Dubai is preparing to borrow as much as US$6.5 billion to ease the burden of its estimated US $100 bn debt.

The US $6.5 billion bond plan consists of US $4 bn euro medium term notes and a US $2.5 billion Islamic sukuk bond programme.

The latest fund-raising is in addition to the bond programme in which the Dubai government sold US $10 bn to the UAE Central Bank, at 4 percent annual interest.

26 October 2009

Analysis and Forecast: increasing risk

The news that Dubai is now looking to sell bonds to external markets shows that Abu Dhabi is still not interested in bailing Dubai out. Dubai has sold US $10 bn of debt to the Abu Dhabi-controlled Central Bank, but at an interest and has so far been unsuccessful in selling a further US $10 bn it said it was planning to earlier in the year. The first US $10 bn have already been mostly distributed to government developers and government companies, including Dubai Properties, the Dubai Electricity and Water Authority (DEWA), Civil Aviation Authority and others.

The fact that Dubai has now resorted to look elsewhere shows that Dubai has reached a point where it needs to urgently address its US $100 bn debt and can no longer wait for help from Abu Dhabi, which is very reluctant to provide it.

It is estimated that Dubai would need to either repay or refinance over US $15 bn in debts coming due in 2010, US $12.1bn in 2011, US $15.2bn in 2012 and US $4.8bn in 2013. In addition, the emirate needs to ensure it can pay the Nakheel sukuk bonds, which mature on 14 December with bondholders due to receive $4 bn in principal and profits.