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Dubai’s debt saga
With the emirate’s total obligations now estimated at $170 billion, analysts say the government may no longer come to the rescue of its related entities.
January 20, 2010 6:17 by Aarti Nagraj
Dubai’s actual debt figures could be much higher than previously projected, according to a report by investment bank EFG-Hermes. “The total debt held by Dubai Inc [consisting of the government and government-related entities] could well be in the range of $130-$170 billion,” the bank said in its 2010 UAE Yearbook, according to an AFP report.
There have been many estimates about the size of the emirate’s debt; late last year, Business Week estimated that Dubai Inc’s debts amount to $90 billion; The Economist put the number at $80 billion, out of which the government itself has $19 billion to repay. According to a Deutsche Bank report in August 2009, the emirate and its entities have bonds worth $46.3 billion maturing between 2010 and 2012. Rating agency Standard & Poor’s estimated last year that Dubai has to pay up $47.4 billion by mid-2013.
Dubai’s debt issues came into spotlight after the real estate sector in the emirate crashed because of the global financial crisis. In February 2008, the emirate launched a $20 billion long-term bond program to repay its debts. The first tranche of $10 billion was bought by the UAE central bank as five-year bonds, and in November, Dubai’s ruler Sheikh Mohammed Bin Rashid al-Maktoum said that he was confident that the second tranche would generate adequate interest from investors. “The second tranche of the bond program will receive subscribers and will be used to settle Dubai’s obligations in future,” he said.
However, Dubai announced on November 25 last year that it would ask creditors for a six-month debt delay for government-owned conglomerate Dubai World and its property subsidiary, Nakheel. The news shocked world markets, and the global media immediately began discussing the emirate’s debt burdens.