Dubai World, Abu Dhabi, and the Bankers (via Times Online)

Just been getting caught up on the weekend, and I ran across this:

Dubai World would offer its creditors 60 per cent of the money they are owed, under the latest proposal to restructure the company’s $22 billion (£14 billion) of outstanding debts.

via Dubai World in new offer to creditors – Times Online.

That’s a default event in my book. A 40% haircut? That’s more than taking a little off the top. That’s a hatchet job. One offer would carry a guarantee along with the haircut, the other would not. That one would be 60% cash, 40% of Nakheel’s assets, with no guarantee.

Which is essentially Nakheel handing the keys over to properties it’s developing. As the article explains later:

The banks are unwilling to take on real estate assets to cover the debt. Many of Nakheel’s grand construction projects have been suspended or scrapped as the economic downturn wiped up to 50 per cent off property values across the emirate last year.

That’s a lot of collateral to take on in a depressed market. So it’s no wonder the banks want to take on real estate assets, especially since they already have a bunch of it on their own books as it is.

And the banks are losing patience. As Lord Mandelson put it:

“Dubai has to be conscious of the fact that how it resolves its current problems and how it deals with its creditors will mean a great deal for its brand, its reputation and how it secures investment from overseas in the future.”

And of course, if the standstill isn’t agreed to, Abu Dhabi will probably stop making the working capital payments and other payments they said they would make until April 30.

So needless to say, if there’s no agreement to be reached to, all bets will be off in the Emirates…

And the only image I could come up with that sums up the situation is Dubai World, Abu Dhabi, and the banks all in a showdown. I’ll let you decide who’s The Good, The Bad and the Ugly…

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Filed under finance, government, International, Markets, Way Forward

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