Dubai's Debts.
Discussion
"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 malaise has also affected Dubai as a whole, where following six years of rapid growth, the economy has slumped since the second half of 2008"
http://news.bbc.co.uk/1/hi/business/8379816.stm
Err, oil wells run dry?
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 malaise has also affected Dubai as a whole, where following six years of rapid growth, the economy has slumped since the second half of 2008"
http://news.bbc.co.uk/1/hi/business/8379816.stm
Err, oil wells run dry?
"Dubai World made headlines in March 2008 after its chairman, Sultan Ahmed bin Sulayem, threatened to take the fund's money out of Europe if the European Union tried to regulate his activities. Dubai World's threats came shortly after the EU attempted to lay out "a set of principles for transparency, predictability and accountability" for Sovereign Wealth Funds."
Foreseeable problems were already being sniffed out last March.
Foreseeable problems were already being sniffed out last March.
[quote=tonker
I recall a number of people on here pushing buying apartments in Dubai as a sure fire winner - are they still maintaining this is just spin or have they left their car at the airport ?
[/quote]
Dubai? Not bad at all. Bought a studio in Lake View for £53k off plan. It took ages to build, but was paid up in 6 x stages. Sold it at the end of last year for £93k.
2 amigos bought similar and held onto them and are making very decent and easily obtained taxfree rent from them.
Using a slide rule, using the same money over the same period here I'd have made the same or even more profit, but it relieved the monotony of dungeon-flipping.
The keen hunter (or sourcing-user) could probably dig up some very good bargains in Dubai just now.
I recall a number of people on here pushing buying apartments in Dubai as a sure fire winner - are they still maintaining this is just spin or have they left their car at the airport ?
[/quote]
Dubai? Not bad at all. Bought a studio in Lake View for £53k off plan. It took ages to build, but was paid up in 6 x stages. Sold it at the end of last year for £93k.
2 amigos bought similar and held onto them and are making very decent and easily obtained taxfree rent from them.
Using a slide rule, using the same money over the same period here I'd have made the same or even more profit, but it relieved the monotony of dungeon-flipping.
The keen hunter (or sourcing-user) could probably dig up some very good bargains in Dubai just now.
groak said:
[quote=tonker
I recall a number of people on here pushing buying apartments in Dubai as a sure fire winner - are they still maintaining this is just spin or have they left their car at the airport ?
Dubai? Not bad at all. Bought a studio in Lake View for £53k off plan. It took ages to build, but was paid up in 6 x stages. Sold it at the end of last year for £93k.I recall a number of people on here pushing buying apartments in Dubai as a sure fire winner - are they still maintaining this is just spin or have they left their car at the airport ?
2 amigos bought similar and held onto them and are making very decent and easily obtained taxfree rent from them.
Using a slide rule, using the same money over the same period here I'd have made the same or even more profit, but it relieved the monotony of dungeon-flipping.
The keen hunter (or sourcing-user) could probably dig up some very good bargains in Dubai just now.
Always enjoy the Moneyweek website
The property bubble was a global phenomenon. Prices rose to ridiculous levels almost everywhere, from Britain to Latvia to the US.
But few places saw a bubble quite as insane as Dubai's. We wrote countless pieces in MoneyWeek magazine, warning people not to invest. There was an almost limitless stream of new supply coming on line, with no apparent care for infrastructure or aesthetics. And it was being ramped left, right and centre as the big 'fly-to-let' destination.
So it's little wonder that Dubai was one of the hardest hit when the bubble burst. But then Dubai's sensible big brother, Abu Dhabi, stepped in with a loan. It seems everyone thought everything would be OK.
Turns out they thought wrong...
Dubai was built on the back of low taxes, cheap credit and petrodollars. And let's not forget, slave labour (if you haven't already seen this expose by Independent journalist, Johann Hari, it's well worth reading: The dark side of Dubai). So when the cheap credit vanished and the oil price collapsed in 2008, it was always going to be one of the first places to suffer.
And suffer it did. David Wighton in The Times points out that around 400 building projects with an estimated worth of more than $300bn are thought to have shuddered to a halt, as property prices have tumbled by around 60%.
But then, just like everyone else on the planet who built their livelihoods on the credit bubble, Dubai found a benefactor to bail it out. In this case it was Abu Dhabi (the capital of the UAE), which came along and saved its fellow emirate by buying $10bn-worth of government bonds.
Sure it didn't do much for Dubai's overall debt load (in total, the emirate - including state-backed companies such as Dubai World - owes more than $80bn). But it sorted out its short-term liquidity problems. So everything was sort of fine. Building came to a standstill of course. But there was a lot going on in the rest of the world, so people forgot about Dubai. Things started to get better elsewhere too. Risk appetite started to pick up. Stock markets bounced across the globe. Investors started to think: "What was all that fuss in 2008 about anyway?"
Then yesterday, state-owned conglomerate Dubai World, which is responsible for about $60bn of that $80bn in debt, turned around to its lenders and said: "You know that money you gave us? Well, we need a bit more time to pay it back." Despite Dubai's clear problems, the news came as a shock, to say the least. The cost of insuring against governments defaulting on their debt jumped, not just in the Emirates, but across the Gulf, reports Bloomberg.
So what's happened? The Government of Dubai has asked Dubai World's creditors to agree to a six-month standstill on the conglomerate's debts "until at least" 30 May 2010, while the company is restructured. That's worrying enough. But what also concerned investors is that the Government of Dubai had also just raised a further $5bn from Abu Dhabi.
Now, according to FT Alphaville, traders had expected this money to be used to repay $3.5bn in bonds issued by Dubai World's property unit, Nakheel (the company which built the artificial palm tree resort much beloved by footballers). This $3.5bn loan falls due on 14 December. But now it won't be repaid until at least the end of May.
And just to add the icing on the cake, Dubai has now shut down for Eid, until early December, which could mean further details will be a while in coming.
As RBS analyst Okan Akin told City AM: "The timing could not have been worse." After all, it's not as though Nakheel investors have been given a lot of notice here. If you'd been planning on that money being paid back soon, you might be a little annoyed, to say the least - particularly as Dubai has been swearing for months that it would meet its obligations without any problems. The Emirate's ruler, Sheikh Mohammed Bin Rashid Al Maktoum "publicly pledged his support for the group and its obligations" earlier this month, notes the FT's Lex column. "Investors, perhaps foolishly, took him at his word."
Norval Loftus, head of Islamic debt at Matrix Group, tells Bloomberg: "The worst case scenario will of course be involuntary restructuring on the Nakheel security that brings into question the entire nature of sovereign support for various borrowers in the region."
What's that mean? As Moody's put it: "Nakheel… sets a major precedent for a high-profile, seemingly strategic company facing debt repayment difficulties and thus relying on the government for support. A restructuring of its obligations would indicate that the government is prepared to allow a government-related issuer to default on its obligations." In other words, this case may show that lenders can't depend on the notion that governments will always make sure that apparently state-backed companies will repay their debts. And that would make an awful lot of other Dubai-backed debt look far riskier than investors have been accounting for.
The property bubble was a global phenomenon. Prices rose to ridiculous levels almost everywhere, from Britain to Latvia to the US.
But few places saw a bubble quite as insane as Dubai's. We wrote countless pieces in MoneyWeek magazine, warning people not to invest. There was an almost limitless stream of new supply coming on line, with no apparent care for infrastructure or aesthetics. And it was being ramped left, right and centre as the big 'fly-to-let' destination.
So it's little wonder that Dubai was one of the hardest hit when the bubble burst. But then Dubai's sensible big brother, Abu Dhabi, stepped in with a loan. It seems everyone thought everything would be OK.
Turns out they thought wrong...
Dubai was built on the back of low taxes, cheap credit and petrodollars. And let's not forget, slave labour (if you haven't already seen this expose by Independent journalist, Johann Hari, it's well worth reading: The dark side of Dubai). So when the cheap credit vanished and the oil price collapsed in 2008, it was always going to be one of the first places to suffer.
And suffer it did. David Wighton in The Times points out that around 400 building projects with an estimated worth of more than $300bn are thought to have shuddered to a halt, as property prices have tumbled by around 60%.
But then, just like everyone else on the planet who built their livelihoods on the credit bubble, Dubai found a benefactor to bail it out. In this case it was Abu Dhabi (the capital of the UAE), which came along and saved its fellow emirate by buying $10bn-worth of government bonds.
Sure it didn't do much for Dubai's overall debt load (in total, the emirate - including state-backed companies such as Dubai World - owes more than $80bn). But it sorted out its short-term liquidity problems. So everything was sort of fine. Building came to a standstill of course. But there was a lot going on in the rest of the world, so people forgot about Dubai. Things started to get better elsewhere too. Risk appetite started to pick up. Stock markets bounced across the globe. Investors started to think: "What was all that fuss in 2008 about anyway?"
Then yesterday, state-owned conglomerate Dubai World, which is responsible for about $60bn of that $80bn in debt, turned around to its lenders and said: "You know that money you gave us? Well, we need a bit more time to pay it back." Despite Dubai's clear problems, the news came as a shock, to say the least. The cost of insuring against governments defaulting on their debt jumped, not just in the Emirates, but across the Gulf, reports Bloomberg.
So what's happened? The Government of Dubai has asked Dubai World's creditors to agree to a six-month standstill on the conglomerate's debts "until at least" 30 May 2010, while the company is restructured. That's worrying enough. But what also concerned investors is that the Government of Dubai had also just raised a further $5bn from Abu Dhabi.
Now, according to FT Alphaville, traders had expected this money to be used to repay $3.5bn in bonds issued by Dubai World's property unit, Nakheel (the company which built the artificial palm tree resort much beloved by footballers). This $3.5bn loan falls due on 14 December. But now it won't be repaid until at least the end of May.
And just to add the icing on the cake, Dubai has now shut down for Eid, until early December, which could mean further details will be a while in coming.
As RBS analyst Okan Akin told City AM: "The timing could not have been worse." After all, it's not as though Nakheel investors have been given a lot of notice here. If you'd been planning on that money being paid back soon, you might be a little annoyed, to say the least - particularly as Dubai has been swearing for months that it would meet its obligations without any problems. The Emirate's ruler, Sheikh Mohammed Bin Rashid Al Maktoum "publicly pledged his support for the group and its obligations" earlier this month, notes the FT's Lex column. "Investors, perhaps foolishly, took him at his word."
Norval Loftus, head of Islamic debt at Matrix Group, tells Bloomberg: "The worst case scenario will of course be involuntary restructuring on the Nakheel security that brings into question the entire nature of sovereign support for various borrowers in the region."
What's that mean? As Moody's put it: "Nakheel… sets a major precedent for a high-profile, seemingly strategic company facing debt repayment difficulties and thus relying on the government for support. A restructuring of its obligations would indicate that the government is prepared to allow a government-related issuer to default on its obligations." In other words, this case may show that lenders can't depend on the notion that governments will always make sure that apparently state-backed companies will repay their debts. And that would make an awful lot of other Dubai-backed debt look far riskier than investors have been accounting for.
rich1231 said:
So you think the collapse of the economy there over the next six months will improve the return of currently held property assets? Who is going to rent when they are switching off the lights?
Am I having a deja-vu experience? Isn't this pretty well exactly what les-jouers-sans-testicles were saying was going to happen here about 18 months ago? And guess whats happened to the extreme bargains provided by the people stupid enough to believe them ?
I bought a studio in Dubai which I sold at a profit. And I've never set foot in the place. I don't like excessive heat and I don't like shopping. BUT....
....if you happen to deal in Dubai property or feel like a holiday home there, then there may well be a few bargains to be had.
Of course if this silly cock is right (and unfortunately they never are) and the economy DOES collapse until Dubai vanishes like ancient Babylon or Nineveh then there will be INCREDIBLE bargains available then. And I'm sure I'll take one of these gruesome footballer palaces. In fact if they're cheap enough, I'll take 2. So will the millions of people who seem to actually like the place. Unless they prefer to keep renting (from the dealers who buy them for next-to-nothing in the by then collapsed economy).
I'll tell you what will change in Dubai by May 26th 2010. Not a lot. Same as here.
If you look into the UAEs energy strategy you'll find it's a bit odd.
Due to internal growth they have had to contract-in gas to supply the burgeoning internal demand. In other words, even though they're sitting on a whole s
t load of gas, it's all already sold and they have to buy their other peoples gas on the world energy markets like you and I.
Due to internal growth they have had to contract-in gas to supply the burgeoning internal demand. In other words, even though they're sitting on a whole s
t load of gas, it's all already sold and they have to buy their other peoples gas on the world energy markets like you and I.Olf said:
If you look into the UAEs energy strategy you'll find it's a bit odd.
Due to internal growth they have had to contract-in gas to supply the burgeoning internal demand. In other words, even though they're sitting on a whole st load of gas, it's all already sold and they have to buy their other peoples gas on the world energy markets like you and I.
Not quite. The gas is used either for power generation or for pressurising the oil wells. There is a long term agreement with Qatar for the the supply of gas, which is used for the increased economic demand.Due to internal growth they have had to contract-in gas to supply the burgeoning internal demand. In other words, even though they're sitting on a whole s
t load of gas, it's all already sold and they have to buy their other peoples gas on the world energy markets like you and I.In my view Dubai has no way of generating wealth, only a cycle of service offerings preying on each other. The future of Dubai depends on the largesse of Abu Dhabi.
Riley15/6 said:
Olf said:
If you look into the UAEs energy strategy you'll find it's a bit odd.
Due to internal growth they have had to contract-in gas to supply the burgeoning internal demand. In other words, even though they're sitting on a whole st load of gas, it's all already sold and they have to buy their other peoples gas on the world energy markets like you and I.
Not quite. The gas is used either for power generation or for pressurising the oil wells. There is a long term agreement with Qatar for the the supply of gas, which is used for the increased economic demand.Due to internal growth they have had to contract-in gas to supply the burgeoning internal demand. In other words, even though they're sitting on a whole s
t load of gas, it's all already sold and they have to buy their other peoples gas on the world energy markets like you and I.Olf said:
Sorry - not quite following you there. I am happy to be corrected but you seem to be saying exactly what I'm saying. The UAE (one of the most naturally gas rich countries in the world) imports natural gas for domestic use. Correct?
Yes it does, but not on the open market, and all the gas production is consumed internally.Riley15/6 said:
Olf said:
Sorry - not quite following you there. I am happy to be corrected but you seem to be saying exactly what I'm saying. The UAE (one of the most naturally gas rich countries in the world) imports natural gas for domestic use. Correct?
Yes it does, but not on the open market, and all the gas production is consumed internally.Olf said:
Riley15/6 said:
Olf said:
Sorry - not quite following you there. I am happy to be corrected but you seem to be saying exactly what I'm saying. The UAE (one of the most naturally gas rich countries in the world) imports natural gas for domestic use. Correct?
Yes it does, but not on the open market, and all the gas production is consumed internally.There is a contract with Qatar for the supply of gas at a fixed price. This was negotiated due to the economic expansion of UAE, as using internally produced gas to pressurise the wells was judged to generate more revenue than the cost of buying in gas. In my original post I was only seeking to clarify that the UAE does not buy gas on the spot market, but has contracted supplies.
Riley15/6 said:
Olf said:
Riley15/6 said:
Olf said:
Sorry - not quite following you there. I am happy to be corrected but you seem to be saying exactly what I'm saying. The UAE (one of the most naturally gas rich countries in the world) imports natural gas for domestic use. Correct?
Yes it does, but not on the open market, and all the gas production is consumed internally.There is a contract with Qatar for the supply of gas at a fixed price. This was negotiated due to the economic expansion of UAE, as using internally produced gas to pressurise the wells was judged to generate more revenue than the cost of buying in gas. In my original post I was only seeking to clarify that the UAE does not buy gas on the spot market, but has contracted supplies.
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff