Monday, December 14, 2009

Abu Dhabi in last minute rescue

Today is when the Nakheel $4.1 billion sukuk, or Islamic bond, is due for payment.

It's the big one. It's been the focus of much international attention since the global slump hit Dubai, attention which reached fever pitch about three weeks ago when Dubai's government said it was seeking a delay in payment of Dubai World companies' debts.

I posted about that here with links to some of the international reactions.

It had been assumed by investors and commentators that the debts of Dubai government related or owned companies were guaranteed by the government. And ultimately by oil-rich Abu Dhabi if necessary.

But both governments said that there had never been such a guarantee.

Abu Dhabi went further and said that they would 'pick and choose' which companies they supported.

Non payment would mean default, legal action to seize assets has been threatened, the whole Islamic bond industry was under a cloud...and today's the day.

A couple of hours ago the Emirates news agency WAM issued a statement from Sheikh Ahmed bin Saeed Al Maktoum, in his capacity as Chairman of the Dubai Supreme Fiscal Committee.

"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.

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..."


Phew!

Brinkmanship.

By the way, BBC World Service news says that there are no conditions on the $10 billion.

Hmmmmm...



The announcement in full is here.

9 comments:

Anonymous said...

Brinkmanship, that's right, but deep waters of decline won't shallow.

the real nick said...

And of course the BBC World Service knows everything that is being dicussed behind closed doors at the Diwan.
Not.

Seabee said...

Nick, they said that's what the Dubai Guvmint was saying.

Well, they would wouldn't they.

I'm sure I put my thoughts on an earlier post; much more federal political control and much less independence for the emirates.

As you say, behind closed doors. Not the sort of information that's going to be issued as a press release.

Anonymous said...

What would have Mo offered Sheikh Khalifa on a one-on-one, man-to-man across the board, as a take-home package for this face-saving handout?

Possibly:

Jebel Ali & Rashid Ports

The Metro

A not so teenie-weenie stake in Dubai's flagship EK (to be eventually merged with Etihad).

Possibly, the two Burj'es & the adjacent tower twins.

Ducab

Dubal

I suspect, RTA will go in the next round of handout.

Seabee said...

Anon@6.22, I don't for one minute believe that AD wants to take over assets, they have more than enough. When you have enough money what you want is power, and that's why I believe that AD wants more political power with less independence for the other emirates.

The one exception could, as a long shot, be a merger of Emirates and Etihad, but I don't think that will happen. Both have strong brands, they can continue to operate successfully as they are, to the benefit of the UAE as a whole.

Dave said...

Whatever AUH takes from DXB you can guarantee that it will be signifcant....

Anonymous said...

not brinkmanship - state-sponsored insider trading on a massive scale.

Remember that Sheikh Mohammed and his tennis partners knew this was going to happen. Can you guess what they were buying last week?

Anonymous said...

Will Abu Dhabi Help Create a Sustainable Dubai?
December 2009 SLDI Newsletter - http://www.sldi.org/newService/SLDIDec2009.html

If ever there was an urban area anywhere on Earth that epitomized the excesses of the boom years between 2002 and 2007, it has to be Dubai. A sign that this large-scale land development extravaganza was veering to unsustainable excess should have been Dubai’s decision to erect a 200-story building that would make it the world’s tallest structure. Other telltale signs should have been Dubai’s determination to build the world’s largest man-made artificial islands as well as a major ski resort in the desert – all developed with dwindling oil reserves, and without a source of sustainable food, fresh water or energy production for its burgeoning class-based society.

Now the financial bubble has burst and Dubai World, the emirate's largest state-owned conglomerate, has requested a "standstill" of subsidiary real estate company Nakheel's bondholders. The crisis in Dubai has gone beyond debt and become one surrounding the credibility of its leadership. Dubai World’s failure to honor its obligations has shaken faith among the international investment community in the emirate’s normally ebullient promotion of over-the-top, land-development practices. Dubai’s oil-rich banker brother, Abu Dhabi, is now in a position to require a price for restoring faith that is likely to be much more than just prudent borrowing and greater transparency. It is likely to be a demand for a restructuring at the top and a return to more sustainable principles.

Less than 100 miles away from the broken dream of Dubai World, a new city based on a very different dream is rising in Abu Dhabi. Being built from the ground up with sustainable living in mind, Masdar City “…will bring together the best-of-breed clean technologies: building-integrated solar photovoltaics and solar glass, solar hot water systems, smart grid technology, electric transportation, power storage, sustainable agriculture and vertical farming, water recycling and desalination, low-energy HVAC, green building materials, waste-to-energy systems... essentially everything but wind energy.”

Hopefully, under Abu Dhabi’s new guiding influence, Dubai will adopt a more sustainable development model that pursues a better balanced, triple-bottom-line return for the long-term benefit of all stakeholders. Earlier in this year of unprecedented crisis and opportunity, SLDI offered to newly-elected US President Barack Obama, and now respectfully submits to the UAE – the World’s 1st Sustainable Land Development Best Practices System that balances and integrates the needs of people, planet and profit into a holistic model that helps land development projects achieve greater success in each area.

Your participation and comments are welcome.

Terry Mock
Executive Director
Sustainable Land Development International - www.SLDI.org

Anonymous said...

Terry, what crisis are you talking about? And credibility? Dubai'leadership will always have credibility, read todays article by the Head of Arabian Business, he claims the crisis in Dubai was manufactured by "dishonest analysis" by foreign media.
It was all just a passing cloud, and Dubai is back up there, whether you like it or not