Dubai International Capital, the private equity unit of the emirate’s flagship conglomerate Dubai Holding, sought a three-month debt repayment delay in another blow to the emirate’s financial image.
“Dubai International Capital (DIC) and a co-ordinating committee of banks today presented to lenders a request for a three-month extension to 30 September 2010 of certain maturities,” the company said in a statement.
The DIC investment unit has a US $1.25bn loan maturing in June and DIC has up to US $3 bn in debt overall.
May 27, 2010
Analysis and Forecast: Increasing Risk
The news represents a double blow to Dubai. The first is that it confirms that Dubai has still not resolved its financial problems. The second is that despite reassuring statements from Dubai officials that no further issues with the repayment issue, this was proved not to be the case. In other words, Dubai has still not addressed the issue of its governance and communications, two aspects that have exacerbated the repercussions.
The news also indicate that Abu Dhabi is either unwilling to help Dubai and are still happy to see Dubai suffer further. In either case, the news will have negative repercussions on the whole of the UAE.
Overall, the standstill confirm that the financial situation for Dubai is still not resolved but also they indicate that they did not address the other equally serious issue of communications and governance. This is of paramount importance, particularly to Dubai, as it is crucial for its economic survival to attract foreign investment. Until communications and governance issues are addressed and resolved adequately, foreign investment is unlikely to return. Dubai has pitched itself by primarily relying on publicity to attract foreign investments and by not addressing the issue of adequate communications, foreign investors will need further reassurances that the past problems will not be repeated. This does not seem to be the case.
The figure below shows a figure of the expected maturing debt facing Dubai until 2013.