Goodbye Dubai
 

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

Sheikhs new clothes
 

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.

And it continues to happen!
 

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."

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.

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

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.

How the courts treat "bounced cheques" in the UAE
 

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)

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.

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

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.)

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.

UAE lifestyle correction in progress
 

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:

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.

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

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.

Dubai broke
 

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

Pay for the 380s?
 

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?

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.

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.

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.