DUBAI - Dubai World is to ask all its creditors and those of real estate unit Nakheel for a six-month debt “standstill” while it restructures, the government said on Wednesday, just weeks before Nakheel’s $3.53 billion Islamic bond matures.The government also said the $5 billion bond announced earlier in the day is not linked to the restructuring of Dubai World and is for “general purpose” use.
“Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least 30 May 2010,” the government said in a statement.
“The $5 billion bond announced earlier today by the Dubai Department of Finance and managed by the DFSF (Dubai Financial Support Fund) is not linked to the restructuring of Dubai World and is meant for the general purposes of the DFSF.”
Dubai Finance Department said earlier it had secured $5 billion through a bond and sukuk fully subscribed by two banks linked to the government of Abu Dhabi.
The $5 billion is part of a $20 billion sovereign bond programme Dubai launched in February to help struggling state-related entities. The UAE Central Bank fully subscribed to the first $10 billion tranche.
Government officials had said the second $10 billion would be raised before the end of the year.
Analysts said the issuance was a positive sign that will allay some investor worries over Dubai’s ability to raise money and support its state-related entities, but that optimism turned to concern just hours later with news of the debt standstill request.
"The market had expected a timely repayment of Nakheel's $3.52 billion sukuk. If that's not going to happen, it will destroy a lot of confidence," said Eckart Woertz, chief economist at Dubai-based Gulf Research Center.
The ability of Dubai-related entities to meet debt obligations and the capacity of the government to support them has been a growing concern for analysts and investors, with the repayment of the Nakheel bond seen as a key test of the government.
Experts estimate that Dubai World’s debt and liabilities stand at around $60 billion and constitute a major chunk of Dubai’s debt of $80 billion to $90 billion.
The government said it has authorised the Dubai Financial Support Fund to “spearhead the restructure of Dubai World with immediate effect” and has appointed Aidan Birkett of Deloitte as chief restructuring officer to Dubai World.
“The CRO will work with Dubai World’s executive management team to oversee the restructuring process and ensure the continuity of Dubai World’s operations,” the government said.
Dubai World said last month it had largely completed its restructuring, cut 15 percent of its workforce to less than 70,000 and expected $800 million in operational savings over the next three years.