Dubai state steers clear of troubled company

THE Dubai government disclaimed responsibility for the debts of Dubai World yesterday, dealing a blow to creditors' assumptions that the Arab emirate would guarantee the conglomerate's liabilities.

THE Dubai government disclaimed responsibility for the debts of Dubai World yesterday, dealing a blow to creditors' assumptions that the Arab emirate would guarantee the conglomerate's liabilities.

"Creditors need to take part of the responsibility for their decision to lend to the companies," said Abdulrahman al-Saleh, the director-general of Dubai's finance department.

"They think Dubai World is part of government, which is not correct."

United Arab Emirates stocks plunged yesterday as investors waited for clarity on Dubai World's request for a delay until May next year on repaying billions of dollars in debt issued by Dubai World and its Nakheel unit, the developer of three palm-shaped islands in the emirate.

Saleh's remarks in an interview with Dubai TV came after UAE markets closed.

"They have confirmed there is going to be restructuring and are doing what they can to differentiate between government and companies," said Mohieddine Kronfol, managing director of Algebra Capital.

"It doesn't take away from the fact that you have a major potential event that is unravelling. People's expectations aren't going to be met with this announcement."

Pledges of financial support have come from the UAE's central bank, helping to steady global markets.

The central bank promised additional liquidity to local banks, and an official in Dubai's neighbour, Abu Dhabi, said on Sunday it would offer selective support to Dubai firms.

Dubai World - which had about R438billion of liabilities as of August - shocked investors last week with news of the standstill request while it restructures, along with Nakheel. The agreement would affect about R42,4billion of debt due to mature before the end of May next year.

Nakheel yesterday asked for three of its Islamic bonds, worth about R39billion, to be suspended on Nasdaq Dubai until it was in a position to "fully inform the market".

Saleh said while the government owned Dubai World, the conglomerate had operated as a standalone entity and was never guaranteed by the emirate's rulers.

"It deals with all parties on this basis and it borrows based on its projects and not the guarantee of the government," Saleh said. - Reuters

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