Leaked Documents Reveal that Dubai World Had Already Been Bailed Out

The property subsidiary of Dubai World, the stricken Gulf investment group, could have lost up to $6 billion in the first half of this year had it not been given government bailouts, it has emerged.
The continued bad news from Dubai World sent investor confidence in the Gulf state crashing, while in Britain fears about the state-backed investment company hit Royal Bank of Scotland, one of its main lenders.
Leaked documents indicated that Nakheel, Dubai World’s property division, which owns The Palm and The World developments, lost 13.4 billion dirhams in the first half of the year. Moreover, the Dubai Department of Finance said that Dubai World had received an additional nine billion dirhams of government money from the Dubai Financial Support Fund ever since the onset of the global crisis, much of which could have ended up with Nakheel, its worst-hit subsidiary.
Four British-listed banks—HSBC, RBS, Lloyds Banking Group and Standard Chartered—and two local lenders—Emirates National Bank of Dubai and Abu Dhabi commercial Bank—met Dubai World’s advisers for the first time. The banks tried to ascertain whether Dubai World would make interest payments due on the bonds of Nakheel next Monday and demanded detailed financial information to help them to revalue it in the event of a default.
Dubai World sparked panic across local markets on November 25 when it requested a suspension of at least six months on repayments of its $59 billion total liabilities. Last week the group said that it had asked creditors to restructure $26 billion of debts.
The Government also admitted that it would take longer than the six months originally planned to restructure Dubai World group’s $26 billion debts.
Abdelrahman al-Saleh, Director-General of the Dubai Department of Finance, hinted at a lengthy restructuring of Dubai World and protracted wrangling with its creditors. Mr al-Saleh said that the company had received $2.5 billion from a $10 billion government bond program in February, but he emphasized that the State—which has distanced itself from Dubai World’s problems, would not guarantee the company’s debts.
The Dubai Financial Market took another battering as local investors reacted to Mr al-Saleh’s remarks, closing down 6.1% at a five-month low. The exchange has fallen by 22% ever since Dubai World announced the six-month delay on its debt repayments two weeks ago.
Of particular concern is a $4 billion Islamic bond, or sukuk, held by Nakheel. The bond is due for repayment on December 14.
Investors have been infuriated by the lack of information and clarity from Dubai World and the Government ever since the crisis broke. Despite Mr al-Saleh’s comments, a spokesman for the Department of Finance said that no official statement from the Government was imminent and that the matter was now between Dubai World and its creditors.
The banks are expected to create a steering committee to conduct negotiations with Dubai World by tomorrow, appointing KPMG as an adviser. The accounting firm has been advising creditors informally for several weeks. A meeting of all Dubai World’s creditors is planned for December 21.