Post by gfaroukh on Feb 16, 2010 23:13:48 GMT 4
Dubai World debt strategy sends stock tumbling
Published on 02-16-2010
Source: Telegraph
Stock markets in Dubai were down this morning as investors reacted nervously to the latest proposed solution to Dubai World’s $22 billion (£14 billion) debt crisis.
The city’s main index, the Dubai Financial Market fell 0.83 per cent in early trading as it emerged that the troubled state-owned conglomerate plans to offer its creditors just 60 per cent of their money back.
The exchange plunged 3.5 per cent yesterday when news of the proposal first leaked. Dubai World has been locked in talks with creditors for almost two months and bankers said yesterday that the two sides remain poles apart on the substantial issues of the negotiations.
The offer floated by Dubai World would see the group’s banks take a 40 per cent “haircut” on their investment in return for a sovereign guarantee that they will be repaid after seven years.
Under an alternative proposal being prepared by Dubai World, the banks would be repaid in full. However, 40 per cent of this would be formed of assets in Nakheel, the group’s struggling property developer, and the agreement would not carry a sovereign guarantee.
The banks have already signalled that they do not wish to take on real estate assets to cover their debts. Many of Nakheel’s extravagant construction projects have been suspended or scrapped following the collapse of Dubai’s property market last year.
The banks have become frustrated at the slow progress of the negotiations, which began in late-December. A proposal to secure a six-month standstill on all Dubai World’s debt repayments was expected by the end of January but has yet to emerge.
Bankers said yesterday that they believe the latest offer from Dubai World is an effort to test the water. Although the group’s major creditors are willing to accept a long-term restructuring, they remain committed to getting most, if not all, of their money back.
Published on 02-16-2010
Source: Telegraph
Stock markets in Dubai were down this morning as investors reacted nervously to the latest proposed solution to Dubai World’s $22 billion (£14 billion) debt crisis.
The city’s main index, the Dubai Financial Market fell 0.83 per cent in early trading as it emerged that the troubled state-owned conglomerate plans to offer its creditors just 60 per cent of their money back.
The exchange plunged 3.5 per cent yesterday when news of the proposal first leaked. Dubai World has been locked in talks with creditors for almost two months and bankers said yesterday that the two sides remain poles apart on the substantial issues of the negotiations.
The offer floated by Dubai World would see the group’s banks take a 40 per cent “haircut” on their investment in return for a sovereign guarantee that they will be repaid after seven years.
Under an alternative proposal being prepared by Dubai World, the banks would be repaid in full. However, 40 per cent of this would be formed of assets in Nakheel, the group’s struggling property developer, and the agreement would not carry a sovereign guarantee.
The banks have already signalled that they do not wish to take on real estate assets to cover their debts. Many of Nakheel’s extravagant construction projects have been suspended or scrapped following the collapse of Dubai’s property market last year.
The banks have become frustrated at the slow progress of the negotiations, which began in late-December. A proposal to secure a six-month standstill on all Dubai World’s debt repayments was expected by the end of January but has yet to emerge.
Bankers said yesterday that they believe the latest offer from Dubai World is an effort to test the water. Although the group’s major creditors are willing to accept a long-term restructuring, they remain committed to getting most, if not all, of their money back.