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Dubai bond rally is modestly positive for 2012

Dubai bond rally is modestly positive for 2012

Although Dubai bonds have outperformed some high-grade Abu Dhabi credits, thin liquidity, lack of supply still put them at risk.

December 22, 2011 4:06 by

…negotiate terms for restructuring their syndicated loans. As long as these deals have not been done, the market may worry about Dubai’s ability to repay bonds in full and on time.

One restructuring effort which is struggling is that of Dubai Group. When it announced it needed to renegotiate its debts last year, the company said it would continue to service them. But Dubai Group has not paid interest on $10 billion of debt for over a year, sources involved in the restructuring said in November. Dubai Group expects to provide further details of its efforts in coming months, a spokeswoman said.

Drydocks World, a unit of Dubai World, expects to complete its long-delayed debt restructuring by the end of March 2012, its chairman said this week.

David Staples, managing director for EMEA corporate finance at Moody’s Investors Service, said the government of Dubai was willing to support its related entities financially but might not have the capacity to do so.

For these reasons, Dubai bonds’ discounts to par may not close completely until the companies or the government indicate much more clearly how they intend to avoid restructurings.

“The government’s announcements were positive for sentiment but as always, the market wants details,” another trader said. (By Rachna Uppal; Editing by Andrew Torchia)

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