Comment sends Dubai stock market down almost 6% to 20-week low

Dubai moved on yesterday to ring-fence prized assets from the US$26 billion debt restructuring of Dubai World, denting already fragile investor sentiment ahead of talks between the struggling conglomerate and key creditors.

Bahrain’s central bank governor said that the kingdom’s exposure to Dubai World was limited, echoing top monetary officials in Saudi Arabia and Oman, while the biggest lenders in Qatar and Deutsche Bank both said that they had no exposure.

Dubai World is expected to meet its main bank creditors this week, possibly as early as yesterday, to discuss a request to delay debt payments that has shaken global markets and damaged the reputation of the Gulf’s business hub, bankers said.

London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland will attend, along with local lenders Emirates NBD and Abu Dhabi Commercial Bank, an unnamed Abu Dhabi bank executive said last week.

Dubai’s finance chief said yesterday that state-controlled Dubai World might sell some assets to finance its commitments, but that the emirate’s government would not chip in with any disposals of its own.

‘Part of obtaining finance is selling assets . . . belonging to the company and not the government,’ Abdulrahman Al-Saleh, director-general of Dubai’s department of finance, said in an interview with Al Jazeera television.

‘There is confusion in the media that the government plans to sell assets . . . The company has foreign investments and real estate investments abroad. There is nothing to prevent selling these assets.’

The struggling conglomerate on Nov 30 shed some light on how it planned to restructure the US$26 billion debt pile, including through asset sales.

It said that the restructuring excluded firms on a ’stable financial footing’ such as Istithmar World, DP World and Jebel Ali Freezone, implying its global crown jewels would not be up for grabs.

Istithmar’s portfolio ranges from US high-end retailer Barneys to the luxury W Hotel in Washington, D.C. as well as sought-after property in London including 10 Whitehall Place.

Infinity World, another unit exempt from the plans, is a stakeholder in MGM Mirage.

‘They need to do this in order to support their statements about the separation between Dubai World and Dubai government . . . The question now is which assets and at what price,’ said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh.

Mr Saleh’s comments sent the Dubai stock market tumbling almost 6 per cent to a 20-week low, reversing quick gains made on Sunday, with DP World, the flagship unit of Dubai World, slumping 5.5 per cent, while property stocks were all trading down.

‘(The market) did not react well to the Dubai government news, which again cast a cloud of doubt,’ said Ayman El-Saheb, Darahem Financial Brokerage’s director of operations.

Since Dubai World requested a payment standstill on Nov 25 for US$3.52 billion worth of Islamic bonds maturing this month, regional government officials and bankers have looked to downplay the impact of the measure on their economies.

Bahrain’s central bank governor joined the chorus yesterday, saying that the kingdom’s exposure to Dubai World was less than 0.1 per cent of total assets or US$281 million.

Deutsche Bank’s Middle East’s chief executive Henry Azzam said that the bank did not have any exposure, and that he did not expect the crisis to have a major impact on the region’s banking sector.

Source: Business Times, 8 Dec 2009