Banks query fresh funds for Dubai World



Banks are questioning the source of US$3.5 billion (Dh12.85bn) of fresh funds that form a key part of a restructuring plan submitted to Dubai World creditors last week. While regional markets have responded positively to the proposals, bankers say the plan raises new questions about the emirate's ability to repay debts, even if the bulk of Dubai World loans are rolled over.

On Wednesday, the Dubai Government presented a proposal for restructuring $23.5bn of Dubai World debt in which banks were asked to roll over their loans to longer maturities of up to eight years. The offer has not yet been approved by bank creditors, which were owed $14.2bn at the end of last year. As part of the plan, Dubai is offering $3.8bn of new money, which it said would come "from internal government resources", without elaborating further.

The restructuring plan looked unlikely "to put the total external debt over gross domestic product on a sustainable trajectory", the Morgan Stanley analyst Paolo Batori wrote in a report. Dubai already has $109.5bn of outstanding debt, according to estimates from the IMF. Under a budget approved in January, the Dubai Government expects to run a Dh6bn deficit this year, its second shortfall in a row. That would be equal to about 2 per cent of GDP. This is despite cutting spending by 6 per cent. Morgan Stanley doubted that the rollover of loans would be sufficient for Dubai to put the total external debt-GDP ratio on a sustainable track.

Credit Suisse said the Dubai Government may not have much cash left to fund other unfinished property projects. "Although we believe this may result in a need to issue bonds, the Government said that there is no intention to issue any bonds in the near term," the Swiss bank said. EFG-Hermes said it expected Dubai's fresh capital injection to come from asset sales and cost savings. However, the Egyptian investment bank called the restructuring "better than expected" and said the "preferential treatment" of sukuk, or Islamic bond, holders "could be positive for coming bond issuances as well as future refinancing and restructuring of international capital markets in general".

JP Morgan also warned that the plan may be "negative" because it lacked any explicit government guarantees and, with the Dubai Government merely injecting $1.5bn in fresh money into Dubai World, the conglomerate's creditors would rely on asset sales and dividends going forward. "There is no mention of a government repayment guarantee for Dubai World's bank creditors," Zafar Nazim, a London-based analyst at the bank, wrote in a report last Thursday.

"The Government intends to inject only $1.5bn of cash into Dubai World to support its creditors and working capital commitments. In essence, Dubai World's creditors will be relying upon assets sales and dividends." Morgan Stanley also expressed worries that the restructuring may drag out longer than expected. The bank said hints by Dubai World that the discussions with creditor banks may take a while "can hide lack of consensus on the announced terms, causing potential risks ahead".

uharnischfeger@thenational.ae

Moon Music

Artist: Coldplay

Label: Parlophone/Atlantic

Number of tracks: 10

Rating: 3/5

FIRST TEST SCORES

England 458
South Africa 361 & 119 (36.4 overs)

England won by 211 runs and lead series 1-0

Player of the match: Moeen Ali (England)

 

COMPANY PROFILE
Name: Airev
Started: September 2023
Founder: Muhammad Khalid
Based: Abu Dhabi
Sector: Generative AI
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
 
Asia Cup 2018 Qualifier

Sunday's results:

  • UAE beat Malaysia by eight wickets
  • Nepal beat Singapore by four wickets
  • Oman v Hong Kong, no result

Tuesday fixtures:

  • Malaysia v Singapore
  • UAE v Oman
  • Nepal v Hong Kong
Jigra
Director: Vasan Bala
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
Rated: 3.5/5
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Joker: Folie a Deux

Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson

Director: Todd Phillips 

Rating: 2/5

The Africa Institute 101

Housed on the same site as the original Africa Hall, which first hosted an Arab-African Symposium in 1976, the newly renovated building will be home to a think tank and postgraduate studies hub (it will offer master’s and PhD programmes). The centre will focus on both the historical and contemporary links between Africa and the Gulf, and will serve as a meeting place for conferences, symposia, lectures, film screenings, plays, musical performances and more. In fact, today it is hosting a symposium – 5-plus-1: Rethinking Abstraction that will look at the six decades of Frank Bowling’s career, as well as those of his contemporaries that invested social, cultural and personal meaning into abstraction. 

Difference between fractional ownership and timeshare

Although similar in its appearance, the concept of a fractional title deed is unlike that of a timeshare, which usually involves multiple investors buying “time” in a property whereby the owner has the right to occupation for a specified period of time in any year, as opposed to the actual real estate, said John Peacock, Head of Indirect Tax and Conveyancing, BSA Ahmad Bin Hezeem & Associates, a law firm.