DubaiNote: this has been translated
Debts overwhelm Dubai.
Dated : 25 November 2009 19:19
Last modified: 25 November 2009 20:29
DUBAI - the Arab emirate Dubai is struggling with enormous financial problems. As a result of the construction frenzy in the previous years debts have grown up to the point that the most important investment corporation of the government wants to delay paying down its debts for the time being.
It concerns Dubai World, the parent company of among others the project developer Nakheel.
Nakheel was among others responsible for the construction of the palm islands off the coast of Dubai. This prestigious country extraction project put the emirate in one go on the world card.
At Dubai World the debt burden amounts to at least 59 billion dollar (39 billion euro). The total debt of Dubai amounts to about 80 billion dollar (53 billion euro).
Banking sector
Refinancing is hampered by the worldwide problems in the banking sector. The economy of Dubai is in the doldrums because the property has been caught up in a downward spiral.
Now Dubai World has asked its creditors to accept delaying payments on its debt for at least six months.
This so-called debt moratorium would have apply up to 30 May next year. In the meantime Dubai with aid of consultancy firm Deloitte wants to reorganise the activities of the state investment company.
Delinquency
Financial markets are already anticipating that Dubai World will fall. The costs to insure debt papers of Dubai against non-payment on its obligations has strongly risen on Wednesday. The prices of their bonds went down strongly.
It is unclear how Dubai will live up to its financial obligations in the coming months. The emirate Wednesday also announced that it has secured 5 billion dollar (3.3 billion euro) with the issue of new bonds which have been placed at two banks from Abu Dhabi.
The two banks which have come to the rescue, National Bank or Abu Dhabi and Hilal bank, are already controlled by the government of Abu Dhabi. This emirate, just like Dubai part of the United arab Emirates, has already financially supported before its neighbouring country.
