Main Page | International Markets » Residential Real Estate

Dubai Money Crunch Surfaces as Debts Put on Hold

Posted by Alex Finkelstein 11/25/09 11:45 AM EST

Related Stories:

Article
Comments (0)

(DUBAI, U.A.E.) -- The up and down fortunes of Dubai World apparently are down for now. The government-owned company can't pay its debt.

Deloitte LLP has been called in to restructure the billions in loan payments Dubai World owes. In a prepared statement, the company says it will take at least six more months for loan repayments to begin.

The government has asked its creditors to go along with the new repayment arrangement to May 30, 2010. Dubai World comprises varied real estate projects and ports.

The loan repayment schedule will immediately affect a $3.65 billion bond that Dubai World real-estate subsidiary Nakheel was scheduled to repay next month.

Dubai World Island

The announcement comes just hours after Dubai said separately that it raised $5 billion from two local banks, the second installment of what officials say will be a $20-billion borrowing program.

The bond program was unveiled in February, with the federal government of the United Arab Emirates snapping up the entire first tranche, effectively a bailout. (Dubai is one of seven semi-autonomous emirates that make up the U.A.E.)

Since then, Dubai officials have suggested they would seek international investors to fund the remaining $10 billion. The city-state says it is using the funds to pay down international debt and unpaid bills to contractors.

In its statement about the Dubai World debt standstill, Dubai officials said the $5-billion bond issue wasn't linked to the Dubai World restructuring.

Dubai World was long the crown jewel in Dubai's economic ambitions, spearheading ambitious real-estate and infrastructure projects.

MGM City Center, Las Vegas

Dubai World also invested heavily overseas. Its private-equity outfit bought high-end retailer Barneys New York in 2007 for just under $1 billion. It also invested heavily in CityCenter, a mixed-use development in Las Vegas, with MGM Mirage.

The Wall Street Journal states Dubai World "was caught in a political maelstrom" in Washington in 2006 after it proposed to buy a British competitor, including a handful of U.S. ports.

Political opposition on Capitol Hill blocked the acquisition, forcing Dubai World to shed the U.S. assets before completing the deal.

Please see related Real Estate Channel articles: