A member of Dubai’s ruling family said on Monday he had made “significant investment” in the emirate's bonds following a government decision to renegotiate the debts of its flagship company.
Sheikh Maktoum Hasher Maktoum Al Maktoum, CEO of the UAE-based conglomerate Al Fajer Group and nephew of Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, told Arabian Business that he made the investment across three of the Dubai’s bonds on the first day of trading following the Eid break.
“You don’t bottom out on positive news,” said Sheikh Maktoum. “I’m looking to invest in these bonds now because this is the last high yielding bond.”
Nakheel’s Islamic bond, which was originally due to mature on Dec 14, was trading as high as 110 on Wednesday, according to Reuters data. The following day it fell by 30 points to a record low of 40 points.
“It looks like a final consolidation of the Dubai position,” said Sheikh Maktoum. “Things are being taken in as a whole and managed as a whole and solved as a whole so am quite happy about it because you always bottom out on very negative news.
“Some of the bonds are trading at minus 50 percent,” he added. “If you buy the bond and if it is paid on the 14th December, you stand to make 100 percent. If they pay you in six months you are still stand to make 100 percent return on investment. Even if they renegotiate and do a haircut reduction you stand to make up to 50 percent.”
Last week Dubai said it would ask creditors of state-backed Dubai World and Nakheel to agree to delayed debt repayments, as part of a wider restructuring plan. Dubai World has $59bn of liabilities, representing a large part of Dubai’s total debt of $80bn.
Dubai World subsidiary DP World will not be part of the restructuring process.
Global markets tumbled following the news. On Monday Dubai’s bourse ended 7.3 percent lower, its sharpest one-day decline since October 8.
Sheikh Maktoum said he didn’t expect the global reaction the debt delay call had caused but said the extension was plausible.
“For me it’s a very plausible scenario because I think what the experts or the people who are handling the situation are trying to do currently they are trying to handle the solution as a turnkey solution, they don’t want to do a short term fix and then be in trouble in another six months.
“Restructuring debt in a downturn is a normal scenario,” he added. “Many companies and governments have renegotiated debt and I view this as a positive outcome. I believe in Dubai and the UAE in the long term, no matter what.”