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Video: Austrian Developer Sees Dubai Sands as Stable Investment

by on August 3, 2010

Aug. 3 (Bloomberg) — Bloomberg’s John Cookson reports on Dubai’s manmade archipelago known as “The World”. With the exception of a palace built by Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum on “Greenland,” all of the approximately 300 islands in The World have remained undeveloped since Nakheel finished creating them in January 2008.

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Video: Austrian Developer Sees Dubai Sands as Stable Investment

Dubai World Said to Offer a Shortfall Guarantee in $14.2 Billion Debt Plan

by on March 29, 2010

By Arif Sharif March 29 (Bloomberg) — Dubai World, the state-owned holding company seeking to restructure $14.2 billion of debt, offered creditors a so-called shortfall guarantee as part of a repayment plan, a person close to the Dubai government said. If the sale of Dubai World’s assets does not generate sufficient cash to repay loans, the government will make up the shortfall up to a certain level, said the person, who declined to be identified because the discussions are private. The guarantee clause was not outlined in Dubai World’s press statement on March 25 when the restructuring plan was announced. Dubai World, one of the emirate’s three main state-owned holding companies, and its property unit Nakheel PJSC are seeking to renegotiate terms on $24.8 billion of debt after the global credit crisis battered Dubai’s property market and hurt the ability of the emirate’s companies to raise loans. The Dubai government and its state-owned companies racked up $109.3 billion of debt, according to International Monetary Fund estimates, as the emirate sought to transform into a tourism, trade and financial services hub. Dubai World asked creditors March 25 to roll over outstanding debt into two new loans of five year and eight year maturities. Lenders will be paid their principal in full, although the interest rate on the loans is still being negotiated with the banks, Dubai World Chief Restructuring Officer Aidan Birkett said that day. Interest Rate Dubai World’s creditors will be paid interest below the market rate in cash, although that will be supplemented by a so- called payment-in-kind element, the person said. The person did not specify how much the payment-in kind was. Nakheel’s creditors were asked to extend loan maturities at interest rates linked to the Emirates interbank offered rate and the London interbank offered rate. Two of Nakheel’s Islamic bonds, which together raised $1.73 billion, will be paid in full when they mature this year and in 2011. The treatment of Dubai World and Nakheel’s creditors reflects the different levels of security and the legal positions of each creditor class, the person said. Dubai World’s lenders are unsecured, while lenders to Nakheel have recourse to the company’s assets, the person said. A spokesman for Dubai World declined to comment when contacted by Bloomberg News today. To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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Dubai World Said to Offer a Shortfall Guarantee in $14.2 Billion Debt Plan

Debt-Burdened Emirate of Dubai May Need Years to Rebuild Creditors’ Trust

March 25, 2010

By Henry Meyer March 26 (Bloomberg) — Dubai may be seeing light at the end of the tunnel after markets welcomed its offer to repay around $25 billion in debt by 2018. The recovery still risks taking years as the sheikhdom rebuilds creditors’ trust. Flagship holding company Dubai World, which owes this money, will get $9.5 billion in government funding over the next three years, the emirate announced yesterday. Dubai World’s property unit Nakheel PJSC was at the forefront of a building boom-to-bust which led to the worst property slump during the global recession after credit markets seized up. Dubai, the second-biggest of the seven states that make up the United Arab Emirates, may still need assistance from its wealthier neighbor Abu Dhabi after getting $20 billion last year. Other sources of credit will be harder to tap after Dubai and its state-controlled companies amassed $109 billion in debt to turn the Persian Gulf city state into a financial and tourism center as oil reserves dwindled. Yesterday’s announcement “won’t materially impact Dubai’s creditworthiness immediately,” said Saud Masud , head of Middle Eastern research at UBS AG in Dubai. “This could be a long, drawn-out process over many months and even years.” The aim of Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum is avoid a fire-sale of assets of Dubai World, said David Butter , regional director for Middle East and Africa at the London-based Economist Intelligence Unit. Dubai World owns DP World Ltd., the third-largest international port operator; Istithmar World, a private equity firm that acquired Barney’s New York Inc. in 2007; and Nakheel, builder of palm-shaped islands in the Persian Gulf. Market Reaction Dubai shares yesterday climbed the most in three months and credit default swaps dropped. Standard and Poor’s and Moody’s Investors Service said the announcement was positive because of the government support, which would help troubled businesses in Dubai World to stay afloat. Creditor banks, which include HSBC Holdings Plc , Royal Bank of Scotland Group Plc, Emirates NBD PJSC and Abu Dhabi Commercial Bank PJSC, will also get full principal repaid if they wait up to eight years. Standard and Poor’s said it would review the credit ratings of five other Dubai government-owned companies that it downgraded in December after Dubai World asked to delay reimbursement of $26 billion debt, roiling world markets. “The amount of money going forward, $9.5 billion, is going to make these businesses more viable,” S&P analyst Farouk Soussa said of Dubai World. “It’s going to have an important knock-on effect on the economy.” Stalled Projects Nakheel’s stalled projects in Dubai include the Waterfront, a development twice the size of Hong Kong Island that would have housed 1.5 million people. Property prices plummeted by more than 50 percent from their peak in 2008. “By getting the Nakheel engine running immediately, more value will be created through the completion of projects, which is in the best interests of the wider Dubai economy,” the Dubai government said in a statement yesterday. The International Monetary Fund on Feb. 17 called for a “vigorous restructuring” of Dubai’s state companies, including giving up nonviable businesses. The Washington-based lender also said government-owned enterprises must make their accounts more transparent if they want to attract financing because banks now understand that Dubai won’t necessarily stand by these obligations. Implicit Guarantee Because of an implicit sovereign guarantee, Western banks gave Dubai World at least $15 billion in 2006 and 2007 without looking at the numbers, according to Chris Turner , a former director of risk and asset management at Istithmar World. Turner was found guilty in absentia of embezzlement last year. He maintains his innocence. There is still not enough information about the web of companies in so-called Dubai Inc., said the EIU’s Butter. “We don’t know enough about the state of these businesses to make a final judgment” about their financial health, he said. “There are other parts of Dubai companies that have challenging debt obligations, particularly Dubai Holding,” a diversified business group with interests in property, hotels and private equity. S&P in January withdrew its rating from a Dubai Holding subsidiary, Dubai Holding Commercial Operations Group, because of “inadequate timeliness of information.” Abu Dhabi funds Goldman Sachs Group Inc. London-based economist Ahmet Akarli said the restructuring plan fails to explain how Dubai will finance the $9.5 billion — $3.8 billion of which it plans to provide from its own pocket in addition to funds lent to it last year by Abu Dhabi. It’s also unclear how Dubai will repay the $20 billion it borrowed from U.A.E. federal and Abu Dhabi institutions, said Akarli. Abu Dhabi is the capital of the U.A.E. and holds about 7 percent of the world’s proven oil reserves. Dubai’s debt difficulties will persist into 2010, 2011 and 2012, Goldman Sachs said on Dec. 13. The emirate must repay at least $55 billion in the next three years. While Dubai has ruled out seeking more money from Abu Dhabi, it may have to swallow its pride yet again, said Mohammed Shakeel , an Abu Dhabi-based analyst on the U.A.E. “Dubai is trying to show that it isn’t as dependent on its neighbor, but what will happen if its financial resources aren’t enough?,” he said. To contact the reporter on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net .

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Nakheel Bonds Advance as JPMorgan Says Creditors May Be Paid at Face Value

March 9, 2010

By Haris Anwar and Dana El Baltaji March 9 (Bloomberg) — Nakheel PJSC bonds, part of parent Dubai World’s planned $26 billion debt restructuring, climbed the most in two months after JPMorgan Chase & Co. said creditors may get paid face value. The developer’s $750 million sukuk, or Islamic bond, added 5 cents, the most since Jan. 6, to 56.25 cents on the dollar at 4:31 p.m. in Dubai, prices compiled by Bloomberg show. The bond due in January 2011 has climbed from a low of 46.5 cents on Feb. 17 and traded as high as 85.5 cents on Nov. 25, when Dubai World said it may delay debt payments. Nakheel’s debt “may not warrant haircuts, and restructuring may only involve long maturity extensions,” JPMorgan said in a report. United Arab Emirates Economy Minister Sultan bin Saeed al-Mansouri said today he’s confident state- owned holding Dubai World will reach an accord with creditors, while Finance Minister Sheikh Hamdan Bin Rashid Al Maktoum said the seven-emirate U.A.E. stands by Dubai. The bank’s “report is very positive and it gives some clarity,” Louis Gargour , the London-based chief investment officer at hedge fund LNG Capital LLP and a holder of Nakheel debt, said in an interview. “You might have a situation where you have sovereign assistance in paying off at maturities.” Dubai World, one of the emirate’s three main state-owned business groups, said Nov. 25 it would seek to delay repaying debt until at least May 30. The announcement sparked the biggest plunge in developing-nation stocks and the largest increase in emerging-market bond yields over U.S. Treasuries in four weeks, while the cost to protect against a default by Dubai doubled. Neutral Rating Dubai World may propose to creditors excluding Nakheel holders a 20 percent cut in face value, a 10-year extension on maturities and a government repayment guarantee, the bank said. A spokesman for Dubai World declined to comment. JPMorgan maintained its neutral rating on Nakheel’s bonds, citing the “unpredictable nature” of the restructuring and “the small probability that sukuks get paid at par upon stated maturity.” The debt “would also have some potential upside if the government guarantees principal repayment under a restructuring plan that involved little or no haircut,” Zafar Nazim , a London-based analyst at the bank, wrote in the report dated yesterday. Dubai avoided a default in December on $4.1 billion of payments due for Nakheel’s 2009 bond after Abu Dhabi and its banks provided $10 billion of loans. ‘Precedent’ “There was a precedent set in 2009 when Nakheel’s debt was settled,” said Jamil Hallak , head of credit trading at Standard Chartered Plc in Dubai. ’’Investors assume that the same will happen in 2010 and 2011, although it’s less likely that they redeem it in full. I think the default is not a scenario that I expect, and that a rollover is more likely.” Dubai, the second-biggest of seven emirates that make up the U.A.E., and its state-owned companies racked up $109.3 billion of debt during a real-estate boom that ended in 2008, according to International Monetary Fund estimates, as the sheikhdom sought to transform into a tourism, trade and financial services hub. The seizure of debt markets after the onset of the global credit crisis led to a 50 percent decline in property prices in the city and hampered the ability of Dubai- based companies to raise new loans to refinance maturing debt. Swap Option All restructuring options are being considered, including swapping Nakheel’s $1.73 billion bonds with new securities, a person close to the Dubai government said on Feb. 17. Nakheel, a developer of palm-shaped islands, has two outstanding Islamic bonds, a 3.6 billion-dirham ($980 million) floating-rate note due May 13 and a 2.75 percent, $750 million sukuk maturing in January 2011. Moody’s Investors Service estimated last month that U.A.E. banks hold about $15 billion of Dubai World debt. ’’Dubai’s domestic banks’ exposure to Dubai World would be an argument that goes against the government demanding steep haircuts,’’ New York-based JPMorgan said in the report. “Assuming two-thirds or $10 billion of this amount relates to Dubai’s banks, a 40 percent haircut implies provisioning of $4 billion,” the bank said. To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.net ;

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Abu Dhabi Supplies $10 Billion To Dubai To Cover Debt

December 13, 2009

DUBAI –Dubai’s government Monday said it received $10 billion in financing from Abu Dhabi, which will pay part of the debt held by conglomerate Dubai World and its property unit Nakheel.

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Dubai’s Possible Nakheel Default Tomorrow to Affect Debt of $5.25 Billion

December 13, 2009

By Haris Anwar Dec. 13 (Bloomberg) — Nakheel PJSC’s possible non-payment of its Islamic bond due tomorrow will trigger cross defaults on two other securities, bringing the total of affected debt to $5.25 billion, bond documents show. Investors are waiting to see if the Dubai state-controlled developer will pay the maturing $3.52 billion Islamic bond, known as sukuk. The Dubai government said Nov. 25 state-run holding company Dubai World is seeking a “standstill” agreement on its debt, including for the Nakheel unit. The cross default would trigger if “the Nakheel Holdings Group, Nakheel World or the guarantor shall fail to make any payment,” at the expiration of the grace period, the bond documents said. Tomorrow’s deadline is followed by a 14-day grace period to remedy the default and to prevent bondholders from starting legal proceedings. Nakheel’s other two bonds are a 3.6 billion-dirham ($980 million) floating-rate note due in May next year and a 2.75 percent $750 million sukuk maturing in January 2011. “The chances of a full payment at this point are very slim,” said Nish Popat , head of fixed income at ING Investment Management Dubai Ltd. “There is a lack of clarity on how the standstill initiative is progressing. Investors are just waiting and speculating.” Nakheel’s bond maturing tomorrow rose 1 percent to 53 cents on the dollar on Dec. 11, on speculation that the developer may seek to avoid a default. The bond has dropped more than 50 percent since the Nov. 25 announcement. Dubai World began talks to restructure $26 billion of debt. To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.net

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Dubai holds promise for debt investors

December 11, 2009

LONDON: Dubai might hold some promise for distressed debt investors, even if the US vulture funds who rushed in following Nakheel’s debt standstill have played a very risky game, industry insiders said. ‘Iceland is something we have

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Dubai holds promise for distressed debt funds

December 10, 2009

LONDON, Dec 10 (Reuters) – Dubai might hold some promise for distressed debt investors, even if the US vulture funds who rushed in following Nakheel’s [NAKHD.UL] debt standstill have played a very risky game, industry insiders said. …

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Stocks, Gold Fall as Rating Companies Highlight Deficit Risk; Yen Advances

December 8, 2009

By Nick Baker Dec. 8 (Bloomberg) — Stocks, gold and oil fell while Treasuries and the dollar rallied after Dubai World’s Nakheel PJSC lost $3.65 billion, Fitch Ratings downgraded Greece’s credit and German industrial production unexpectedly dropped. The MSCI Emerging Markets Index declined 1 percent, and the Standard & Poor’s 500 Index slumped 0.5 percent at 11:44 a.m. in New York. Gold dropped for a third day in New York. Crude posted a fifth consecutive retreat. Yields on 10-year U.S. Treasuries fell six basis points to 3.37 percent, while the rate on Greece’s two-year notes rose the most since 1998. The dollar appreciated against 14 of the 16 most-active currencies. Concern that Dubai World would default on $59 billion in debt roiled markets last month, spurring speculation that the recovery in the global financial system would stall. Moody’s Investors Service said deteriorating public finances in the U.S. and U.K. may test their Aaa ratings. Federal Reserve Chairman Ben S. Bernanke told the Washington Economic Club yesterday that the economy faces “formidable headwinds.” “There is some nervousness with investors about how things are going to evolve,” said Thomas Schudel, a fund manager at Zurich-based Clariden Leu Ltd., which oversees about $100 billion. “The economic recovery might not be so quick as people thought.” Equities and commodities dropped from their highs of the day, while the yen and dollar gained against the euro, after German industrial output fell 1.8 percent in October, led by a drop in production of energy and investment goods such as machinery, the Economy Ministry in Berlin said today. Economists forecast a 1 percent gain, according to the median of 38 estimates in a Bloomberg survey. Extending Losses The MSCI World Index of equities in 23 developed nations and futures on the S&P 500 extended their decline after Bloomberg News reported that Nakheel, the Dubai World-owned property developer seeking to renegotiate debt, had a first-half loss of 13.4 billion dirhams ($3.65 billion) as revenue fell and it wrote down the value of land and property. A spokesman for Dubai World, Nakheel’s parent, wouldn’t comment. Royal Bank of Scotland Group Plc , the biggest underwriter of loans to Dubai World, fell as much as 9.7 percent in London trading following Nakheel’s loss. Greek stocks and government bonds tumbled on mounting concern the nation may struggle to meet its debt commitments as public finances deteriorate. The Athens Stock Exchange General Index dropped 6 percent, its biggest intraday decline since Nov. 26. The yield on the government two-year note jumped 58 basis points, the most since August 1998. Within Two Months Fitch Ratings cut Greece one step to BBB+ today, the third- lowest investment grade. S&P put Greece’s A- rating on watch for a possible downgrade yesterday, signaling it may be reduced within two months. MSCI’s gauge of emerging-market stocks slumped for a third day, the longest losing streak in five weeks. Dubai shares fell the most among benchmark indexes tracked by Bloomberg, tumbling 6.1 percent. The DFM General Index has lost 25 percent since Nov. 16. On Nov. 25, the government said it was seeking a “standstill” agreement on Dubai World’s debt. Gold futures for February delivery decreased 1 percent to $1,152 an ounce in New York as the dollar’s 0.5 percent advance to $1.4760 per euro curbed the metal’s appeal as an alternative investment. ‘Illusion in Gold’ The Bank of Korea , diversifying foreign-exchange reserves away from a falling dollar, said additional gold holdings aren’t attractive as most other central banks aren’t buying and the metal offers no cash returns. “There’s an illusion in gold,” Lee Eung Baek , head of the bank’s reserve-management department, said in an interview. “We follow the big trend. Gold isn’t the trend.” Barrick Gold Corp. , the world’s largest producer of the precious metal, dropped 2.3 percent in U.S. trading. It fell to $40.69, the lowest intraday price since Nov. 6. Crude oil for January delivery lost 1.5 percent to $72.79 a barrel in New York. U.S. supplies of crude oil climbed 500,000 barrels in the week ended Dec. 4, the third straight increase, a Bloomberg News survey showed before tomorrow’s Energy Department report in Washington. PetroChina Co., the nation’s largest oil company, declined 1.4 percent in Hong Kong. Exxon Mobil Corp. slumped 1.2 percent. Treasuries rose for a second day as the Fitch Ratings downgrade of Greece spurred demand for the relative safety of U.S. government securities. Two-year note yields fell two basis points to 0.73 percent, according to BGCantor Market Data. The yield touched 0.69 percent, the lowest level since Dec. 2. The securities gained the most in five weeks yesterday after Bernanke said the job market “remains weak” and inflation “could move lower.” To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net .

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Dubai Stocks Tumble Most in World on Nakheel Debt Restructuring Concerns

December 8, 2009

By Claudia Maedler Dec. 8 (Bloomberg) — Dubai shares tumbled to the lowest level in almost five months, led by Emaar Properties PJSC and Emirates NBD PJSC, on concern that Dubai World is struggling to restructure its debt. Emaar , the United Arab Emirates’ biggest real-estate developer, slumped 7.6 percent and Emirates NBD, the region’s largest publicly traded bank by assets, retreated to the lowest since Sept. 3. The DFM General Index plunged 4.7 percent, the biggest fluctuation among global benchmarks tracked by Bloomberg, to 1,663.35 at 10:41 a.m. in the emirate. The measure, which is heading for the lowest close since July 13, has tumbled 20 percent since Dubai said on Nov. 25 that it was seeking a “standstill” agreement on Dubai World’s debt. Dubai World last week began talks with banks to restructure $26 billion of debt, including a $3.52 billion Islamic bond of property unit Nakheel PJSC maturing on Dec. 14. Debt restructuring by Dubai state-run companies may almost double to $46.7 billion as more of the emirate’s businesses could need help making payments, Morgan Stanley said. “Until there is some clarity on debt restructure, there won’t be any serious buyers,” said Julian Bruce , director of institutional equity sales at EFG-Hermes Holding SAE in Dubai. “The closer we get to the Nakheel deadline with no news, the worse it will be.” Emaar fell to 2.91 dirhams, poised for the lowest close in four months. Emirates NBD lost 4.8 percent to 3.59 dirhams. Abu Dhabi’s index dropped 1.5 percent, bringing the two-day retreat to 3.2 percent. Oman’s MSM30 Index declined 0.4 percent, while the Kuwait Stock Exchange Index was unchanged. To contact the reporter on this story: Claudia Maedler at cmaedler@bloomberg.net

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Dubai Bondholders Would Get Manhattan-Sized Barren Land in Case of Default

December 7, 2009

By Chris Bourke and Zainab Fattah Dec. 7 (Bloomberg) — Nakheel PJSC creditors may win the right to seize a strip of barren waterfront land the size of Manhattan if the company defaults on the $3.5 billion bond backing the development. Investors will be able to seek foreclosure on the property’s mortgages should the Dubai World unit fail to repay the loan, according to the bond’s prospectus. The debt is due on Dec. 14, after which Nakheel has two weeks to remedy a default. The property forms part of the Dubai Waterfront project, where Nakheel plans to build a city twice the size of Hong Kong. Dubai World is trying to restructure $26 billion of debt after seeking a “standstill” agreement on liabilities including Nakheel’s sukuk bond on the waterfront parcel. The bond is secured against a 50-year lease on 677 million square feet (63 million square meters) of land on which Nakheel plans to build the southern part of Dubai Waterfront , and a series of man-made islands in the shape of a crescent. “The project isn’t likely to happen,” said Saud Masud , a Dubai-based real estate analyst at UBS AG . “I’d be very surprised if anything is built in the next five years.” The land was valued at $4.2 billion by Jones Lang LaSalle Inc . three years ago, based on the entire project being ready by 2018, when it would be worth $11.8 billion, the prospectus said. Sukuk are securities that comply with Islamic law, which forbids interest-bearing bonds. The leases on the two Nakheel properties were sold to a special-purpose vehicle that issued the sukuk. They were then leased back to Nakheel which made rental payments to stay within the law. Setting the Tone The sukuk’s trustee, acting on behalf of noteholders, can “take any action to enforce any of the security documents,” if Nakheel doesn’t redeem the bond, said the 2006 prospectus, which classifies the mortgages as security documents. “The outcome of Nakheel will set the tone of how people will approach the question of access to assets, what a security package is really worth, and legal rights with a jurisdiction,” said Brinda Kirpalani , head of credit and convertible research at ADI Alternative Investments SA in Paris. Nakheel didn’t return telephone calls and e-mails yesterday for comment. The waterfront project was among Dubai World’s most ambitious. Dubai Waterfront posters had lined a wall of billboards about 10 meters (30 feet) high and stretching for at least a kilometer (1.6 miles) along Sheikh Zayed Road, which surrounds part of the land. The posters were removed in the last month. Smaller billboards with Nakheel’s corporate logo remain. Now the area is bare except for a cluster of partly finished low-rise buildings and idle cranes for hundreds of meters. Yesterday, camels roamed part of the land. Doubling Dubai’s Size The waterfront development was “essentially a doubling of Dubai,” said Masud. Some initial land reclamation and building work has taken place and little else, he said. The portion of the land backing the sukuk is likely to be worth “significantly less” than the 2006 valuation, Saud estimates. Dubai office values fell 58 percent in the year through September, according to Colliers International. House prices have plunged 50 percent from the peak last year. “If built houses drop 50 percent in value, un-built land will likely drop more,” he said. Court Case? Creditors seeking to enforce any mortgages, which are governed by Dubai law, would have to do so in a Dubai court, according to Mark Andrews , a London-based partner at law firm Denton Wilde Sapte LLP who is advising some sukuk-holders. “That process will be neither quick nor easy,” he said. Nakheel sold parts of the waterfront land to private builders, while remaining as lead developer, according to brokers based in Dubai. It sold for as much as 95 dirhams ($26) per square foot based on the project being completed, said Ian Albert , Colliers’ regional director. That value reached about 400 dirhams at the market’s peak before falling to about 70 dirhams. Its value today is indeterminable, he said. “They put in the infrastructure and the utilities and then sold off serviced plots to private developers who would actually build the individual projects,” said Matthew Green , head of U.A.E. research at CB Richard Ellis Group Inc . “We are still awaiting further infrastructure for the project to move ahead and that’s unlikely to happen in the current environment.” Nakheel’s bonds sunk to the lowest in four days on Dec. 4 as creditors held a conference call to discuss their plans. To contact the reporters on this story: Chris Bourke in London at cbourke4@bloomberg.net ; Zainab Fattah in Dubai on zfattah@bloomberg.net .

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Abu Dhabi Stocks Advance Most Since March as Dubai Rebounds From 13% Slide

December 6, 2009

By Vivian Salama Dec. 6 (Bloomberg) — Abu Dhabi shares gained the most since March and Dubai’s index rose for the first time in three days on investor speculation last week’s drop was overdone and the impact of Dubai’s debt problems would be limited. Emirates Telecom Corp., the biggest operator in the United Arab Emirates known as Etisalat, soared the most in more than eight months. Aldar Properties PJSC and Sorouh Real Estate Co., the two largest developers in Abu Dhabi, gained after they were rated “buy” in new coverage at HC Securities. Abu Dhabi’s index climbed 3.9 percent, the most since March 24, to 2,673.12. The index tumbled 12 percent last week. Dubai’s DFM General Index added 1.2 percent after retreating 13 percent last week. Efforts by Dubai World, a state-run investment company with $59 billion of liabilities, to tackle its debts are on the right track, U.A.E. Minister of Economy Sultan bin Saeed al-Mansouri said Dec. 2, according to state-run WAM news agency. Financial and property stocks slumped last week after Dubai World requested a “standstill” agreement on all its debt payments. Nakheel PJSC, the property unit of Dubai World, has a $3.52 billion bond maturing on Dec. 14. “We’re seeing a lot of decoupling today of affected companies from non-affected,” said Mohammed Ali Yasin , managing director of Dubai-based Shuaa Securities. “Some lower prices are tempting investors to pump liquidity back into the market.” Dubai “is still a very volatile market” and will remain so at least until the Nakheel bond comes due “because people are going to be holding hope for an announcement.” Etisalat Jumps Etisalat climbed 5.8 percent to 10.95 dirhams, the biggest one-day gain since March. Gulfmena Alternative Investments said last week the stock is attractive after falling to the lowest level since August. Aldar added 1.8 percent to 4.55 dirhams, the highest level in a week. HC assigned the stock a price estimate of 6.20 dirhams. Sorouh surged 4.8 percent, its biggest gain since Nov. 2., to 2.64 dirhams. HC estimated the shares will trade at 3.20 dirhams. Oman’s MSM30 Index lost 1.2 percent on the first day of trading after the week-long Eid El Adha holiday. Bank Muscat SAOG retreated 5.9 percent to 0.773 rial. Oman’s biggest lender is owed 19.25 million rials ($50 million) by Dubai World. Qatar’s DSM 20 Index added 0.3 percent, the Kuwait Stock Exchange Index gained 0.5 percent and Saudi Arabia’s Tadawul All Share Index rose 0.3 percent. Bahrain’s measure dropped 0.7 percent. To contact the reporter on this story: Vivian Salama in Dubai vsalama@bloomberg.net

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Video: Commerzbank’s Costa Sees Abu Dhabi Taking on Dubai Debt: Video

November 27, 2009

Nov. 27 (Bloomberg) — Luis Costa, an emerging markets debt strategist at Commerzbank AG, talks with Bloomberg’s Mark Barton about the ability of Dubai to repay its debt. Dubai World, the company’s state-owned parent, will ask creditors for a “standstill” agreement on debt including $3.5 billion in Nakheel bonds that mature on Dec. 14. It’s the biggest maturity for a Dubai entity since credit markets froze last year. (Source: Bloomberg)

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Video: Commerzbank’s Costa Sees Abu Dhabi Taking on Dubai Debt: Video

November 27, 2009

Nov. 27 (Bloomberg) — Luis Costa, an emerging markets debt strategist at Commerzbank AG, talks with Bloomberg’s Mark Barton about the ability of Dubai to repay its debt. Dubai World, the company’s state-owned parent, will ask creditors for a “standstill” agreement on debt including $3.5 billion in Nakheel bonds that mature on Dec. 14. It’s the biggest maturity for a Dubai entity since credit markets froze last year. (Source: Bloomberg)

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Dubai World’s Nakheel May Need Further $2 Billion to Finish Developments

November 26, 2009

By Chris Bourke Nov. 26 (Bloomberg) — Nakheel PJSC, the Dubai-owned developer whose parent is seeking to delay debt payments, may need a further $2 billion to finish residential developments, according to an analyst based in the sheikhdom. Nakheel may be liable for about 20 percent of an estimated $11 billion required to build 40,000 homes that it and other Dubai developers have started, said Saud Masud , a real estate analyst at UBS AG . That amount represents the cost, or “funding gap,” required to complete and hand over the properties, on which investors are now defaulting, by the end of 2010. Dubai World, the company’s state-owned parent, will ask creditors for a “standstill” agreement on debt including $3.5 billion in Nakheel bonds that mature on Dec. 14. It’s the biggest maturity for a Dubai entity since credit markets froze last year. Dubai and its state-controlled entities amassed $80 billion of debt during a five-year property boom. “There may be a potential key risk stemming from Nakheel’s funding gap and I think it goes beyond the $3.5 billion that the company owes in three weeks,” Masud said by telephone. “That may be the least of what their liabilities look like.” No one at Nakheel nor Dubai World was immediately available when Bloomberg telephoned the companies for comment. Today is the start of Eid Al-Adha, a religious holiday in the United Arab Emirates. Worst Market Masud said in April that Dubai house prices might drop as much as 70 percent from their peak last year. They’ve already fallen by more than 50 percent, making the emirate the worst-hit market in the global real estate slump. Around half of the investors in the 40,000 unfinished homes may default by the end of next year, said Masud, who covers companies including Emaar Properties PJSC and Aldar Properties PJSC, the U.A.E.’s largest developers. The Dubai government said yesterday it borrowed $5 billion from state-owned banks based in Abu Dhabi, half the $10 billion Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum said he planned to raise by the end of this year. The debt raised yesterday may not be enough, said Masud. “One of the main off-balance sheet liabilities in Dubai’s property market is the funding gap to finish properties that are already started and which investors are defaulting on,” he said. “The fundamental liabilities are much larger.” There is no certainty that Dubai World will successfully postpone debt payments because creditors have to vote on the proposal, Masud said. To contact the reporter on this story: Chris Bourke in London at cbourke4@bloomberg.net .

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Dubai World May Sell Bonds to Repay Maturing Nakheel Sukuk, Bankers Say

October 21, 2009

By Arif Sharif Oct. 21 (Bloomberg) — Dubai World , the state-owned holding company grappling with $40 billion of debt, may be able to sell bonds to repay loans, including a $3.5 billion Islamic bond due at year-end, two bankers familiar with the group’s plans said. Some of the money needed to settle the Islamic bond, or sukuk, of Dubai World’s real-estate unit Nakheel PJSC may be raised from a bond sale and the rest from local lenders, said the bankers, who declined to be identified because nothing has been decided yet. Some of Nakheel’s Middle Eastern bondholders may accept an offer to extend the bond’s maturity, they said. “Market sentiment has improved a lot,” said Abdul Kadir Hussain , chief executive officer of Mashreq Capital (DIFC) Ltd. , a Dubai-based fund management firm. Dubai will still “not only have to be pretty transparent about how the sukuk will be refinanced, but also what their strategy is to tackle the emirate’s entire debt situation,” he said. The cost of protecting against a default on Dubai’s bonds for five years has fallen 70 percent from a two-year high in February, ranking it between Lithuania and Lebanon, data compiled by Bloomberg show. A successful repayment of the Islamic bond, on which investors were concerned Nakheel may default after a slump in property prices, will make it easier for banks to reschedule $12 billion of Dubai World’s debt that mature during the next three years, the bankers said. $20 Billion Rescue Fund The decision to sell bonds will hinge in part on how much money Nakheel gets from a $20 billion rescue fund the government is raising, the bankers said. Both the fund and Dubai World’s creditors are seeking more disclosure on the company’s business plan, cash flow projections and its strategy to repay debt, they said. Creditors haven’t yet reached consensus on giving Dubai World more time to repay the loans, they added. Dubai will probably complete raising the second $10 billion for the support fund to help state-owned companies through the credit crisis by the end of next month, Mohammed Alabbar , a member of Dubai’s Executive Council said Oct. 9. A spokeswoman for Dubai World declined to comment. Credit-default swaps tied to Dubai’s bonds, or the cost to protect against default, have fallen to 288 basis points from 976 basis points on Feb. 17, according to CMA DataVision prices. “The government of Dubai is likely to be able to generate some demand from institutional investors in this region and internationally,” said Chavan Bhogaita, head of credit research at National Bank of Abu Dhabi PJSC. “The key will be how much demand exists and at what price.” Investor Roadshow Dubai World’s advisers, AlixPartners LLP, Deutsche Bank AG and NM Rothschild & Sons Ltd. have drawn up alternative plans to repay the sukuk depending on whether Dubai’s fund agrees to provide Nakheel with between $1 billion and $2 billion this year, the bankers said. The Government of Dubai will hold meetings with fixed income and Islamic investors in Asia, the U.A.E. and Europe starting Oct. 22, according to a banker involved in the transaction. The government is canvassing investor interest in the Dubai Civil Aviation Authority’s plan to sell bonds and pay down $1 billion of debt maturing next month, two bankers familiar with the transaction said Oct. 18. Dubai and its state-related companies borrowed $80 billion to help transform the emirate into a financial services and tourist hub. The seizure of global credit markets sparked concern the emirate will be unable to repay some of its loans. DP World, Nakheel Dubai World said Oct. 15 it expects to save more than $800 million in three years after completing a reorganization and cutting 12,000 jobs. The Dubai government-owned company controls DP World Ltd. , the world’s fourth-biggest port operator, developer Nakheel PJSC, which is building palm-tree shaped islands off the emirate’s coast, as well as Economic Zones World, an operator of business parks like Jebel Ali Free Zone. Dubai World had $59 billion in liabilities at the end of last year and assets of $100 billion, Nakheel told Nasdaq Dubai Aug. 20. Some $18 billion of Dubai World’s debt is with companies such as DP World which have enough cashflow to service their debt, two bankers said. The remaining $22 billion is the concern, they said. “We have the right organization size now for the current market,” Jamal Majid Bin Thaniah , Dubai World’s chief executive officer, said in an interview Oct. 15. The company has no “intentions at this point in time to sell businesses within Dubai World.” Dubai World and its advisers are negotiating with its lenders, which number more than 70 and include Abu Dhabi Commercial Bank PJSC and Emirates NBD PJSC , its two biggest creditors, a person familiar with the situation said last week. Other lenders to Dubai World include Credit Suisse Group AG , HSBC Holdings PLC , Barclays PLC , Lloyds Banking Group PLC and Royal Bank of Scotland Group PLC , the person said. Representatives of Emirates NBD, HSBC, Credit Suisse, RBS and Lloyds declined to comment. Representatives for Abu Dhabi Commercial Bank and Barclays weren’t available to comment. To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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