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Dubai World: A light at the end of the tunnel

Dubai World: A light at the end of the tunnel

The saga continues, but the beleaguered company’s Thursday meeting with creditors could herald a positive new phase for the both the UAE economy and the whole region.

July 22, 2010 1:36 by

Gulf markets suffered across the board by association with Dubai following the Dubai World announcement.
Abu Dhabi had to come to the rescue of its fellow emirate and in Kuwait, International Investment Group also said in April it was unable to pay the coupon of a $200 million sukuk.

“Unfortunately, even investors that know the difference find it difficult to divorce the Dubai debt story from the GCC (Gulf Cooperation Council) as a net creditor,” said Daniel Broby, chief investment officer at Silk Invest fund in London.

“The risk-taking hedge funds have returned but traditional long fixed income players are yet to return.”

The risks include the continued possibility of defaults. Dubai International Capital (DIC), the private equity unit of flagship conglomerate Dubai Holding, said in May it was seeking a three-month debt delay, and Dubai Holding Commercial Operations Group said earlier this month it was extending a $555 million revolving credit facility for two months.

But there have been more positive signs in recent months for investment in the Gulf region as a whole. Qatari Diar, the property arm of the country’s sovereign wealth fund attracted orders of $23 billion for a $3.5 billion government-guaranteed Eurobond launched earlier this month. In March, Bahrain issued a $1.25 billion Eurobond, having initially aimed for $1 billion, and bonds from National Bank of Abu Dhabi and Banque Saudi Fransi were heavily oversubscribed.

One London-based emerging debt fund manager said his company had relaxed its policy of keeping clear of the Gulf.
“We have a couple of corporates now, we are more comfortable with the story,” the fund manager said.

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