Wednesday 13 December 2017

Mandelson: Dubai debt crisis will put off future investors

The Palm Island development, built by property developers Nakheel in Dubai
The Palm Island development, built by property developers Nakheel in Dubai
An artist's impression of the $20bn Burj Dubai skyscraper

Jason Benham

DUBAI's handling of the debt crisis at flagship Dubai World will affect its ability to attract future investment, British Business Secretary Peter Mandelson said yesterday, amid a report the firm may be about to offer creditors just 60 cents on the dollar.

Mr Mandelson said the Gulf Arab emirate, which shocked global markets in November with plans to delay repayment on $26bn (€19bn) in debt, must reach a "demonstrably fair" deal with creditors.

Dubai yesterday denied a Dow Jones report that it was mulling a two-part deal, including one that may repay lenders 60pc over seven years.

"Dubai has to be conscious of the fact that how it resolves its problems will mean a great deal for the Dubai brand, its reputation and how it secures investment from overseas in the future," Mr Mandelson said.

"Time is running out. The current uncertainty and the lack of agreement can not go on for much longer."

Dubai World is in talks with banks on the debt delay -- about $22bn linked to its main property units Nakheel and Limitless World -- but has yet to present a formal proposal.

Bailout

It staved off default on a $4.1bn Islamic bond linked to Nakheel, after a last-minute bailout from Abu Dhabi in December.

Investors reacted with dismay to the reported proposal.

"A 40pc haircut is potentially larger than what people were expecting, plus there's the extra sting in the tail of seven years," said Ali Khan, managing director and head of brokerage at Arqaam Capital. "That's weighing heavily on the market."

Dubai's benchmark index slumped 4.1pc on investor worry about such a deal. It closed down 3.5pc.

Citing two unnamed bankers, Dow Jones said the firm may offer 60 cents on the dollar in a plan that may come with a sovereign guarantee but does not pay interest.

The second offer may see creditors get full repayment, including 40pc of their Dubai World debt in the form of assets in Nakheel, with no government guarantee and also over seven years.

"There will be two offers on the table by the end of April," one banker told Dow Jones.

The ruler's media office said it had not made any offer to Dubai World creditors and no offer would come before March or April.

Irish Independent

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