x Abu Dhabi, UAEWednesday 26 July 2017

Questions emerge on relief for Dubai

Comment Excitement about Dubai World's US$10 billion relief package on Monday turned to calm as investors absorbed the news.

Excitement about Dubai World's US$10 billion (Dh36.73bn) relief package on Monday turned to calm as investors absorbed the news and began to piece together its consequences. Markets which shot up on the day of the announcement pared some of those gains. While the cash injection was essential for Dubai World to pay its pressing debts, including a $3.5bn Islamic bond that came due on Monday and was paid off yesterday, many questions remained unanswered. It was unclear, for example, what conditions, if any, were attached to the $10bn.

It also remained a mystery how much more support might be forthcoming from the Abu Dhabi Government, or whether further help was needed for other Dubai companies on the ropes. As the initial surprise wears off, the details of the package, as well as the willingness of governments in Dubai and Abu Dhabi to support struggling companies, will take centre stage. As the task begins of distributing aid, judging the claims of creditors and restructuring debt, a band of lawyers, accountants and consultants are getting down to business. Already, a steering committee has been formed of banks owed money by Dubai World and its subsidiaries. Creditors have also scheduled a meeting next week to discuss their claims.

As tempting as it may be to see the $10bn rescue as a panacea, much work remains to be done. Many firms are being retooled to confront new economic realities. Management changes have become commonplace. And, lest we forget, tens of billions of dollars of borrowings by government-owned firms are set to come due in the next three years; they too need to be repaid. Progress, it seems, is being made, but it may take years, not mere months, for all the bills to be paid, all the debts to be restructured and all the contractors to get their due.

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