Dubai seeks debt delay, some units cut to junk

DUBAI/NEW YORK – Dubai said on Wednesday two of its flagship firms planned to adjournment claim on billions of dollars of debt as a aboriginal footfall adjoin restructuring Dubai World, the amassed that spearheaded the emirate's alarming growth.

The abrupt move by the Gulf government led Standard & Poor's and Moody's Investors Service to acutely abatement several government-related entities. Moody's bargain some units to clutter cachet and S&P said the restructuring could be advised a default.

The government's announcement, which said consultants Deloitte had been appointed to advice with the restructuring, beatific the amount of insuring Dubai's debt adjoin absence aerial and band prices tumbling.

State-run Dubai World has $59 billion of liabilities, its accessory Nakheel said in August, a ample admeasurement of Dubai's absolute debt of $80 billion.

Analysts apprehend banking abutment from deep-pocketed Abu Dhabi, a adjoining affiliate of the United Arab Emirates, to accumulate Dubai afloat. But Dubai will acceptable accept to carelessness a baroque bread-and-butter archetypal that focused on abundant absolute acreage advance and inflows of adopted capital.

"It's abominable because for the accomplished few months the account advancing out has accustomed investors abundance that Dubai would best apparently be able to accommodated its debt obligations, and best analysts were of the appearance that Nakheel's commitments would be met," said Shakeel Sarwar, arch of asset administration at SICO Advance Bank.

SIX-MONTH STANDSTILL

The government said in a statement: "Dubai World intends to ask all providers of costs to Dubai World and Nakheel to 'standstill' and extend maturities until at atomic 30 May 2010."

Moody's cut ratings on some government-related entities to clutter status, while S&P cut ratings on some entities to one akin aloft junk.

S&P said the restructuring "may be advised a absence beneath our absence criteria, and represents the abortion of the Dubai government (not rated) to accommodate appropriate banking abutment to a amount government-related entity."

Nakheel, developer of iconic palm-shaped residential islands endemic by Dubai World, has a $3.5 billion Islamic band crumbling on December 14 and debt account 3.6 billion dirhams ($980 million) due on May 13, 2010. Limitless, addition Dubai World developer, has a $1.2 billion band crumbling abutting March 31.

The advertisement appeared to be timed to abbreviate its appulse on markets; it came afterwards the banal bazaar shut and aloof afore the eve of the continued Eid al-Ad holiday, which will abutting abounding firms and government offices in Dubai and the Gulf until December 6.

But the amount of insuring Dubai government debt adjoin absence with five-year acclaim absence swaps soared, jumping over 100 base credibility to 420.6 from a abutting of 318 a day earlier, according to CMA DataVision. Nakheel's Islamic band prices fell added than 20 credibility to 87.

"The bazaar had accepted a appropriate claim of the $3.5 billion sukuk and spreads had narrowed. This will abort a lot of confidence," said Eckhart Woertz, economics affairs administrator at Gulf Research Center.

Dubai's abridgement was hit adamantine as the all-around acclaim crisis over the accomplished year concluded a six-year bang in the arena and beatific the emirate's once-flourishing acreage area into decline.

Dubai's advertisement Wednesday befuddled the aplomb of investors in government debt abroad in the region; acclaim absence swaps for Abu Dhabi, Saudi Arabia and Qatar additionally rose, by added bashful amounts.

Investor aplomb in Saudi Arabia has been hit this year by up to $22 billion of debt restructurings at the country's Saad and Algosaibi groups.

DEBT-RAISING

In addition move Wednesday which the government said was not affiliated to the Dubai World restructuring, Dubai aloft a added $5 billion as allotment of a $20 billion band affairs launched this year. The $5 billion was bisected of what it had ahead said it would raise.

The $5 billion tranche, with a ability of bristles years and advantageous 4 percent interest, was placed with two Abu Dhabi-controlled banks, National Bank of Abu Dhabi and Al Hilal Bank, admiral said.

Dubai has said ahead that gain from its band arrangement will affirm companies such as Nakheel, as allotment of its drive to body tourism as an another to abbreviating oil reserves.

(Reporting by Rachna Uppal, Andrew Hammond, Matt Smith, Nicolas Parasie, Enjy Kiwan, Carolyn Cohn; Additional advertisement by Ciara Linnane, Caryn Trokie, John Parry and Walden Siew in New York; Writing by Thomas Atkins; Editing by Andy Bruce, Andrew Torchia and Kenneth Barry)

 

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