Dubai World Piles Up Debts of $59 Billion

Government-run conglomerate Dubai World owed $59 billion in debts at the end of 2008, its property subsidiary Nakheel said in a financial exchange filing. Nakheel disclosed to NASDAQ Dubai on July 31 that Dubai World’s consolidated liabilities at the end of last December amounted to Dh217.8 billion, or about $59.1 billion, compared to total assets at that time of Dh365.8 billion. Analysts said that the information did little to alter their earlier estimates of the foreign debts owed by government-owned and affiliated firms in Dubai. “This figure does not give us any insight. It is a consolidated debt figure. Our estimates of Dubai’s debt is $85 billion, but this only includes bonds, sukuks and syndicated loans,” said Fahd Iqbal, an analyst at investment bank EFG-Hermes. “There is no telling what proportion of Dubai World’s $60 billion consolidated debt is accounted for by these items,” he said. Chet Riley, an analyst at Nomura Investment Bank, seemed to agree. “Dubai has previously quantified (its) debt at about $80 billion and most people were attributing that to Dubai World, so the figure is not surprising. The key is to assess the maturity schedule of this debt,” Riley said. Khaleej Times tried to contact Dubai World and Nakheel for comment, but no one from either company was immediately available. Nakheel revealed details of its parent firm as part of its obligations on a $3.5 billion sukuk due in December.

Government-owned companies in Dubai are under pressure to restructure as the emirate struggles to bolster its slowing economy amid the rising costs of financing its heavy debts. Dubai recently announced plans to raise the second $10-billion tranche of a $20 billion bond issue later this year, and it has set up a support fund to distribute money raised from the bond. Moody’s Investors Service last February estimated Dubai’s government-related entities to have an aggregate foreign debt of $80 billion. Its data specified the debts of Dubai World subsidiaries including DP World, with $5.8 billion in liabilities at the end of December; Jebel Ali Free Zone, with $2 billion; Nakheel, with $7.3 billion; and Drydocks World, with $2.2 billion. Nakheel has $80 billion of projects underway in Dubai but has been hit hard by a near 50 per cent drop in property prices in the emirate. It is entangled in a number of disputes over unpaid bills to foreign contractors. Dubai World on Wednesday said it might withdraw from a 16 billion ringgit ($4.5 billion) Malaysian maritime centre project, the latest in a series of setbacks for the emirate’s government-run investment arm. Dubai World said on August 6 that it has postponed several projects, including tourism developments in Africa.