UAE/TURKISH BUSINESS RELATIONS

UAE/TURKISH BUSINESS RELATIONS

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  • Dr. Nilgün Birgören
    Dr. Nilgün Birgören    Premium Member   Group moderator
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    Shares slide over Dubai fears
    Oil prices dropped sharply. US crude fell about 5% to $73.64 a barrel and London Brent Crude was down $1.56 to $75.31.

    Dubai, which has less oil money than many of its neighbours, became a trading and tourism hub with global ambitions.

    Dubai World, the conglomerate that led the emirate's expansion, had $59bn (£36bn) of liabilities as of August, a large proportion of Dubai's total debt of $80bn. Its subsidiary Nakheel was the builder of the landmark palm tree-shaped island developments off Dubai.
    US shares have opened lower on worries about Dubai's debt problems, with the Dow Jones index down 126 points, or 1.2%, at 10,338.49.

    It was the first chance for markets in the US to react to news that state-owned Dubai World had asked for more time to repay its debts.

    US markets were closed for a holiday on Thursday when other world markets suffered steep losses.

    However, the main European markets recovered from earlier falls.

    The main share indexes in the UK, France and Germany had all fallen by more than 3% on Thursday. But after falling further in early trade on Friday, the UK's FTSE 100 closed up 1%, and both Germany's Dax index and France's Cac 40 were up more than 1%.

    Earlier in Asia, Japan's Nikkei index had closed down 3.2% and the Hong Kong Hang Seng ended 4.8% lower.

    UK Prime Minister Gordon Brown described the fall in the markets as a "setback" but said it was "not on the scale of previous problems".

    "The world financial system is stronger now and able to deal with the problems that arise," he told reporters on his way to a Commonwealth leaders summit.

    Sources close to the company have suggested that various refinancing options have been on the table for at least a month, although details have not been revealed until now.

    A six-month suspension on interest payments is believed to be the most likely option.

    David Buik, senior partner at BGC Partners, said: "You can't just say to the world: 'I don't want to pay my debts'. There is no income coming in from any of these properties. I think this is shocking PR."

    The news shook markets that are recovering from the collapse of the US housing market and contagion that threatened to rupture the global financial system last year.

    It was the timing of the announcement as much as the lack of clear information that heightened nerves. The first news emerged late on Wednesday, as the Muslim world was preparing for its Eid celebrations.

    It also coincided with the closedown of the world's most important share market, with US markets winding down for Thursday's Thanksgiving holiday.

    Uncertainty of the scale of banks' exposure to Dubai hit banking shares at first. However, bank shares recovered strongly throughout Friday morning.

    The biggest underlying fear is that Dubai's problems could reignite the international financial turmoil of the credit crisis.

    Any knock to economic confidence could lower global demand for a whole range of commodities, including oil.

    Oil prices dropped sharply. US crude fell about 5% to $73.64 a barrel and London Brent Crude was down $1.56 to $75.31.

    Dubai, which has less oil money than many of its neighbours, became a trading and tourism hub with global ambitions.

    Dubai World, the conglomerate that led the emirate's expansion, had $59bn (£36bn) of liabilities as of August, a large proportion of Dubai's total debt of $80bn. Its subsidiary Nakheel was the builder of the landmark palm tree-shaped island developments off Dubai.
    • 27 Nov 2009, 8:26 pm
  • Dr. Nilgün Birgören
    Dr. Nilgün Birgören    Premium Member   Group moderator
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    Re: Shares slide over Dubai fears
    Dear friends and members,
    Here is an article on the issue from The Economist print edition (Nov 26th 2009 ) I would like to share with you all:



    One of the biggest events in the Muslim calendar, Eid al-Adha, which began this weekend, is supposed to be a festival of sacrifice. On November 25th investors in Dubai were given an early chance to get into the spirit of things. The emirate’s government asked creditors of Dubai World, one of three big government-backed conglomerates, to agree to a standstill on repayments until May 30th 2010 at the earliest. The standstill does not apply to Dubai Ports World, which operates one of the biggest container terminals in the world. But it does include the $4.05 billion due on December 14th to holders of an Islamic bond, or sukuk, issued by Nakheel, a developer responsible for the Palm Islands and other spectacular land-reclamation projects.

    The announcement left investors feeling wronged and wrong-footed. Only weeks ago, Sheikh Mohammed bin Rashid al-Maktoum, Dubai’s ruler, assured investors that the emirate would soon raise the funds to meet “current and future obligations”. Either he was not ready to reveal what was afoot, or he did not know. In an autocratic regime like Dubai, bad news acquires an extra coating of sugar with each step it takes up the hierarchy.

    Dubai’s debts are heavy, amounting to about $80 billion including the government and the conglomerates it controls. Investors had half-expected Dubai World to seek forbearance from its bankers, asking them to extend their loans. But they felt sure the emirate would make good on publicly traded instruments, and in particular Nakheel’s sukuk, rather than suffer further damage to its financial reputation.

    The dismay of investors was quickly apparent in the market for credit-default swaps (see chart) and in the equally active market for gossip. “Normally we know what’s going on,” says one sheikh in Sharjah, another member of the United Arab Emirates. “Now we haven’t a clue. This smacks of a complete lack of control.”

    Credit-rating agencies quickly downgraded all government-related debt. Whether the standstill counts as a default depends on whether Dubai is asking investors to defer their claims or telling them to. The answer probably depends on how many of Nakheel’s bondholders insist on timely repayment on December 14th. If push comes to shove, the emirate surely has the means to satisfy many of them. It raised $10 billion from Abu Dhabi, its wealthier neighbour, in February. And hours before it requested a standstill, it said it had raised another $5 billion from two Abu Dhabi banks, although only a portion of that was available immediately.

    These bail-out funds flow to the Dubai Financial Support Fund, a committee which is overseeing the restructuring of Dubai’s indebted companies. It is described by one banker as a “command-and-control cockpit”, imposing some financial discipline on Dubai’s government-backed champions.

    Dubai sorely lacked such oversight in the run-up to the crash. Indeed, a month ago, bankers worried that the reorganisation of “Dubai Inc” still might not go far enough. Some in the emirate seemed tempted to declare victory over their woes, pretend that every balance-sheet was sound, and go back to business as usual.

    But the request for extra time suggests the Support Fund is digging in for a longer campaign. In this stiffening of resolve, some see the influence of Abu Dhabi. Rich in oil and conservative in outlook, its rulers have viewed Dubai’s penchant for frolic and folly with distaste and occasional envy. It is possible they are now putting their foot down, fearful that if Dubai does not take its share of pain, it will be back for more money in the next downturn.

    Unlike Abu Dhabi, Dubai has to borrow to finance its future. As the recovery takes hold, it will make money again from its property, tourism, trade and financial industries. One banker describes the emirate as an “integrated service industry, no different from a very large Euro Disney”. Such an industry can and should carry a certain amount of debt. But it has to learn how to pay for that debt from serving customers, not speculators.


    Source: Economist
    • 29 Nov 2009, 7:38 pm
  • Dr. Nilgün Birgören
    Dr. Nilgün Birgören    Premium Member   Group moderator
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    Re^2: Shares slide over Dubai fears
    Hello everybody :-)

    Financial markets and businesses are closed for the Eid holiday - some suggest that's why the announcement was made when it was.

    It's sparked real shock that things have come to this. Just 12 months ago, few could have believed the city would find itself asking for this lifeline. It seems Dubai is now paying the price for living on borrowed money.

    Of course, everyone knew the boom couldn't last forever, but no-one expected it to collapse when, or as suddenly, as it did. Property prices have more than halved over the past year and investors have fled.

    The official figure for Dubai's debt is $80bn, but talk to anyone and the feeling is the figure is much higher. Unpaid bills, abandoned cars and empty buildings are all too obvious. Some analysts put the real figure at close to $160bn.

    Let's wait a little and see what happens.

    Kind regards,
    Nilgun
    • 30 Nov 2009, 3:36 pm