Why is the US$5bn bond issue not being used to repay Nakheel’s debts?
With Nakheel’s US$3.5bn sukuk maturing in a matter of weeks, it is not clear why the government would raise US$5bn for the DFSF, yet not use it to pay off the emirate’s most pressing debts. Dubai World controls some of Dubai’s most high-profile companies, such as Nakheel and DP World, which have helped turn it into a real estate, financial and tourism hub, not to mention a global brand. Allowing Dubai World to default will do too much damage to Dubai’s reputation for it not to be a priority. This makes me think that Dubai World’s debt problems simply run too deep for US$5bn from the DFSF to be sufficient. While that would cover the cost of Nakheel’s sukuk, Dubai and all its government-related companies are estimated to have a total of US$13bn maturing in 2010, and a further US$19bn in 2011. If a restructuring has become inevitable, why not it get it over with sooner rather than later? What Are The Implications? Ratings Downgrade: DP World, Emaar Properties, Dubai Holding, DIFC Investme
