Dubai World seeks debt moratorium Property developer Nakheel was due to pay off nearly $3.5bn in bonds in December [EPA] The government of the Gulf emirate of Dubai says it will ask creditors of its cash-strapped Dubai World conglomerate to accept a moratorium on debt worth billions of dollars. The government announced the move on Wednesday as part of a plan to restructure the state-run company and its property developer subsidiary Nakheel. “Dubai World intends to ask all providers of financing to Dubai World and Nakheel to a ‘standstill’ and extend maturities until at least 30 May 2010,” a statement issued by the Dubai Financial Support Fund said. Nakheel, the developer of the emirate’s palm-shaped residential islands, was due to pay off nearly $3.5bn in maturing Islamic bonds in December. Wednesday’s announcement pushed up the cost of insuring Dubai’s debt against default and brought down bond prices, the Reuters news agency reported. Nakheel’s Islamic bond prices fell more than 20 points to 87. The announcement came just hours after Dubai said separately that it raised $5bn from two local banks, the second instalment of what officials had said would be a $20bn borrowing programme. The bond programme was unveiled in February, with the federal government of the United Arab Emirates picking up the entire first tranche. Billions in debt Dubai World has $59bn of liabilities, a large proportion of the Gulf emirate’s total debt. The company, which owns Barneys New York, hired an advisory firm in August to help it explore options to shore up the US luxury chain’s financial position. Dubai World had been trying to persuade bank creditors to restructure up to $12bn of its loans, an indication that the emirate is starting to grapple with the challenge posed by its $80bn-plus debt pile. Dubai accumulated its debt as it expanded in banking and real estate projects before the global financial crisis dried up available financing. Dubai is showing signs of recovery on the back of global economic optimism. However, restructuring Dubai’s government-linked debts remains a top priority as the government seeks to assure a rebound for its trade, tourism and services-focused economy and recover from the precipitous property crash.
