Dubai ruler says ‘We are back’ after debt accord

Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum said the emirate is recovering after state-controlled holding company Dubai World reached a debt restructuring settlement with creditors.

“We are back. Of course we are back,” Sheikh Mohammed said in an interview with Bloomberg Television’s “InBusiness With Margaret Brennan” at the FEI World Equestrian Games in Lexington, Kentucky, on Sunday. “This is a challenge. Life would be boring if there’s no challenge.”

Dubai World, one of three main holding companies controlled by Sheikh Mohammed, said September 10 that 99 percent of creditors had agreed to alter the terms on $24.9 billion of debt after the deepest global financial crisis since the 1930s led to a 50 percent drop in property prices in the emirate. Dubai amassed $109 billion in debt to turn itself into a financial, logistics and tourism hub, with about $15.5 billion due this year, the International Monetary Fund estimates.

Dubai’s vision is unchanged after projects such as Meydan’s racecourse and Burj Khalifa, the world’s tallest building developed by Emaar Properties, were completed on schedule, Sheikh Mohammed said. “All the projects that were there are going ahead,” although some may be delayed for six months to a year, he said.

“Life goes on,” said Sheikh Mohammed, who was taking part in a 12-hour, 160km endurance race.

Nakheel, developer of palm-tree shaped islands off Dubai’s coast, said last week it will complete its debt- restructuring by the end of this year and that it has resumed construction work in its Al Furjan project with Al Shafar Transport and Contracting Co. Arabtec Holding Co. earlier this year stopped work on the 800 villa development because of unpaid bills. About 4,000 homes were initially planned in the project.

Dubai’s benchmark stock index has gained 7.8 percent since the Dubai World announcement, trimming its loss for the year to 4.8 percent. Abu Dhabi’s ADX General Index has risen 4.9 percent. The two emirates are the two biggest of the seven sheikhdoms that make up the UAE.

The Dubai World and Nakheel announcements “are steps in the right direction” and have helped improve investor sentiment, Ali Taqi, a portfolio manager at A/T Capital Management in Dubai. “The completion of pending real-estate projects is a sign of real-estate companies getting back on track. On the other hand, these projects will create further oversupply, thus the real-estate market could get worse before it gets better.”

The emirate’s property prices are unlikely to recover any time soon as 41,000 new homes are expected to be completed by the end of this year, adding to a glut of homes, according to Colliers International estimates in May. Builders in Dubai have delayed or canceled developments worth about $330 billion, Dubai-based market researcher Proleads estimates.

The Dubai government will seek to raise about $1 billion from a bond sale this week, two bankers familiar with the plan said September 23. The bond sale will tap the market for the first time since Dubai World’s announcement.

In an attempt to spur the emirate’s economy, Dubai’s government on Sunday said it is allowing Dubai Islamic Bank PJSC, the UAE’s largest Shariah-compliant bank, to purchase a majority stake in Tamweel with the aim of reviving mortgage lending. Frozen credit markets had blocked Tamweel’s and Amlak Finance’s access to funds and forced what were once the two biggest mortgage lenders in Dubai to stop lending. Dubai borrowed about $20 billion last year from the UAE government and wealthier neighbour Abu Dhabi.

“When I talk, I talk about Dubai, but we have to talk about the whole UAE as a country,” Sheikh Mohammed said. “We do things in Abu Dhabi, we do things in Dubai, we do things in Sharjah. But the completion will be great.” (Bloomberg)