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Semi-official news reports that Dubai government-affiliated Zabeel group seeks to restructure over US $1.6 billion in debt. Zabeel is a privately-owned company with stakes in the Jumeirah Zabeel Saray hotel and the Tiara Residence on the Palm Jumeirah. In 2007, it invested in Abraaj Capital, the region's leading private equity firm.

 

The company is discussing extending debt maturities, as well as asset sales and a potential injection of capital.

 

Zabeel has already missed some repayment of loan principals, although it has managed to meet most interest payments, sources said.

 

The news came as there were hints by Dubai government officials that the emirate is considering partial or full privatization of its transport and utility companies.

 

January 12, 2011

 

 

Analysis and Forecast: Increasing Risk


 

This is another blow to Dubai’s debt problem and an indication that the emirate is still facing difficulties. Zabeel’s debt are thought to be with bilateral agreements with mainly local banks, as well as HSBC, which has strong links to the ruler of Dubai according to sources.

 

News coming out of Abu Dhabi about its own difficulties further erode the likelihood that Abu Dhabi will be in a position to bail-out Dubai.

 

News about Dubai is considering the privatization of utility and transport infrastructure is further indication that the emirate is looking for alternative ways to revive the economy. Whilst it is positive that the government is considering this option, it is also an indication that the situation remains dire as privatization of such assets was almost taboo before the beginning of the crisis.