Abu Dhabi lend Dubai $5bn

Abu Dhabi lend Dubai $5bn

Two wholly-owned Abu Dhabi banks have subscribed a further US$5 billion in financing for debt-laden Dubai, the emirate's department of finance said in a statement on Wednesday.

National Bank of Abu Dhabi and Al Hilal Bank, an Islamic institution founded only last year, each subscribed US$2.5 billion in bonds issued by Dubai, the statement said. The subscription comes 10 months after the Central Bank of the United Arab Emirates, which is based in Abu Dhabi, bought US$10 billion of government paper issued by Dubai, the first tranche of a proposed US$20 billion programme.

This prompted the Dubai government to announce it has raised US$5 billion in a new bonds issue as part of its US$20 billion bond programme launched earlier this year. Proceeds from the bond issue will be used by the Dubai government for the repayment of billions of dollars of debt on its corporates, especially a US$3.5 billion loan on real estate developer Nakheel that matures 14 December.

Dubai and companies which it owns have US$80bn in outstanding debt

"It is similar to the first tranche, and indicates that there is Abu Dhabi and federal support for Dubai," one credit analyst said shortly after the news was announced.

Ratings agencies estimate that the emirate of Dubai and companies which it owns have US$80 billion in outstanding debt. The emirate, which is one of seven which together form the UAE, is struggling to cope with the effects of deep property slump.

The first amount scheduled to be drawn down is US$1 billion and will be split equally between a conventional bond issuance to NBAD and a sukuk to Al Hilal Bank.

The signing ceremony of the agreement was attended by HE Abdul Rahman Al Saleh, Director General of Dubai Department of Finance, HE Nasser Ahmed Khalifa Al Suwaidi, Chairman of the National Bank of Abu Dhabi and HE Ahmad Atiq Al Mazrouei, Chairman of Al Hilal Bank.

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