Dubai can't pay

Dubai has shocked investors by asking for a debt standstill at Dubai World, the government's flagship holding company that has developed some of the world's most extravagant real estate projects.

"This will destroy confidence in Dubai, the whole process has been so opaque and unfair to investors," said Eckart Woertz, economist with Dubai's Gulf Research Centre.

edition.cnn.com...

Just read about this here. Sounds like this might be a big bump.

Global stock markets tumbled Thursday on mounting anxiety over a debt default request by Dubai and tighter lending conditions in China, analysts said.

London lost 1.86 percent to 5,264.97 points in late morning trade but was suspended at about 1030 GMT owing to a technical issue.

The London Stock Exchange said it was investigating the "root cause" of the problem and would update investors when it had further information.

Elsewhere, Frankfurt dived 1.80 percent to 5,698.99 points and Paris plunged 1.89 percent to 3,737.06 points at the half-way stage.

In Asia, Beijing nosedived 3.62 percent, Tokyo fell 0.62 percent and Hong Kong closed 1.78 percent lower. Chinese shares were also hit by the prospect of tighter banking rules and worries about monetary policy next year.

"We have two major factors weighing on equities and other risk markets: Dubai's call for a moratorium on its debt repayment to May and more stringent capital adequacy requirements for Chinese banks -- but Dubai is bigger," David Morrison, an analyst at financial betting firm GFT, told AFP.

The government of Dubai shocked financial markets on Wednesday when it said it would ask creditors of its Dubai World conglomerate for a debt moratorium of at least six months.

The Dubai government announced that it would revamp the Dubai World group and wanted its lenders to extend its maturing debt until at least May 2010.

And this is the final nail in the coffin for good ol' Dubai. I will visit the place in a decade or so, just to see what happens to a city full of abandoned 5 star hotels and mega complexes.

Dubai just defaulted on their loans. They just declared bankruptcy.

They are halting all investment returns until May, because they have no money and need time to strategize so as not to officially default. But had they not placed a Moratorium on themselves, which is completely unfair and is considered cheating, they would have defaulted.

Great timing.

Turkey Day and all in the USA.

Bank of Scotland, HSBC, and a few others will be caught with pants down...meanwhile back in Saudia Arabia we have the making of a "conflict".

I may say that it won't be a fun place to be in anyway, expect tourists to go to jail for looking at other women or kissing on the cheek and for maybe a romp on the beach. How will their own strict laws effect them in the long run?

Dubai: An arid Disneyland for the 9-figure crowd where all the fun takes place behind closed, bullet-proof brass doors. Fail.

What does this say about the rest of the world's economies??? Is this the shape of things to come??? I thought Dubai was one of, if not the richest country in that part of the world I don't get it... All those above expensive hotels and resorts and private man made islands you can see from space...I thought all that was funded with oil dollars...Maybe this has something to do with the move from the petro dollar to the euro????

Should this be a surprise? Dubai was a facade, a life-size model city. The citizens born there were being 'restrained' for lack of better words for the sake of making money from tourists.

Originally posted by ARNOMANNN
What does this say about the rest of the world's economies??? Is this the shape of things to come??? I thought Dubai was one of, if not the richest country in that part of the world I don't get it... All those above expensive hotels and resorts and private man made islands you can see from space...I thought all that was funded with oil dollars...Maybe this has something to do with the move from the petro dollar to the euro????

Dubai is as close as humaity has ever come to a concrete manifestation of the global financial bubble now imploding.

Like the bubble, it was created artificially out of nothing, in the middle of an arid desert. Like the bubble, it required constant new inputs: it was not a self-sustaining system that could survive in the absence of trucked-in resources. Like the bubble, it was highly privitized and lacked any sort of natural public culture: No bustling city-squares or famous public parks. Like the bubble, all the fun took place behind closed doors, with imported sex-slaves and narcotics in grotesquely opulent, nouveau-riche-style hotel suites. Like the bubble, it sprang up overnight, going from zero to sixty in less than a decade. Like the bubble, its facade of extreme wealth was complemented by the a carefully-hidden underworld of extreme misery: sex workers, dollar-a-day laborers imported from less fortunate nations, and gritty corruption. And, perhaps, most tellingly, like the bubble it was finaced based on future promises (i.e., debt) rather than actual productive activity such as industrial manufacturing.

Some more details on this collapse of Dubai, and possibly Abu Dhabi.

The Dubai government has been forced to call in accountants Deloitte to advise on a financial restructuring, as its economy buckles under $80billion of debt.

Dubai World, the conglomerate which was the driving force behind the emirate's rapid expansion, is asking creditors to give it some breathing space on the $59billion of loans racked up by the firm and its subsidiary Nakheel.

Dubai World accounts for the bulk of Dubai's debt, having geared up to invest in property and finance. It also owns DP World, owner of the former P&O ports operator.

It has been widely assumed that Dubai's neighbour Abu Dhabi, the capital of the United Arab Emirates, would provide further loans. But now investors are not so sure. It has already bailed out Dubai with $10billion this year.

The cost of insuring Dubai's debt against default soared yesterday. Also in Abu Dhabi, the price of insuring its own debt rose, so it now costs $134,600 per year to insure $10million of its sovereign debt.

Deloitte has flown out a specialist team from London to work on the restructuring.

A spokesman said: 'We can confirm that Aidan Birkett, managing director for corporate finance at Deloitte, has been appointed chief restructuring officer to Dubai World.'

Dubai World is likely to be forced into asset sales after the credit crisis triggered a crash in the value of its property assets and decimated finance and tourism in the state. House prices in Dubai slumped by 47 per cent in the second quarter, compared with a year ago.

The Dubai government last week removed the chairmen of Dubai Holding and Dubai World, two large state-owned firms.

The emirate is due to repay $4.3billion in loans next month and another $4.9billion in the first quarter of 2010, according to Deutsche Bank.

Shakeel Sarwar, head of asset management at SICO Investment Bank said: 'It's shocking because for the past few months the news coming out has given investors comfort that Dubai would most probably be able to meet its debt obligations.'

Source

[edit on 11/26/09 by Ferris.Bueller.II]

I am sure that UAE is going to be fine the have a lot of money stashed away and weapons also.
See this thread that they were biggest weapon purchaser fron USA in 2008.
They new that this step will come one day and were getting ready for something big...
www.abovetopsecret.com...


So this is my 0.02

reply to post by xxxcosta


Not just any weapons, though. They also acquired US missile defense shield. And it was not on most MSM and no one actually started a thread here on ATS about it. It was reinhardt who first alerted folks about it.

Originally posted by whiteraven
Great timing.

Turkey Day and all in the USA.

Bank of Scotland, HSBC, and a few others will be caught with pants down...meanwhile back in Saudia Arabia we have the making of a "conflict".

Indeed.

Investors recoiled from risky assets on Friday and dumped shares in Asian banks and builders, fearing a Dubai debt default could reignite the financial turmoil of the credit crisis.

Stocks in Tokyo and Hong Kong were haunted by suspicion that lenders such as HSBC may be exposed to the Dubai firms that built palm-frond shaped islands in the Gulf and planned cities from Pakistan to Africa.

The news shook the markets that were recovering from the collapse of the U.S. housing market and contagion that threatened to rupture the global financial system last year.

"The panic button's been hit again," said Francis Lun, general manager of Fulbright Securities.

Shares in HSBC Holdings dropped more than 5 percent and Standard Chartered fell 10 percent. The London listed shares of the two lenders led the biggest tumble in European bank stocks in six months on Thursday.

The Dubai crisis could have a "meaningful impact" on banks across Asia, said Daniel Tabbush, Asia banks analyst at CLSA in Bangkok, listing Standard Chartered, HSBC and Singapore's DBS Group as the most exposed in the region.

Builders took a beating from Seoul to Sydney on concern that money due from Dubai's grandiose construction projects, including the world's tallest building, would not be paid.

The delays in debts payments and the risks for a global financial system battered by bank failures in Europe and the United States, raised fears of a fresh wave of market turmoil.

www.reuters.com...

Europe shares suffer biggest 1-day drop in 7 months

www.reuters.com...

Dubai debt may be even higher according to an article on Bloomberg.com

“Perhaps Dubai’s debt includes sizeable off-balance sheet liabilities that imply a total debt burden well above the $80 billion to $90 billion markets have estimated so far,” real estate analyst Saud Masud wrote in a note yesterday. “This could imply that the debt issued by Dubai in recent weeks is insufficient to meet upcoming redemptions.”

We had friends that moved out to Dubai around this time last year. They had guaranteed jobs which included accommodation and a place at a private school for their son. It quickly became apparent that things weren't all they seemed and after 6 months they moved back here. Things are pretty dire in Spain at the moment because the area we live in relies heavily on property and tourism. Many ex-pats are leaving Spain, which has almost 20% official unemployment, so I was really surprised to see our friends back here but they said it's not as bad as Dubai.

So, who's gonna default next?

Stock volatility and risk aversion may jump as countries and companies default on loans, according to Das, the head of market research and strategy at RGE, the advisory firm founded by Nouriel Roubini.

Samsung Engineering Co. tumbled 9.8 percent, leading declines among construction stocks on concern orders may slow in the United Arab Emirates, South Korean builders’ biggest overseas market.

www.bloomberg.com...

Saudi Arabia bit off more than they could chew, they thought that the world would flock to their 'new edens' but whilst they were planning on and building islands in the sea to house the super rich they forgot that the rest of the world was suffering, and that there are more sufferers than rich.

Now they had these grand plans that the people would see these new 'must haves' and rush to own them, but they shot themselves in the foot by not allowing themselves to catchup to modern times, and the stories of outdated, by the rest of the worlds standards , judicial and humanitarian practices made the world realise that " whats the point of living in paradise if you are not allowed to enjoy freedom"?
So most if not all of those grand designs literally fell back into the sea.

Plus all the oil magnates that are over there thought they could really control the distribution of the oil are now claiming that should the world no longer need oil that they should be compensated? . The world got tired of the Saudis and their plans and now look whats happened. Expect to see some of them heading over the the UK and US claiming asylum as they are 'oppressed' in their home states ( re. make that too many beggars asking for their cash).

Dubai deserves to fail, end of story.

Yes, I'm aware of the ripple effect it will have on our superficial world economy.

reply to post by DataWraith


Uh, what? This UAE, not Saudi.

I'm sure the Saudis approve of this demise as the UAE was planning to become a regional political power:

Dubai's debt troubles have exposed the fallacy of its once much-vaunted "model" of raising shining cities in the desert with foreign residents, finance and labor.

They have also set in train a power shift toward Abu Dhabi.

The fiasco is playing into Abu Dhabi's ambition to unify UAE policies, clean up the Gulf state's image and project the country as a political power in the region.

www.reuters.com...

reply to post by eldard


Yep I stand corrected but all still the same anyhow. Outdated notions overtaken by faster greed.
You reap what you sow.