The federal government will support Dubai as it grapples with a $26 billion debt restructuring and expects the matter to be resolved soon, the United Arab Emirates' finance minister said.
State-owned conglomerate Dubai World is holding informal talks with major creditors, which include HSBC and Standard Chartered, in London this week as it finalizes a restructuring proposal.
Asked whether the government would support Dubai, Sheikh Hamdan bin Rashid al-Maktoum said: “Of course. Dubai is part of the federation.”
Sheikh Hamdan, who is also deputy ruler of Dubai, said the emirate had not yet approached the federal government for aid.
“The federation hasn't reached that far but the Emirates are one entity and things will be resolved soon, God willing,” he told reporters on the sidelines of a conference.
Dubai World shocked global markets in November, when it requested a standstill on debt linked mainly to its property developers, Nakheel and Limitless World.
“The whole thing is that ... companies are in arrears. These companies are not the whole country,” Sheikh Hamdan added.
Dubai, famed for its elaborate property projects and glitzy lifestyle, was bailed out in December by neighboring Abu Dhabi, the wealthiest member of the United Arab Emirates federation.
More conservative than Dubai, Abu Dhabi stepped with in a last minute bailout that helped Dubai avert an embarrassing default on an Islamic bond issued by developer Nakheel, builder of Dubai's palm-shaped islands.
UAE Economy Minister Sultan bin Saeed al Mansouri said on Tuesday that creditors should reach an agreement with the conglomerate.
Bankers have said the restructuring plan is being delayed by efforts to value the assets of its Nakheel unit.
Dubai's debt crisis is still causing ripples around the region. Moody's downgraded seven Abu Dhabi government-related entities late last week, due to the absence of an explicit, formal guarantee of government backing.
Abu Dhabi, home to most of the UAE's oil, dismissed the downgrade but analysts said it would not be pleased about the impact Dubai's debt problems were causing.
“Abu Dhabi is aware of the consequences and I suspect it is working out the best thing for the UAE as a whole,” said the head of a western bank in Abu Dhabi, who asked not to be identified.
“They want to position themselves the right way, probably a federal solution that is well structured because Dubai needs to maintain its credibility and dignity.” (Reuters)