Gulf emirate government in Dubai said that it would ask its creditors of its cashless Dubai world conglomerate to accept a plea of suspension on billions of dollars of debt.
The move was announced by the government as a part of plan to restructure Nakheel, the state-owned company and its property developer.
Dubai Financial support Fund released a statement which said “Dubai World intends to ask all providers of financing to Dubai World and Nakheel to a ‘standstill’ and extend maturities until at least 30 May 2010″.
Nakheel is the developer of the emirate’s palm-shaped residential islands who had to pay nearly $3.5 billion in attaining Islamic bonds in December. Islamic bond prices of Nakheel fell more than 20 points to 87.
The announcement came just few hours after Dubai announced that it borrowed $5 billion from two local banks and that another installment of 20 billions dollars would be raised, the officials said.
Reuters news agency reported that this announcement pushed up the cost of insuring Dubai’s debt against the original and brought down the bond prices.
The bond program was announced in February and the first one was picked by the federal government of the United Arab Emirates.
Out of the Gulf emirate’s total debt major part belongs to the Dubai world which has a liability of 59 billion dollars.
The company hired an advisory firm in August to help it with options to shore up the US luxury chains financial position. Bank creditors are being persuaded by the Dubai world to restructure upto 12 billion dollars of its loans showing that emirates is having a problem paying its debt of 80 billion dollars.
The debt accumulation was a result of its expansion in banking and real estate projects before global financial crises arose. Eventhough Dubai is showing a quick recovery from the economic conditions still the debt is large enough to show up delays.
The government however said that the debts were the main top priority as the government itself seeks to assure trade and tourism economy and also recover from the steep crash in its economy.
(Courtesy : Al Jazeera)
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