Sheikh Mohammed bin Rashid says the economy of the emirate is "strong and persistent" despite financial problems at Dubai World
Dubai Ruler: media and markets 'fail to understand situation'
Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, says the economy of the emirate is "strong and persistent" despite financial problems at Dubai World, the government-owned property and ports conglomerate. At a celebration for the UAE's National Day yesterday, he added that global markets and media "do not understand anything" in their reaction to the Dubai World situation.
"We are strong and persistent," Sheikh Mohammed said, adding that, "it is the fruit-bearing tree that becomes the target of stone-throwers, or anything else in their hands". He insisted that the company was "independent of the government", underlining Monday's statement from the Department of Finance that Dubai World's debts would not be guaranteed by the sovereign. This line was echoed by Sultan al Mansouri, Minister of Economy, who also said the country had proved its strength in times of crisis and prosperity.
"The UAE has already taken concerted efforts to meet the challenges arising from the financial crisis," Mr al Mansouri said. "Several practical steps were initiated including guaranteeing bank deposits for three years and injecting liquidity into the banking system." The comments from leaders came as international markets digested the news that Dubai World was in talks with bankers on the future of its property units, Nakheel and Limitless.
Early yesterday Dubai World said it had identified US$26 billion (Dh95.5bn) of debts and liabilities associated with the two groups, over which it would be seeking negotiations with creditors. Michael Atkin, of Putnam Investments in Boston, told Bloomberg the $26bn "confirms that it's a relatively minor problem". Nick Chamie, of RBC Capital Markets in Toronto, added: "Now they're saying $26bn it reduces some of the panic that built up in the last few days. This is positive."
Rachel Ziemba of Roubini Global Economics in New York said: "Even though it's going to be tough to restructure $26bn of debt, Dubai World creditors have an incentive to do so in order to reduce the 'haircut' they will have to take." But there remained lingering fears that Dubai World might have to sell assets at knock-down prices, something the group has reportedly been resisting for several months.
Khuram Maqsood, the managing director of Emirates Capital and former director of Istithmar, told Reuters: "I don't think they're in a position to choose - I don't think anything is sacred in the current environment." Immediate attention will focus on the negotiations regarding the $4bn payment on Nakheel's sukuk due on December 14. There has been significant buying of the sukuk on the "grey market" in London and New York, despite the fact that trading has been suspended on NASDAQ Dubai.
QVT Financial, a hedge fund based in New York, has been trying to organise bondholders to present a united front in talks with Dubai World advisers. One New York bondholder, who declined to be named, said he felt that creditors had some leverage with Dubai World over the sukuk that matures this month, which he said was backed by group assets including those in the US. Moelis and Company, a specialist investment bank with corporate restructuring expertise, has been appointed by Dubai World to lead talks with US bondholders and investors.
Bondholders have appointed Ashurst, a London law firm, to handle negotiations with Dubai. Nakheel's 2009 sukuk traded in the low-50 cent region yesterday on the grey market, down from 59 cents the previous day. @Email:firstname.lastname@example.org