The United Arab Emirates said it will issue $20 billion in long term bonds and the first half of that is already fully subscribed by the UAE's Central Bank.
It has been expected since Dubai financed much of its recent growth with international borrowing and a big chunk of that debt comes due this year.
'The bond issuance will provide Dubai with the necessary liquidity to substitute the liquidity that has dried up globally in the last 12 months and accordingly meet all upcoming financial obligations,' a statement said. The bond will be unsecured, fixed-rate paper, yielding 4% a year, with a five-year maturity.
However analysts say it is unclear if this will be enough to keep Dubai from turning into a cityscape of half-finished buildings. Last week that a handful of international banks participated in a modest refinancing of one loan, for $3.8 billion, that was coming due. But they didn't agree to lend much, forcing Dubai's government to step in.
The bailout comes as Dubai's once-soaring real-estate market comes crashing down. Prices in some areas have fallen by 50% or more and sales have slowed leading to massive cash flow problems for developers.
Property developers are now scrambling to shed employees, cancel or postpone billions of dollars worth of projects and extend installment plans to avoid missed payments. Banks, meanwhile, aren't lending to buyers or to developers.
'Suddenly, the sales stopped, and when developers went to the banks, they found there was a credit freeze,' said Saleh Muradweij, a director at contractor Drake & Scull.
Jim Delkousis, a partner in the Dubai practice of DLP Piper, a business law firm, says the practice has seen a significant increase in debt-collection claims in the construction industry.
Major developers have seen profits plunge and last week, state owned Emaar Properties said it will recommend withholding dividends at its annual meeting next month in order to save cash.
The strain is reaching the very top of Dubai's corporate empire. Earlier this month, Dubai Holding, the conglomerate controlled by Dubai ruler Sheik Mohammed bin Rashid al Maktoum said it would merge its two investment firms and combine the back offices of three of its property developers to cut costs.
Cranes loom over dozens of half-finished or just-started buildings along Sheikh Zayed Road, the eight-lane superhighway that serves as Dubai's main artery. Other buildings are finished but empty.
Foreign workers, from professionals to laborers, are leaving in droves, many simply abandoning their cars at the airports.
