From: "Farkas, Andrew L." < 1=1=>
To: "Epstein (jeevacation@gmail.com)" <jeevacation@gmail.com>
Subject: FW: Dubai WSJ Article - FYI
Date: Fri, 24 Apr 2009 14:04:30 +0000
From: Levy, Marc
Sent: Friday, April 24, 2009 9:40 AM
To: Farkas, Andrew L.; Garrison, Frank; Cohen, Jeffrey; Carleton, George; Garner, Charles;
Lande, Mark; Aston, Jim
Subject: Dubai WSJ Article - FYI
Dubai Gets Its Breathing Room
Government Quickly Gives Companies Half of a $10 Billion U.A.E. Lifeline
By CHIP CUMMINS<http://online.wsj.com/search/search_center.html?
KEYWORDS=CHIP+CUMMINS&ARTICLESEARCHQUERY_PARSER=bylineAND> and MARGARET
COKER<http://online.wsj.com/search/search_center.html?
KEYWORDS=MARGARET+COKER&ARTICLESEARCHQUERY_PARSER=bylineAND>
DUBAI -- Two months after receiving a $10 billion lifeline, Dubai's government says it has
disbursed more than half of that money to indebted companies, allowing them to pay off bills
and refinance debt.
The quick payouts have provided breathing room for a handful of government-controlled
companies. Dubai also has recently stepped in to fill funding gaps for certain Dubai entities
that were unable to refinance or pay off debt on their own.
This has reassured markets that Dubai, for the time being, can support its overstretched
companies. The cost of insuring Dubai-related debt against default soared earlier this year
but has fallen back again.
The city-state, however, is still straining under a short-term debt load. Dubai's real-estate
market has dropped, and prospects are dim this year for tourism, transportation and financial
sectors. That means persuading investors to lend more, or seeking more federal funds, is key
to staving off a hard landing.
Dubai and its corporate entities have nearly $19 billion of debt coming due this year and
next, according to investment bank EFG-Hermes. Unlike many Mideast neighbors, Dubai doesn't
have much oil and has financed its growth by borrowing.
Officials say they won't cut back on their ambitious infrastructure-building boom. Dubai
announced at the start of the year a 42% boost in spending, saying it would risk a deficit
and borrow to fund it, if need be.
In February, Dubai announced a $20 billion bond program. The United Arab Emirates' central
bank immediately bought up the first tranche of $10 billion. Dubai is one of seven emirates
that make up the U.A.E., so the move was essentially a federal bailout.
Dubai officials have said the proceeds of that federal borrowing will go to meet debt
obligations, both overseas and at home, of its corporate entities. Falling property sales for
big developers has translated into unpaid bills owed to contractors and subcontractors.
Nasser Al Shaikh, Dubai's director of finance, told a local radio station this week that a
little more than half of the first $10 billion has already been distributed to companies, and
Dubai will probably offer the next $10 billion in bonds by year's end.
It is unclear if the federal government will pony up for the bulk of those new bonds. In an
interview with The Wall Street Journal, Mr. Al Shaikh said international investors have shown
new interest in lending. Industrial & Commercial Bank of
EFTA00774225
China<http://online.wsj.com/public/quotes/main.html?type=djn&symbol=0349.hk> took part in a
refinancing earlier this month for Dubai's airport authority.
"We're even seeing more money coming in from other markets that haven't been there before,"
he said. "Pockets of liquidity more and more" are coming from the East, he said.
Despite the optimism, Dubai debt remains a tough sell since the cost of insuring it against
default is relatively high, making refinancing in international markets expensive. Many big
international banks, drawn by the recent oil boom to the Mideast and to Dubai in particular,
already sit on big exposure to the place.
As Dubai gears up to court investors again, ruler Sheikh Mohammed bin Rashid Al Maktoum
appears to be relying on a new corps of lieutenants to spearhead a restructuring of
government companies and get a handle on their debt.
Mr. Al Shaikh is among Dubai's rising stars. Another is Mohammed Al Shaibani, chief executive
of Investment Corp. of Dubai, a holding company of many of Dubai's biggest corporate players.
Their ascension comes at the expense of a handful of other, longtime officials and
executives. Mr. Al Shaikh denies there's been a power shift, saying only that "different
times require different formations."
EFTA00774226