No guarantee on Dubai Worlds Debt

"Creditors need to take part of the responsibility for their decision to lend to the companies. They think Dubai World is part of the government, which is not correct," Abdulrahman al-Saleh, director general of Dubai's department of finance, said on Dubai TV, according to Reuters.

Dubai World, the state-owned conglomerate behind the emirate's astonishing rise, triggered a collapse in world equity markets last week when it said it would delay repaying its debts, raising fears about the knock-on effects on the fragile global recovery.

It has run up debts of $59bn (£36bn) creating the emirate's "Palm Islands" and buying stakes in high-profile assets such as the London Stock Exchange and US department store Barneys.

The comments raised worries about how companies with exposure to Dubai World will fare in a restructuring without government help.

Earlier, stock exchanges in Dubai and Abu Dhabi suffered record one-day losses on fears over debt defaults, pushing London's FTSE 100 index lower in morning trading.
Dubai's index sank 7.3pc, its biggest one-day fall since October last year. Abu Dhabi's Securities Exchange endured the largest one-day loss in its history as it ended the session down 8.3pc.

London's index of Britain's 100 biggest companies fell 54 - or 1pc - to 5191 points at one stage. Trading in the FTSE 100 has been volatile with the index opening up before falling. Bourses in Germany and France following a similar pattern as London.
Investors remained jittery about the possible fallout for banks which have loaned money to the Gulf state. The biggest fallers were state-owned Royal Bank of Scotland and bailed-out Lloyds, down 5.8pc and 4.3pc respectively. Barclays and Standard Chartered also fell, with HSBC slightly up.

Tim Hughes, head of sales trading at IG Index, said: "Today’s move in London could equally just be put down to a normal pullback after Friday’s rise. We are likely to see a lack of direction ahead of the US open and a steady session on Wall Street should ensure that markets return to normality for the rest of the week."

Nakheel, the troubled "Palm Islands" developer at the heart of Dubai's debt crisis, today asked the exchanges to stop trading its bonds until it was in a position to provide further information about the restructuring exercise to which it is being forcefully submitted.

Authorities in the United Arab Emirates sought to reassure investors again yesterday when its central bank issued a statement promising to "stand behind" local and foreign banks operating in the country.

"Central Bank has issued a notice to the UAE banks and branches of foreign banks operating in the UAE, making available to them a special additional liquidity facility linked to their current accounts," it said. The facility would be at 50 points above the Emirates inter-bank offered rate.

The announcement calmed international fears about exposure to a new debt crisis from the problems afflicting Dubai World, a state-run holding company, and a consequent further credit crunch.

Earlier in Asia, the MSCI Asia Pacific Index climbed 3.3pc, with banks and South Korean conglomerate Samsung, whose engineering arm is responsible for some of Dubai's prestige high-rises, both doing well.

Nakheel said it wanted the exchanges to halt trading on its three major sukuks, or Islamic bonds, including the $3.5bn (32.1bn) sukuk due in two weeks' time that is at the centre of the liquidity problems of Dubai World, its parent company.

“Following the announcement on Wednesday 25 November from the Government of Dubai, Nakheel has today asked for all three of their listed sukuks to be suspended until it is in a position to fully inform the market,” it said in a statement to the exchange, Nasdaq Dubai.
Both emirates are rampant with speculation about terms and conditions for a bail-out of Dubai World, but negotiations seem to be continuing at a political level even as the chief restructuring officer, Aidan Birkett of Deloitte, starts going through the books.

At issue are not only unpaid debts but also a string of unfinished property developments across Dubai - and out into the sea.

Nakheel is fully owned by Dubai World and has no listing.

Another subsidiary, DP World, though, the ports operator which bought P&O three years ago, fell 15pc to 36.6 cents, even though it has been excluded from the restructuring exercise.

Other big losers in Dubai were property companies. Emaar, another state-run firm, the largest developer in the UAE and the name behind the world's tallest building, Burj Dubai, fell 9.9pc to 3.75 dirhams.

Like DP World, its credit ratings were cut after the Dubai government statement on Wednesday, which said Dubai World was seeking a standstill on its debt repayments while it restructured.

National Bank of Abu Dhabi, which bought into a new $5bn bond issuance by the Dubai government's financial support fund on Wednesday, fell 9.7pc to 12.1 dirhams.

Source: telegraph.co.uk