Gulf shares tumble as investors remain jittery

Dubai: Fears that Dubai's debt restructuring is not limited to Dubai World hurt investor confidence in the world's top oil-exporting region and sent Gulf shares down further on Wednesday.

Dubai's index fell to a 38-week low after Dubai World unit Istithmar World lost control of a $282 million (Dh1.03 billion) US hotel. Istithmar lost the W Hotel in Manhattan for $2 million in an auction, adding to negative news over Dubai's debts.

Earlier, Dubai World property unit Nakheel said its total liabilities rose 7.2 per cent to Dh73.3 billion ($20 billion), making a first-half loss of Dh13.4 billion ($3.65 billion). Dubai's index fell 6.5 per cent to 1,531, edging up slightly from an intraday low of 1,529, its lowest level since March 19. Eight stocks dropped more than 9 per cent, including Emaar Properties and Arabtec.

Investors have only received sparse information since Dubai announced on November 25 that it sought to delay payment on Dubai World debt while it overhauls the conglomerate, which builds and operates everything from ports to luxury flats.

While Dubai's government has tried to ring-fence profitable businesses from the $26 billion restructuring at Dubai World, the issue has led to credit downgrades.

Dubai World unit Nakheel, the developer whose debt is at the centre of the restructuring, has a $3.5 billion bond maturing on Monday. The bond's trustee, Deutsche Bank, held a conference call yesterday to coordinate the administrative process, sources said.

Rating

Ratings agencies said downgrades could accelerate a payment clause for $2 billion in debts at Dubai's water and power firm.

A spokesman at the utility firm rejected the notion, but, underscoring potential moves at other Dubai firms, a unit of Dubai Holding has sold its stake in Egyptian investment bank EFG Hermes.

With time running out, bondholders may have to accept some form of "haircut" or impairment, leaving Dubai World free to negotiate with longer-term debt holders, several bankers said.

"Banks need to stabilise the market and achieve that by not falling behind other creditors," one banker said.

President His Highness Shaikh Khalifa Bin Zayed Al Nahyan reassured markets yesterday, saying the UAE, the world's fourth-largest oil exporter, was determined to contain the impact of the global crisis on its "solid" economy.