Dubai Prefers Loan Restructuring to Bailout

123jump.com Staff
30 Nov, 2009
New York City

U.S. stocks are expected to open lower after Dubai government says that lenders should work with Dubai World to restructure loans. the benchmark indexes in UAE dropped more than 7%. Talks of regional bailout in the Middle East gain momentum.

[R]8:30 AM New York – U.S. stocks are expected to open lower after Dubai government says that lenders should work with Dubai World to restructure loans. the benchmark indexes in UAE dropped more than 7%. Talks of regional bailout in the Middle East gain momentum.[/R]

Markets in Asia closed higher and European markets trended lower ahead of the market opening in New York.

Dubai Takes Hand-off Approach

Dubai worries are expected to dampen trading in New York as investors struggle to estimate the extent of the problem. Dubai World, a state controlled real estate and development entity has asked its lenders to freeze the debt repayment for the next six months.

Markets around the world have been jittery since the request on November 25.

Dubai government officials played down its responsibilities in supporting Dubai World.

Abdulrahman Al Saleh, Director General of Department of Finance told today in an interview with Dubai TV that lenders had granted the financing to Dubai World “on its project schedule, not a government guarantee.”

Dubai’s DFM General Index, the benchmark general index declined 7.3% to 1,940.36 and Abu Dhabi’s ADX General Index plunged 8.3% or 241.93 to 2,668.23.

Investors have always assumed that if Dubai gets in trouble Abu Dhabi will provide the assistance. So far, Abu Dhabi has refused to provide blank check guarantee and officials in Abu Dhabi are insisting that the government may provide assistance on a “case by case basis.”

So far Abu Dhabi has avoided in providing direct support to the troubled construction subsidiary Nakheel PJSC. However, investors in the region are expecting a regional conference of rulers of Dubai, Saudi Arabia, Abu Dhabi, Qatar, Kuwait and Bahrain to build a consensus for a regional bailout.

Dubai has halted 400 construction projects totaling $300 billion of investments.

Dubai government may have issued implied guarantee to various projects of as much as $100 billion according to Moody’s Investors Services and $25 billion may be bad debt.

Earnings Review

Aberdeen Asset Management Plc, an independent asset management company said full-year revenues fell 2% to £421.9 million from £430.1 million a year ago. Net loss for the full-year was £8.07 million or 1.71 pence per diluted share compared to net profit of £35.2 million or 4.52 pence per share a year ago.

Thomas Cook Group plc, the travel operator said full-year revenues rose 6% to £9.3 billion from £8.8 billion a year ago. Net profit for the full-year rose 46% to £15.8 million or 1.8 pence per diluted share compared to net profit of £10.8 million or 4.6 pence per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 264.03 or 2.91% to 9,345.55, and Hang Seng index in Hong Kong increased 687.00 or 3.25% to 21,821.50, and CSI 300 index in China higher 129.16 or 3.82% to 3,511.67. ASX 200 index in Australia increased 129.20 or 2.83% to 4,701.30 The FTSE Bursa KL Composite index in Malaysia was lower 11.50 or 0.91% to 1,259.11.

The Kospi Index in South Korea increased 31.10 or 2.04% to close at 1,555.60. SET index in Thailand closed higher 8.70 or 1.28% to 689.07. JSE Index in Indonesia increased 22.32 or 0.93% to 2,415.84. The Sensex index in India increased 294.21 or 1.77% to 16,926.22.

Europe Markets Review

In London FTSE 100 Index traded lower 28.99 or 0.55% to 5,216.74, in Paris CAC 40 Index decreased 27.62 or 0.74% to 3,693.83 and in Frankfurt DAX index traded lower 38.57 or 0.68% to 5,647.04. In Zurich trading SMI decreased 50.71 or 0.80% to 6,285.95.