Business | Markets
Dubai World deal will bolster UAE economy
Government welcomes milestone, markets receive news in good way
- By Nadia Saleem, Staff Reporter
- Published: 00:00 May 21, 2010
- Image Credit: Virendra Saklani, Gulf News
- In the wake of the deal, UAE markets reacted positively, as indicated by the price boards at the DFM yesterday. Dubai's DFM General Index may advance 9.7 per cent by the end of May after Dubai World's final debt proposal to creditors, Shuaa Securities LLC said on Thursday.
Dubai: The announcement that property and logistics holding company Dubai World has reached an agreement with its largest creditors to restructure $23.5 billion of debt will bolster the economy and financial markets in the UAE, analysts said.
But continued turmoil on financial markets in Europe yesterday undermined a rally on the Dubai and Abu Dhabi stock exchanges, which have long been waiting for the good news. The Dubai bourse rose 0.35 per cent, and Abu Dhabi added 0.19 per cent.
"The Government of Dubai welcomes this important milestone, which is the result of considerable efforts by a large number of stakeholders who all share a common interest in Dubai's future," Shaikh Ahmad Bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee, said in a statement.
Restructuring
"Markets received the news in a good way," said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.
"The main take-away is reduced uncertainty. The details were pretty much what was talked about in the market, it's no great surprise," said Mathew Wakeman, director of cash and equity-linked trading at EFG-Hermes.
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Mohieddine Kronfol, managing director of debt markets at Algebra Capital, said the proposal would put to rest the restructuring and allow the government to focus on other economic issues and public policy.
Agreement
Dubai World said on Thursday it has reached an agreement to restructure $23.5 billion of debt with its seven biggest creditor banks.
These banks, holding 60 per cent of the $23.5 billion owed by Dubai World to financial institutions, negotiated on behalf of creditors.
In the coming weeks, the other 66 banks that hold the rest of the debt are expected to sign up for the deal.
After the restructuring, Dubai World's financial indebtedness will be approximately $14.4 billion in two maturities — Tranche A of $4.4 billion payable in five years and Tranche B of $10 billion in eight years, the company said. The lenders were given options of a government guarantee or a higher payment in kind.
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