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Dubai Debt Restructuring Plan – Is It Really Going to Work?


Middle East : 28 March 2010

While most feel the Dubai World debt restructuring plan is very promising for the future success of the Dubai markets not everybody is as easily convinced. Some Investors showed their concern in the last couple of days by increasing the cost of Dubai Debt Insurance. Many Investors now doubt the ability of the Dubai Government to actually be able to stand by all the terms they guaranteed in so many areas of the plan.

In order for the terms of the restructuring plan to be adequately met the Dubai government has to ensure the full repayment of all of Dubai World’s outstanding Creditors many by 2015 and the remainder by 2018. The government has also agreed to pay off two bonds outstanding by Dubai World’s subsidiary development company known as Nakheel. $5.7bn of the credit now guaranteed comes from a loan Dubai has received from Abu Dhabi with the remaining $3.8bn having to come from Dubai’s internal resources.

Many now fear that the cash flow of the Dubai government will be seriously hindered by shouldering all this debt. The $3.8bn of the total that is to come from internal sources is actually equal to 40% of Dubai’s revenue for 2009. This restructuring plan will mean the country will need to borrow heavily over the next few years and many fear this could put too much pressure on Fiscal Policy.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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