Dubai developer Nakheel bailed out by Abu Dhabi govt for $4.1 billion debt due today
Abu Dhabi has bailed out struggling Dubai based developer Nakheel to enable it to pay a $4.1 billion sukuk bond due to today.
The money is part of a bigger sum paid to parent company Dubai World which recently shocked the world’s markets by announcing it is seeking a six month delay on paying its debts.
‘The Government of Abu Dhabi has agreed to fund $10 billion to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World,’ said Sheikh Ahmad Bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee.
‘As a first action for the new fund, the Government of Dubai has authorized $4.1 billion to be used to pay the sukuk obligations that are due today.
The remaining funds would also provide for interest expenses and company working capital through April 30, 2010 – conditioned on the company being successful in negotiating a standstill as previously announced,’ he added.
‘In addition, the Government of Dubai is particularly focused on addressing the concerns of Dubai World trade creditors within the Emirate of Dubai.
To help address these concerns, today the Government of Dubai is announcing that the remainder of the funds provided will be used for the satisfaction of obligations to existing trade creditors and contractors.
Discussions with affected contractors will begin in short order,’ he continued.
Al Maktoum also said that the central bank is prepared to provide support to local United Arab Emirates banks and there will be a comprehensive reorganization law based upon internationally accepted standards for transparency and creditor protection.
‘This law will be available should Dubai World and its subsidiaries be unable to achieve an acceptable restructuring of its remaining obligations,’ he said.
The once rapidly booming economy of Dubai has been hit hard by the global financial crisis, which turned off the tap on easily available foreign finance, leaving many of its companies high and dry with a heavy debt burden.
The property industry has been particularly badly hit with prices falling 47% in the last year according to the latest global real estate industry index published last week by Knight Frank.
The total debt of the Dubai government and its state-run companies is a minimum of $80 billion and some experts believe it could run into $100 billion plus.
Today’s cash is not the first bail out from neighbouring Abu Dhabi. Two Abu Dhabi controlled banks subscribed last month to a $5 billion bonds package issued by the government of Dubai and the UAE central bank provided a $10 billion bond in February earmarked to help Dubai sort its debt problems.