DUBAI/LONDON — Dubai struggled to ease fears of debt default on Thursday after its move to delay repayments at two flagship firms shook confidence in the Middle East as a centre for investment and a source of capital.
Dubai’s debt problems, a hangover from a property boom that produced the world’s tallest building, have shaken trust among Western investors who turned to the oil-exporting Gulf region for help during the global financial crisis.
The emirate said on Wednesday it would ask creditors of Dubai World, the conglomerate behind its rapid expansion, and Nakheel, builder of its palm-shaped islands, to agree a standstill on billions of dollars of debt as a first step toward restructuring.
On Thursday, Dubai tried to revive confidence by saying its profitable DP World, which runs 49 ports around the world, would not be involved in the restructuring. DP World, which has US$3.25-billion outstanding bonds, is majority owned by Dubai World but has shares listed on NASDAQDubai.
“It might be a move to distinguish the solvent from less solvent companies in an attempt to shift the weight away from the less exposed entities,” said John Sfakianakis, chief economist at Saudi Fransi bank.
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It’s hard to feel sorry for Dubai when they’ve spent umpteen billions of dollars making man-made islands and building mega-projects. A fool and his money??
Also, are there other ‘Dubai’s just around the financial corner?