Abu Dhabi rescues Dubai

Abu Dhabi rescues Dubai

Dubai's government announced today it has received US$10 billion in emergency funds from its oil-rich neighbour Abu Dhabi, which will help pay debts owed by the struggling Dubai World conglomerate.

State-owned Dubai World had been up against a Monday deadline to repay a pile of debt from its Nakheel property division. Some US$4.1 billion of the bailout money will be used to pay off those bills. Dubai's ability to repay that debt had been seen as a key test of the emirate's creditworthiness.

The Dubai stock market surged over 10 percent as it awoke to Dubai's fresh announcement, while the market in neighbouring Abu Dhabi opened up 7.07 percent.

"The government of Abu Dhabi has agreed to fund US$10 billion to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World," an official statement said.

"Our best days are yet to come"

"As a first action for the new fund, the government of Dubai has authorised US$4.1 billion to be used to pay the sukuk (Nakheel Islamic bonds) obligations that are due today," it added.

Sheik Ahmed bin Saeed Al Maktoum, chairman of the Dubai supreme fiscal committee, said in a statement: "We are here today to reassure investors, financial and trade creditors, employees and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices.

"Our best days are yet to come."

The money is a direct bail out of Nakheel, the construction arm of Dubai World, which has often been described as "too big to fail" by regional analysts.

Welcome financial support

Dubai World said in a separate statement it welcomed the financial support, which will provide "funding and a stable basis" for a restructuring the company announced last month.

The company said it is pushing ahead with talks to convince lenders to agree to a "standstill" - effectively a delay - on paying back some other debt it owes.

In the immediate aftermath of Dubai's request to delay repayments, Abu Dhabi claimed they would "cherry-pick" what they saved from their neighbour, but essentially the oil-rich emirate has more to gain from saving Dubai.

As reported by Middle-East-Online.com, two Abu Dhabi-controlled banks had subscribed last month to a US$5 billion bonds package issued by the government of Dubai.

The UAE central bank had also fully-subscribed to a US$10 billion bond issuing in February, earmarked to help Dubai sort its debt problem.

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