Abu Dhabi Bails Out Dubai World With $10 Billion

By Haris Anwar
Bloomberg

Abu Dhabi provided $10 billion to help Dubai World, the state-owned holding company, meet its obligations, including $4.1 billion needed to repay an Islamic bond maturing today for the real-estate unit Nakheel PJSC.


Dubai will use the rest of the money to pay Dubai World’s contractors, suppliers, interest and operating costs until the company reaches a standstill agreement with its creditors, Dubai’s government said in an e-mailed statement today. “This support provides funding and a stable basis for the restructuring process, which continues,” Dubai World said in a separate e-mailed statement.

Dubai shares surged the most in 14 months, and Asian stocks and U.S. index futures rebounded from losses on optimism that the emirate’s debt problems won’t spread to other emerging markets. Dubai World said Dec. 1 it’s seeking to restructure $26 billion of debt, less than half the $59 billion of liabilities it had at the end of 2008.

“It comes as a relief for the market, underpinning hopes that the implicit government support for Dubai corporate issuance is intact,” said Jason Watts, head of credit trading at National Australia Bank Ltd. in Sydney. “Whilst we are not out of the woods yet, it is definitely a step in the right direction.”

Dubai Shares Jump

Dubai’s benchmark share index added 10 percent, the most since October 2008, to 1,866.82 at 10:04 a.m. in the emirate. The measure had lost 19 percent since Dubai World on Nov. 25 sought a “standstill” agreement on its debt. Abu Dhabi’s measure climbed 6.1 percent. The MSCI Asia Pacific Index rose 0.6 percent to 120.37 at 4:20 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index rose 0.8 percent.

“The fund injection gives some leeway to Dubai World to put together an orderly debt restructuring plan as it tries to alter its debt profile,” said Abdul Kadir Hussain, chief executive officer of fund manager Mashreq Capital DIFC Ltd.

The cost to protect Dubai’s five-year bonds from default plunged 32 percent, with credit-default swap contracts falling 175 basis points to 375 basis points, according to National Australia Bank Ltd. Prices.

While Dubai’s government owns 100 percent of Dubai World, it hasn’t guaranteed the company’s debt and creditors must help it restructure, Abdulrahman Al Saleh, director general of Dubai’s Department of Finance, said Nov. 30. Read More...