Dubai Bankrupt?!?!
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IMF urges more effort from Dubai
By Robin Wigglesworth in Abu Dhabi and Simeon Kerr in,Dubai
Published: February 18 2010 02:00 | Last updated: February 18 2010 02:00
The International Monetary Fund yesterday urged Dubai to improve its handling of the debt restructuring of a major conglomerate and advised the emirate to reorganise the rest of its state-linked companies.
Dubai World, a troubled state-owned holding company, is restructuring $22bn of loans and bonds to local and international banks. But it has been criticised by bankers and investors for its lack of communication and transparency.
In a so-called Public Information Notice, the IMF "stressed the importance of a speedy, orderly, co-operative and predictable approach to debt restructuring . . . The process should seek to enhance transparency and information disclosure and ensure comparability of treatment among creditors."
Markets were alarmed this week by rumours that the conglomerate could impose severe "haircuts", or losses, on its creditors by repaying considerably less than the outstanding loans. Dubai World has denied the rumours, but Lord Mandelson, the UK business secretary, and a US treasury official recently urged the emirate to reach a fair deal with creditors.
Dubai World is still trying to secure a formal standstill agreement, but as the de facto standstill remains in place, the focus is on finalising a restructuring offer.
Abu Dhabi, the richest member of the United Arab Emirates, has provided funds to bail out Dubai. Previous statements suggested this financing was contingent on a formal standstill agreement. But one source said the funding would remain available even if this condition is not met.
Dubai World's decision last November to restructure its debts has caused bankers to speculate that other government-related entities (GREs) may follow suit. The emirate and its ruler, Sheikh Mohammed bin Rashid al-Maktoum, control two other conglomerates: Investment Corporation of Dubai (ICD) and Dubai Holding.
While ICD is considered the main repository of Dubai's "good assets" such as Emirates Airlines and Dubai Aluminium
, it has $28.3bn (€20.8bn, £18bn) of outstanding loans and bonds. Dubai Holding, the ruler's personal investment vehicle, has total debts of $15bn, according to Morgan Stanley.
The IMF emphasised that Dubai World's debt restructuring "should be accompanied by a vigorous effort to undertake an operational restructuring of GREs, including formulating exit strategies for non-viable corporations, a process that will likely take time".
Fitch Ratings yesterday downgraded Dubai Holding Commercial Operations Group, a part of Dubai Holding which includes hotel chain Jumeirah, to B+ from BB. Standard & Poor's withdrew its rating of DHCOG in late January, citing worries about its financial strength and complaining that "insufficient" information had been provided about the group.
Led by Dubai's travails, the overall economy of the UAE shrank by 0.7 per cent last year, the IMF estimated.
Dominique Strauss-Kahn, Page 9 More news and analysis: In depth news, comment and analysis of the Dubai financial crisis from the Financial Times
FT.com / UK - IMF urges more effort from emirate
Published: February 18 2010 02:00 | Last updated: February 18 2010 02:00
The International Monetary Fund yesterday urged Dubai to improve its handling of the debt restructuring of a major conglomerate and advised the emirate to reorganise the rest of its state-linked companies.
Dubai World, a troubled state-owned holding company, is restructuring $22bn of loans and bonds to local and international banks. But it has been criticised by bankers and investors for its lack of communication and transparency.
In a so-called Public Information Notice, the IMF "stressed the importance of a speedy, orderly, co-operative and predictable approach to debt restructuring . . . The process should seek to enhance transparency and information disclosure and ensure comparability of treatment among creditors."
Markets were alarmed this week by rumours that the conglomerate could impose severe "haircuts", or losses, on its creditors by repaying considerably less than the outstanding loans. Dubai World has denied the rumours, but Lord Mandelson, the UK business secretary, and a US treasury official recently urged the emirate to reach a fair deal with creditors.
Dubai World is still trying to secure a formal standstill agreement, but as the de facto standstill remains in place, the focus is on finalising a restructuring offer.
Abu Dhabi, the richest member of the United Arab Emirates, has provided funds to bail out Dubai. Previous statements suggested this financing was contingent on a formal standstill agreement. But one source said the funding would remain available even if this condition is not met.
Dubai World's decision last November to restructure its debts has caused bankers to speculate that other government-related entities (GREs) may follow suit. The emirate and its ruler, Sheikh Mohammed bin Rashid al-Maktoum, control two other conglomerates: Investment Corporation of Dubai (ICD) and Dubai Holding.
While ICD is considered the main repository of Dubai's "good assets" such as Emirates Airlines and Dubai Aluminium
, it has $28.3bn (€20.8bn, £18bn) of outstanding loans and bonds. Dubai Holding, the ruler's personal investment vehicle, has total debts of $15bn, according to Morgan Stanley.
The IMF emphasised that Dubai World's debt restructuring "should be accompanied by a vigorous effort to undertake an operational restructuring of GREs, including formulating exit strategies for non-viable corporations, a process that will likely take time".
Fitch Ratings yesterday downgraded Dubai Holding Commercial Operations Group, a part of Dubai Holding which includes hotel chain Jumeirah, to B+ from BB. Standard & Poor's withdrew its rating of DHCOG in late January, citing worries about its financial strength and complaining that "insufficient" information had been provided about the group.
Led by Dubai's travails, the overall economy of the UAE shrank by 0.7 per cent last year, the IMF estimated.
Dominique Strauss-Kahn, Page 9 More news and analysis: In depth news, comment and analysis of the Dubai financial crisis from the Financial Times
FT.com / UK - IMF urges more effort from emirate
