanity's most unpleasant.

Operate at your peril. Do the deal and get out. Its going to be a while before this place resembles a 21st century country.

You may make money but after a stint here, you get out broke or rich. But the rich mostly leave without their soul.

[Jet II]

The government of Abu Dhabi and the Central Bank of the UAE has announced that it has agreed to provide $10 billion to the Dubai Financial Support Fund, allowing Dubai World to repay $4.1 billion of Islamic sukuk bonds that are due to be paid on Monday.

Arabian Business (http://www.arabianbusiness.com/576060-10bn-deal-agreed-to-help-pay-off-dubai-debt)


If you were one of those that bought Nakheels Sukuk last week, then congratulations on your 100% profit in less than 7 days - who's buying the beers then? :E

Oh - I found one...

HH Sheikh Maktoum Hasher Maktoum Al Maktoum, nephew of Dubai's ruler, tells Claire Ferris-Lay why reports of Dubai's debt have been much exaggerated.

While nearly all stock markets across the world were tumbling last week, HH Sheikh Maktoum Hasher Maktoum Al Maktoum was on the beach in the Maldives. News that state-backed Dubai World had asked to delay payment on its debt by six months didn't concern the nephew of Dubai's Ruler, HH Sheikh Mohammed bin Rashid Al Maktoum, in the least.

In fact, on the same day that Gulf markets opened for the first time following the four-day Eid break, Sheikh Maktoum, the CEO of the UAE-based conglomerate Al Fajer Group, was snapping up bonds for less than 50 percent of their value the previous week. He tells Arabian Business that he made a "significant investment" across three of the emirate's government bonds the first day Dubai's bourse opened following the news.

So the Western Banks take a haircut and Dubai massively reduce the amount of debt they owe... all in less than 7 days.

You couldn't make it up :ok:

[jethrotull]

AUH have extended a bailout of $10b to DXB, It will be interesting to learn what is the cost of this bail out to Shk Mo...........family silvers as guarantee ?

[Dropp the Pilot]

A proud moment when state-sponsored terrorism was created by Iran, now we in UAE can add state-sponsored insider trading to the trophy case.

[S.F.L.Y]

the surprising and inventive middle east


What about the states who created the virtual economy by replacing the gold by the dollar as the reference, secured by treasury bonds and followed by massive note printing of this new world reference? What is the real value of the dollar in which these debts are due?

[FJCruiser]

He may have made a quick return on some bonds like the hedge funds did but the world including these guys are still sitting on a pile of junk.
I see today's bail out by AD as a massive loss of face. The Westerm world should feel better for at least a day!

[Craic Ore]

Well, confirmed, AUH owns 50%+ of EK due to the crisis. Shows the astute nature of AUH and waiting for the price to be right. What else behind closed doors, DUBAL? the ports? You honestly didn't think the neighbours to the south wouldnt come in with no backing and front up 20 bil, did you? The largest soverign wealth fund in the world didn't become so due to bad and risky investments.

It is interesting times we live in for sure.
CO

[mensaboy]

Has there ever been a more blatant example of insider trading? Amazing, but they will get away with it.

On another note, 10B$ is only ten percent of the 'estimated' debt obligations of Dubai and look what it took to get that amount of money secured by Abu Dhabi. It required massive negative publicity, stock markets taking a hit and for once, a hint from the authorities that Dubai was not exactly how they had portrayed it.

Money is leaving, instead of coming into Dubai. The bankers know it and they have been told to keep the issue from us common folk, in order to hopefully avoid a run on the banks in Dubai. They seriously fear that possibility, which should scare the hell out of all of us.

You ever get the feeling you are on a sinking ship, yet most of the passengers are happily drowning (no pun intended), their misgivings at the ship's bar?
EK will eventually take a hit too. EK's employees already have, with the continual erosion of our T&C's but there has also been the secret pillaging of EK's coffers to support Dubai. For months we were told on our weekly update email, that we were barely making a profit and then suddenly we had made 200M$ in the first half, which was announced just prior to DW's request for a debt extension and the resultant fallout.

At some point EK will have to be offered to the Lords of Money in AD, if we already haven't been. I just don't see any other outcome.

My denial has ceased finally, this place is in serious trouble and the latest announcement should not be a sign of positive and progressive action to alter the downturn, IT SHOULD BE a clear indication that things are going to get worse.

Hope I'm not the last rat to leave this sinking ship.

ps for WhiteKnight.... GO GEORGE GO!

[J.I.P]

A new middle east crisis erupted last night as Dubai Television was refused permission to broadcast 'The Flintstones'.
A spokesman for the channel said....
'A claim was made that people in Dubai would not understand the humour, but we have heard that people in - Abu Dhabi Do.'

[S.F.L.Y]

The world biggest investment fund is big from its assets, not its cash.
Anyway who seriously thinks 70bn is the real amount? This could easily be covered by the neighbors, unless it's worse. Sheik Mo was with the Queen a couple of days before the "bad news" was released, what a coincidence.

[millerscourt]

mensaboy

Now then don't taunt White Knight as he is liable to throw his toys out of his pram:{

As an aside we have not heard him boasting recently about his huge property gains ( on paper at least ) in Dubai. Wonder if he will update us all?

[Marooned]

SFLY: When you say Queen was that Mandleson or HRH? Probably both.

[nakbin330]

FYI ..


Dubai Debt Management Announcements

HSBC is one of the world's strongest banks and is proud to have offered banking services in the Middle East for over a century. We remain fully committed to the development and prosperity of the Region, and to Dubai in particular. We are confident that the leadership of Dubai and the UAE will overcome the short-term challenges faced by the Emirate.
HSBC welcomes the recent Central Bank of the UAE announcement regarding the provision of extra liquidity to the banking sector, and applauds the timeliness and decisiveness of the action. This will ensure that ample liquidity remains in the market for Dubai and the UAE to continue to conduct business as usual.
In the meantime, we too remain open for business-as-usual. HSBC is one of the strongest banks in the world, and maintains ample liquidity. This is particularly true in the UAE: At the half year, the bank had US$15.9bn of customer loans and advances in the UAE, and US$19.3bn of customer deposits. Once again, HSBC’s usual prudent approach to banking is evident. These advances to the UAE represent 1.7 per cent of HSBC’s global customer loans and advances. A large proportion for a small country, but one that reflects the importance of the region to the bank, and the importance of HSBC to the country.

[Dune]

Gulf News Urges Reporters To Tone Down Dubai Debt Coverage

By Maria Abi-Habib
Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Gulf News, a newspaper part-owned by a senior government minister in the United Arab Emirates, has told its journalists to avoid using the words "bailout" and "default" when writing about Dubai's debt crisis, according to an internal memo sent to staff and seen by Zawya Dow Jones.

Reporters for the paper, the largest English-language daily in the U.A.E., were also urged to steer clear of the phrase "debt crisis" and asked to "ensure the following politically correct terminology is used" - words such as "financial consolidation" and "fiscal support" - when describing the sheikdom's economic problems and the assistance it has received from Abu Dhabi, according to the note sent Dec. 14.

"This is a style guide," said Francis Matthew, the Dubai-based paper's editor-at-large when asked by Zawya Dow Jones about the memo. "We're trying to restrict people from using financially incorrect terms."

U.A.E. officials have criticized international press coverage of Dubai's debt crisis since the emirate surprised markets on Nov. 25, saying it needed to freeze $26 billion of debt owed by one of its largest government-owned groups, Dubai World. Abu Dhabi bailed out Dubai on Dec. 14 with $10 billion, which the government used partly to pay off an Islamic bond due on that day.

Dubai's finance chief, Abdulrahman Al Saleh, this month blamed the media for spreading "blind panic" about the emirate's financial woes following the standstill request that triggered a downgrade of many of its banks and government-owned companies.

The sheikdom, which closely monitors the media, has come under intense scrutiny as it struggles to contain the estimated $80 billion of debt, mostly racked up by its government-owned companies building speculative real estate and infrastructure projects.

The Sunday Times was ordered off shelves in the U.A.E. on Nov. 29 after the paper carried a double-page graphic illustrating Dubai's ruler, Sheik Mohammed bin Rashid al Maktoum, sinking in a sea of debt. Its sister publication, The Times, was censored in the U.A.E. on Dec. 5 for a story that described Sheik Mohammed as a "benign dictator" and criticized his management of the economy.

The Sunday Times and The Times are part of News International, a unit of News Corp., owner of Dow Jones & Co, publisher of this newswire.

Gulf News is published by Al Nisr Publishing, which is part-owned by the country's Minister of State for Financial Affairs, Obaid Humaid Al Tayer, who chairs the company. Abdulrahman Hassan Abdulhamid Al Rostamani and Jumaa Al Majid, two large merchant families in Dubai, are also part owners along with the Al Tayer Group, according to Zawya.com's corporate monitor service.

-By Maria Abi-Habib, Dow Jones Newswires; +97150-941 9737

[Gulfstreamaviator]

Is the PC stuff going too far:

I can understand the Flintstones being banned.

I suppose that the new buzz words will be: Fiscally Challenged, or similar.

Happy Christmas, (sorry happy working day).

glf

[bherald]

I went to the Persian Gulf State of UAE knowing that I would find lots of sand (which I could live with!)..lots of opportunities..to make money, new friends and new experiences. I had some idea as to the incompetence when it came to implementing the law. Likewise when it came to human rights issues. What I had no idea about was the locals' ability to twist and break the law..their passion for treating people like slaves!! This was pretty close to living in a state of lawlessness..I thought they were the masters of economy and wealth management, and hence the attraction of all foreign companies and expats with their experiences and knowledge in the various fields of technology..what happened in the real estate business has been very obvious and showed that it has really been an economic bubble. But I think the worst is yet to come. Other areas are also suffering. I have witnessed frightening scenes and heard frightening stories about their attempts for recovery where the financial issues were put before safety when it came to priorities in the private aviation business, and the owners interests before human rights. It all turned out to be a nightmare with events surely not taking place in the 21st century!

[S.F.L.Y]

I guess all incompetent UAE nationals should expatriate themselves like all the foreigners in UAE. Most of us (foreigners) wouldn't be here if we were competent enough to get what we expect in our own countries. There's no secret why all businesses are f**** up in this country when all "advisers", "consultants" and "phd holders" are only looking after short term personal benefits. Sure nationals have a big responsibility in giving us visas and positions we shouldn't have.

[bherald]

Most of us (foreigners) wouldn't be here if we were competent enough to get what we expect in our own countries.
While I talked about new opportunities and new experiences referring to the healthy fact of exchanging expertise and gaining more experiences other than that available in our home countries, you are stating that most of the expats are there because of disappointing experiencies in their home countries..This is amazing!
There's no secret why all businesses are f**** up in this country when all "advisers", "consultants" and "phd holders" are only looking after short term personal benefits.
You seem to blame the economic crisis in this God foresaken part of the world on the expats who you are accusing of being there only for short term personal benefits. I wonder who works there for free? Who is there offering charity work? Yet it is only fair to say that one has to offer and put in what is worth his/her salary. But such accusations are amazing!

Sure nationals have a big responsibility in giving us visas and positions we shouldn't have.
Again, here I find you implying that expats do not deserve visas and positions they were given. While I say that there are bound to be individual cases where foreigners were misjudged, your statement was amazing!
I find your confidence in the locals groundless, and your implications regarding ALL expats terribly unfair..but for you to hold this opinion is amazing!