Dubai World restructuring: 'reaction exaggerated'

Dubai: The reaction by the world markets in the wake of Dubai government's decision to restructure Dubai World Group was exaggerated, said Abdul Rahman Al Saleh, Director General of Dubai Finance Department.

Speaking at the press centre at the Dubai Media Incorporated (DMI), he underlined that there was huge media mix-up between the Dubai World Group and the Dubai government, adding that Dubai World Group "is a company set up with commercial basis" and its transactions with creditors and investors were on that basis. He added that the group used to get financing based on its commercial status and feasibility of its projects.

"The gross mistake of the media is that they deem the company as part of the government. It is baseless", he said, stressing that the Dubai government has supported the group since its inception.

Al Saleh noted that Dubai World Group has implemented huge projects in the emirate of strategic significance, but has been affected by the world financial crisis similar to what happened to many corporations worldwide.

He added that it faced difficulties in the redemption of its financial obligations, and hence, the decision taken by the government to restructure the company was to help it overcome that situation.

He added that the debts and obligations were not guaranteed by the government, indicating that it was set UP as an independent commercial company.

He aded that though the government is owner, "the company has multiple activities and prone to risks. So from the day one it was indicated that the government is not a guarantor. Therefore, the dealingS of company with all parties was based on this conception."

Al Saleh underscored that the creditors should bear part of responsibility as they offered loans as per feasibility of projects and not upon the guarantees offered by the government.

In reference to the restructuring decision, which might have created inconvenience, particularly for the creditors, Al Saleh reiterated that the decision was sound and favours all parties in the long term and not short term, as Dubai World Group has strategic projects.

He emphasised that the reaction was dispropotionate to the size of Dubai World Group loan problem and that the situation would be rectified, calling on the media to learn from the experience.

Al Saleh said restructuring of companies is normal in many countries through intervention of governments or boards of companies to deal with corporate difficulties when they occur.

He cited the intervention by the UAE Central Bank on Sunday to assure the markets and banks, stressing the existence of good federal coordination in this respect.