Dubai may sell stakes in state-owned companies
One year after the debt crisis in Dubai
Dubai may sell off stakes in state-owned companies, top financial officials said on Sunday, as the Gulf Arab emirate tries to dig itself out of a $100 billion-plus debt pile.
The emirate, a regional financial and trade hub, suffered a blow to its reputation a year ago when state-linked conglomerate Dubai World announced it would ask creditors for a standstill agreement on almost $25 billion in debt.
"We are working on opening up the capital of leadingcompanies to our public," Sheikh Ahmed said, adding that the emirate needs to "regroup, review and reconsider" some of its investments.
Dubai's market shrugged off the news, with Dubai's benchmark index closing at a 10-week low with developer Aldar Properties leading the decline. The cost of insuring Dubai sovereign debt against default or restructuring was at 453 basis points, well above pre-crisis levels of around 300 basis points.
Sheikh Ahmed was joined at the news conference by Dubai's other top financial officials and, apparently underscoring their solidarity, by Dubai's ruler, Sheikh Mohammed bin Rashid Al-Maktoum. He did not speak, but was tapping on an iPad.
Since the crisis, Dubai World has managed to reach a restructuring deal with creditors, allowing the government to tap into improved investor confidence to issue a $1.25 billion bond in September.
Dubai's economy grew 2.3 percent in the first half of this year, the government's statistics office said earlier this month. The IMF says Dubai's economy likely contracted 0.9 percent in 2009, although no official figures for the full year of 2009 have been released.
"Dubai's real economy seems to be on the mend," said Tristan Cooper, head analyst for Middle East sovereign at Moody's.
As Dubai's state-linked companies try to cope with more than $100 billion in debt, they have been able to reassure investors and creditors facing debt restructuring by reminding them that Dubai's tightly-controlled companies could be sold for cash.
Prized stakeholdings in assets such as DP World, Emirates Airlines and Dubai Electricity and Water Authority (DEWA) are attracting keen interest from potential investors.
At the same time, Dubai has shown a clear reluctance to sell off its crown jewels, even as some $30 billion worth of loans and bonds at predominantly state-linked firms are due to mature in 2011-2012.
"Asset sales are not on the cards... we are reluctant to sell assets at this time," said Mohammed Ibrahim Al-Shaibani, deputy chief of Dubai's fiscal committee.
State officials also raised the possibility that Dubai could raise more funds through debt issues.
Dubai World's flagship property developer Nakheel plans to issue a sukuk, or Islamic bond, to its trade creditors in the first quarter of 2011, said a senior official at the Investment Corporation of Dubai (ICD), which controls some of the state's assets.
"We are making very good progress on the restructuring...Nakheel's financial and operational restructuring is going according to plan," said ICD executive Vice President Faisal Mikou.
Under Nakheel's restructuring plan, trade creditors have been offered 40 percent of what they are owed in cash and the remaining 60 percent through a sukuk, or Islamic bond.
Despite improving balance sheets among Dubai's state-linked companies, significant challenges remain.
In a reminder that the Gulf Arab emirate's debt troubles are far from over, financial services firm Dubai Group recently missed two payments on separate loans.