Dubai official distances state from troubled Dubai World

In a statement released today, Abdulrahman al-Saleh, director general of Dubai’s department of finance, distanced the financial position of the state from the debts of Dubai World, a ports and real estate investment conglomerate it owns.

The Dubai Finance Department has today distanced itself from the debt obligations of Dubai World, a state-owned ports and real estate conglomerate which shock the global economy last week after stating it intended to ask for extensions on its loan maturities.

Speaking to Dubai TV, Abdulrahman al-Saleh, director general of Dubai’s department of finance, said that “Dubai World is not part of the government” and that “creditors need to take responsibility for their decisions to lend to [its] companies.”

Saleh admitted that creditors to Dubai World’s companies, which include Nakheel Holdings, the developer behind the emirates iconic ‘The World’ development, DP World and Istithmar, would be affected in the short term but pointed to long term benefits as the government restructured its businesses.

To date, Dubai World has already embarked on its own restructuring effort which has resulted in numerous senior personnel changes and the transferring of assets.

The firm has been widely reported as owing a total of $59 billion across its businesses, $3.5 billion of which is owed by Nakheel in the form of Islamic bonds. These are due next month but are part of the debt, the maturities of which, Dubai Holdings has requested be deferred.

Ahmet Akarli, economist at Goldman Sachs said it would offer “no encouraging new” for Nakheel and Dubai World bondholders but interpreted the move to distance the state from the companies as part of a wider program. He said: “We continue to believe that the events of the past 5 days are part of a broader process of financial consolidation.” He added that the process would likely result in asset sales and further attempts at debt restructuring as well as potential liquidations.

Mohammad Ali Yasin, chief executive, Shuaa Securities, the brokerage division of Shuua Capital, was quoted by Reuters as saying: “What is important for people in the investment community is not to speculate: we shouldn't expect anybody to bail anybody out. It is a commercial decision, done on commercial terms.”