Abu Dhabi: Terms of the $10 billion (Dh36.7 billion) support fund provided by the Abu Dhabi Government for Dubai "are similar to the structure of the first tranche of the bond programme," a source close to the Dubai Government told Gulf News.
The source, who declined to be identified because of sensitivity of the issue, said the funds will be provided for entirely by the Abu Dhabi Government.
The UAE Central Bank's involvement is limited to its support of banks with exposure to Dubai World, the source added.
The $10 billion constituting the first tranche of the $20 billion Dubai bond programme was underwritten by the Central Bank in February at a 4 per cent rate over five years.
The National Bank of Abu Dhabi (NBAD) and Al Hilal Bank subscribed equally to the second $5 billion tranche late last month under the same terms.
Financial support
Yesterday's announcement of financial support from the Abu Dhabi Government means Dubai will have to find a way to pay back at least $25 billion in loans in 2014.
Still, local and international banks including the UK's Standard Chartered and HSBC welcomed the support.
"The announcement from the Government of Dubai and the Government of Abu Dhabi today highlights the true strength of the UAE Federation," Peter Sands, Standard Chartered Group chief executive said in a statement.
"Today's commitment will boost global and regional confidence in the country and allow Dubai to continue to build its profile as one of the world's leading financial centres."
Bonds
But the announcement also means Dubai will be seen to be reliant on Abu Dhabi in the future.
"Nakheel sukuk was global and it was of a large value," said a senior Islamic banking executive who also declined to be identified. "The publicity of a default would have been adverse."
According to listing documents on Nasdaq Dubai's website, Nakheel faces another payment deadline next May when a Dh3.6 billion sukuk is due for repayment, then again in January 2011 when certificates totalling $750 million mature.
The sukuks, or Islamic bonds, are part of the $26 billion debt burden Dubai World is seeking to restructure.
Jebel Ali Free Zone has a Dh7.5 billion sukuk maturing in May 2012, but its parent company Economic Zones World has already announced the security was not part of the Dubai World restructuring.
