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      Dubai June 7, 2011 Nakheel said on Wednesday that its CEO Chris O'Donnell had left the company "after completing his contract terms". O'Donnell, an Australian who joined the developer in 2006, said he had decided to leave Nakheel following five years spent with the company, the statement added. O'Donnell has overseen a traumatic time […]
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Posts Tagged ‘dubai financial crisis’

Dubai Holding seen at risk

Posted by 7starsdubai on December 4, 2009

original source Zawya / Financial TimesThursday, Dec 03, 2009
Thursday, Dec 03, 2009

Thursday, Dec 03, 2009

With Dubai World cut adrift from implicit government support, there are concerns about potential defaults by other state-related entities. The name mentioned most by bankers and investors in the region is that of Dubai Holding, the personal investment vehicle of the ruler, Sheikh Mohammed bin Rashid al-Maktoum.

“Dubai’s actions have introduced the risk that restructuring of other corporates could follow,” Barclays Capital said in a report this week. “We would focus on those with weak fundamentals and upcoming maturities and we view Dubai Holding as being most at risk.”

Dubai Holding’s Commercial Operations Group’s debt was yesterday downgraded to below investment grade by Standard & Poor’s, the ratings agency, along with four other government related companies. The cost of insuring $10m (€6.7m, £6m) for five years against default ballooned to $1.1435m a year on Tuesday, making it the riskiest Dubai corporate bond according to the market.

A Dubai Holding spokesman yesterday said: “I am very doubtful that we will face any problems paying the debt. Dubai Holding is confident that it is on track with all payments.”

Formed in 2004, its investment arms led the emirate’s international buying spree to recycle funds generated by developing swaths of Dubai desert. The group leveraged profits to build debts of $10bn, with maturities in 2010 of $2bn, according to Barclays Capital.

Bankers say because of its connection to the ruler the conglomerate enjoys stronger political standing than Dubai World

It appears to have a stronger financial position. Analysts say it has a greater ability to service its debts thanks to a number of cash-generating businesses. It is believed to have received cash injections from the government in recent months. The company has never confirmed this.

Still, bankers say its investment arms, Dubai International Capital and Dubai Group could face more financial problems than its commercial wing, which spans hospitality, business parks and real estate. “Dubai Holding is not going to acknowledge problems right now. But there is a contagion effect in every Dubai entity , this is just the beginning,” a senior banker said.

Dubai International Capital is believed to be looking to sell assets but has enough money ringfenced by the holding company to keep afloat its buy-out businesses in Europe and the Middle East, according to those familiar with the company. These people say its public equities portfolio, which includes stakes in EADS, Sony and ICICI Bank in India, may be sold. DIC is also winding down its emerging markets private equity unit, Middle East venture capital portfolio and interests in other private equity funds.

Dubai HoldingDubai ‘s commercial arm includes profitable businesses, such as flagship hotels company Jumeirah Group. The group has slimmed down faster than the troubled Dubai World conglomerate. DICand Dubai Group, for example, have merged their back-office operations and Dubai Holdings’ developers have merged and been folded into Dubai ‘s leading developer, Emaar Properties, much to the alarm of minority shareholders who fear dilution and say they are being forced to bail out other companies.

The restructuring already under way at Dubai Holding is so deep that analysts are raising the possibility that, like Dubai World
, it could be broken up and its best businesses – notably Jumeirah – moved into other parts of Dubai Inc., such as Investment Corporation of Dubai , which is emerging as the emirate’s “good bank” of assets.

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Shocking – Dubai`s main investment fund seeks debt payment delay

Posted by 7starsdubai on November 25, 2009

original source BBC

The government-owned investment company behind Dubai’s rapid development drive has asked its creditors for a six-month delay on repaying its debts.

Dubai World, which has total debts of $59bn (£35bn), is asking creditors if it can postpone its forthcoming payments until May next year.

Dubai World has also appointed global accountancy group Deloitte to help with its financial restructuring.

The company has been hit hard by the global credit crunch and recession.


The Dubai government said in a statement that the request to delay debt repayments also applied to property developer Nakheel, a Dubai World subsidiary.

“It’s shocking because for the past few months the news coming out has given investors comfort that Dubai would most probably be able to meet its debt obligations,” said analyst Shakeel Sarwar, of SICO Investment Bank.

Dubai is one of the seven self-governing emirates or states that make up the United Arab Emirates.

Analysts say the Dubai government has paid the price for a flamboyant economic model centred on foreign capital and giant construction projects.

Some have speculated it is likely to turn to the more economically conservative Abu Dhabi emirate to bail it out.

The Dubai World announcement was made on the eve of the Eid al-Adha Muslim festival, which will see many government agencies and companies close in Dubai until 6 December.

see also: Bloomberg Reuters WallStreetJournal

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Critical test of Dubai’s credit worthiness – Dubai `s 80 Billion Dollar debt pile

Posted by 7starsdubai on October 19, 2009

original source online WallStreetJournal by Maria Abi-Habib and Stefania Bianchi

Dubai will crank up efforts this week to tackle its $80 billion debt pile with senior officials heading to Asia to meet potential investors amid reports that one of its most indebted companies has repaid a $1.2 billion bond ahead of schedule.

Top officials from Dubai’s Department of Finance will meet fixed income and Islamic investors in Hong Kong, Singapore, London, Dubai and Frankfurt starting Thursday ahead of possibly selling more debt this year, according an invitation sent to bankers and seen by Zawya Dow Jones Monday.

An external spokesman for the department said the roadshows are part of “ongoing investor communication” but bankers suspect the meetings could be an early sign that Dubai may be preparing to issue the second half of its $20 billion bond program launched in February to support its economy and embattled companies.

“This will be the first time investors hear the Dubai story from officials post-crisis,” Abdul Kadir Hussain, chief executive of Mashreq Capital told Zawya Dow Jones. “How this story is received will determine how successful Dubai will be over the next three to five years.”

At the height of the global financial crisis, the Abu Dhabi-based central bank of the United Arab Emirates supported Dubai by underwriting the first half of its planned $20 billion bond program to bail out the sheikdom’s struggling companies and economy.

Recently, Dubai officials including Omar bin Sulaiman, the head of the Dubai International Financial Center, have said they expect strong interest from private investors for the eagerly awaited second $10 billion bond.

Mohamed Alabbar, who helps oversee a committee evaluating the impact of the global credit crisis on Dubai, told CNN earlier this month that the emirate may raise the additional $10 billion by November.

The investor meetings due to start in Hong Kong on Oct. 22 are the latest sign that Dubai and its government-owned companies are trying to dig themselves out of an estimated $80 billion debt pile, most of which was incurred during the emirate’s property, tourism and logistics boom.

According to Standard & Poors, Dubai has almost $5 billion worth of debt maturing between September and the end of the year. The biggest share of this debt is held by Nakheel, a unit of government-owned Dubai World. The company has a $3.5 billion Islamic bond maturing December. The bond, which will be pumped into Dubai’s Financial Support Fund, is seen as a critical test of Dubai’s credit worthiness.

“The Financial Support Fund is in need of further resources to fulfill its mandate of supporting Dubai’s government related entities, many of which face heavy debt repayments in the coming three years,” said Farouk Soussa, head of Middle East government ratings at S&P.


A report Monday in Middle East Economic Digest said Nakheel had repaid a 4.4 billion U.A.E. dirham ($1.2 billion) securitized bond issued in January, one month ahead of the scheduled repayment deadline of Nov. 15.
The repayment made on Oct. 15 will come as a comfort to many investors in Nakheel, and especially those concerned about Nakheel’s December sukuk. A Nakheel spokesperson declined to comment when contacted by Zawya Dow Jones Monday.
Nakheel’s bond repayment came on the same day that government-owned conglomerate Dubai World announced that it completed a major restructuring.

The move will help the firm save $800 million over the next three years and ease a small part of the near $60 billion of liabilities on its books. The term liability refers to a company’s legal debts or obligations arising from its business operations.

Earlier this month, Dubai Holding, a conglomerate controlled by the emirate’s ruler, paid back in full a $300 million loan belonging to its Sama property unit. There are also signs that Dubai is repaying some of its outstanding bills to construction contractors.

On Monday, U.K. Trade Minister Mervyn Davies said that debts owed to British contractors in Dubai have reduced, but payments remain outstanding.

“I think it has improved, but it’s been a sensitive issue, and it is important that Dubai companies pay their debts,” he said.

The U.K.-based Association for Consultancy and Engineering, which represents about 800 British construction firms, said in May it was tracking approximately GBP400 million in unpaid fees for building in the emirate.

(Natasha Brereton in London contributed to this story.)

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Dubai contractors still concerned over payments

Posted by 7starsdubai on April 28, 2009

source Reuters


Dubai’s government said on Monday it would continue to meet all its contractual obligations, including to contractors, and would not limit the number of construction firms licensed to operate in the emirate.

Emaar Properties EMAR.DU, in which the state is the largest stake holder, said payments for contractors and consultants were based on a credit cycle agreed with each firm.

“All payments that meet the criteria have been honoured and will continue to be cleared, in line with our contractual agreements,” Emaar said in a statement emailed to Reuters.

State-owned Nakheel declined to comment. no one at Dubai Properties and Sama Dubai were not immediately available for comment.

London-based MEED has reported that contractors who are owed money would not be paid for work they have carried out on Dubai government-backed schemes as the emirate will only settle debts with contractors it wishes to work with in future.

The government denied the MEED report but said it would not decide how firms that had received aid would use the funds.

“We are still waiting for payments from a government-linked firm,” a source at an international contracting firm said. “I am expecting a call from them in the next few days … until we speak to them I don’t know what the situation is for us.”

Nasser al-Shaikh, the head of Dubai’s department of finance, said last week the government would not reveal the names of the firms receiving support from the first bond proceeds, although key beneficiaries were developers and companies in which Dubai’s government holds some ownership stake.  Continued…

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UBS downgrades UAE Property Sector – 70 % Pricefall

Posted by 7starsdubai on April 22, 2009

source WallStreetJournal

DUBAI (Zawya Dow Jones)–Swiss Investment bank UBS (UBS.AG) Tuesday downgraded the U.A.E.’s real estate sector, citing a possible 70% fall in prices and significant oversupply as its main concerns.

“We believe the recent run up in equities with positive global market sentiment, U.A.E. government bailout as a backdrop is unsustainable,” the bank said in a research note. “We don’t yet see fundamentals improving, hence we view overall systematic risk as mispriced.”

Despite shares in Abu Dhabi’s Aldar Properties, and Dubai’s Union Properties and Emaar Properties rising 84%, 40%, and 33% respectively over the past month, UBS downgraded Emaar and Union Properties to sell, from neutral rating and Aldar to neutral, from buy.

Dubai property prices have been sliding since September when the ongoing global financial crisis and a fall in oil prices ended the Gulf region’s economic boom.

UBS expects Dubai’s population to fall 10% over the next two years due to job cuts, with residential vacancy rates reaching up to 30% by the end of 2010 due to an oversupply.

It says that this could cause the average house price to fall to as much as 500 U.A.E. dirhams ($136.1) per square foot from a peak of AED1850 in the fourth quarter of 2008.

“In our view we are still in relatively early stages of the property down cycle in the U.A.E.,” UBS said. “We believe risk-reward profiles are not yet compelling for investors to consider market reentry hence continued price declines are expected.”


UBS said average property prices have already fallen at least 25% to approximately AED1400 per square foot, but anticipates that prices will become even more attractive in the second half of the year.

“We believe the majority of investors would prefer to stay on the sidelines and revisit potential purchase opportunities in second half of 2009,” the bank said in its note.

Amid the slump, many large developers have been scaling back projects to survive the downturn.

UBS estimates that between 60% and 70%, or $300 billion worth, of new projects have either been canceled or delayed amid the slump.

The bank said Dubai’s total liabilities currently stand at $112 billion, which includes a $42 billion cost to finish all residential properties.

The emirate’s exposure to mortgages last year is approximately $30 billion, UBS said, and expects this to rise over the next year.

“With ramping job losses and loan-to-values of various properties rising above 100%, implying negative equity, we believe mortgage default rates will pick up over the coming quarters, potentially in the mid to high single digit range,” it said.

Emaar shares closed Wednesday 2.8% higher at AED2.61, while Union Properties rose 2.3% to AED0.90. Aldar shares gained 2.7% to AED3.78.

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Moody’s Investors Service downgraded the credit rating of Dubai’s Emaar Properties

Posted by 7starsdubai on April 2, 2009

source WallStreetJournal

Moody’s Investors Service downgraded the credit rating of Dubai’s Emaar Properties (EMAAR.AI), the Middle East largest developer,  to just above “junk” status due to its exposure to the emirate’s struggling property market.

Moody’s downgraded its ratings for Emaar and Dubai Holding Commercial Operations Group by one notch each, taking Emaar’s rating to Baa1 from A3, two notches above “junk”. The outlook for both companies is negative.

“The one-notch downgrade of both entities reflects the more severe fundamental strains facing their business models,” Philipp Lotter, Moody’s lead analyst for Gulf-based corporates, said in a statement.

The term “junk” is used for all bonds for Standard & Poors’ ratings below BBB and/or Moody’s ratings below Baa.

“I don’t think the downgrades have come as much of a surprise to the markets,” said Fahd Iqbal, an analyst at investment bank EFG-Hermes. “The downgrade will serve more to confirm investors’ existing negative view on Dubai, given its tough economic outlook for this year and next.”

Real estate firms such as Emaar, which sits at the heart of the Gulf region’s building boom, have been hit by the impact of the financial crisis both at home and overseas.

Dubai’s once-booming property market has slowed in recent months and home financing has evaporated, impacting Emaar’s sales and property prices.

Last month, Emaar was downgraded by S&P to BBB+ from A- with a negative outlook, taking the developer almost below investment grade.

Shares in the company that is 31% owned by Dubai’s government according to Zawya.com, closed flat at AED2.20 on the Dubai Financial Market Wednesday. The stock lost 85% of its value last year.

“Both companies are real estate master developers with hospitality businesses and are thus more immediately exposed to the Dubai real estate market,” Moody’s said.

Amid the downturn in the property market, many large developers have been scaling back projects to survive the downturn.

In February, a report by investment bank Morgan Stanley (MS) said the United Arab Emirates is delaying or canceling real-estate projects worth more than $260 billion. An earlier HSBC (HBC) report said Dubai is delaying or canceling almost 60 projects worth $75 billion.


Moody’s said it held off from downgrading the companies further because of Dubai’s recently announced bond program.

“The severity of potential rating actions….was moderated as a result of the supportive action by the federal government,” said Moody’s Lotter.

“We thus balance a severe deterioration in the economic prospects of Dubai with a now explicit reliance on federal assistance,” he said.

Dubai announced a $20-billion bond program in February, and said the federal government of the U.A.E. had fully subscribed half of it. The move allayed some fears that Dubai and government-owned companies would struggle to refinance debt obligations this year.

Moody’s said that although the bond “provided greater assurances to the market that explicit financial support from the federal government is forthcoming”, it also highlighted the emirate’s “vulnerability in the current global economic environment given its reliance on volatile sectors such as real estate, trade, financial services and tourism, as well as its burgeoning debt and refinancing challenges.”

Moody’s Wednesday also confirmed its ratings for other key Dubai Inc. corporates including DP World, Dubai Electricity & Water Authority and DIFC Investments.

The ratings agency said the outlook for all firms is negative, “reflecting the prevailing uncertainty that exists within Dubai Inc., in particular the ongoing structural changes to some of Dubai’s core domestic sectors including real estate, and the potential for economic and market conditions to remain depressed over a longer period”.

By Stefania Bianchi, Dow Jones Newswires

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Dubai payments dry up – Contractors hit

Posted by 7starsdubai on March 5, 2009

original published Financial Times

March 4 2009 22:00 | Last updated: March 4 2009 22:00

Not so long ago Dubai was an El Dorado for construction and property companies. Attracted by some of the world’s most ostentatious and expensive projects, contractors and subcontractors from around the world flooded in to help the ambitious emirate turn itself into a modern metropolis.

Now, in the latest sign of the slowdown enveloping the Gulf, contractors working in Dubai are facing severe cash flow problems as state-linked developers, hampered by blocked credit markets, -fleeing investors and a tumbling local property market, fail to meet their financial commitments.

Some contractors and consultants have not been paid for up to six months, and large Dubai-affiliated developers owe billions of dollars, according to contractors, lawyers and executives.

They say large government-controlled developers in the emirate, such as Nakheel and Emaar, are among those failing to pay.

Economists at National Commercial Bank, Saudi Arabia’s largest lender, estimate that $250bn (€199bn, £178bn) of projects have been cancelled or delayed in the seven-state United Arab Emirates – the majority in Dubai.

“The economy just stopped in the middle of November,” said Chris Cole, chief executive of WSP, a British design consultant active in the country.

Spending on two of WSP’s contracts, the Dubai World Trade Centre and Meraas Developments, has been reined in since last November and the company is estimated to have set aside more than £4m to cover bad debts in the emirate.

Justin Atkinson, chief executive of Keller, a UK-based foundations specialist, said the company was still waiting to be paid for sums outstanding on the Palm Deira, an artificial island development that was scaled back late last year.

“The official line from developers is that we will be paid, but probably not this year,” said the regional head of a large European property consulting firm. “That is hard to explain to headquarters. We have our own bills to pay.”

Neither of Dubai’s largest developers would confirm any delays in payment, saying that they would continue to honour contracts. “Payments for contractors and consultants are based on a credit cycle and set deliverables agreed with them,” said an Emaar spokesman. “All payments that meet the criteria have been honoured and will continue to be cleared, in line with our -contractual agreements.”

A Nakheel spokesman said that all contracts would be honoured but the -company was seeking to renegotiate some in light of falling material and -construction costs.

Read the rest of this entry »

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