Dubai World did not ask for debt standstill

State-owned Dubai World did not ask creditors for a standstill on its $22bn debt at a meeting on Monday, adding to uncertainty for investors who have been in the dark for weeks.Dubai's flagship conglomerate met around 90 of its creditors and was expected to formalise a request for a debt standstill.

The conglomerate said it would work with lenders to seek a debt standstill in "an orderly way" and will get government financial support if an agreement is reached.

"As long as a standstill is successfully implemented, Dubai World has assurances that the government of Dubai ... will provide financial support to cover working capital and interest expenses to ensure the continuity of key projects," it said in a statement.

A Dubai World spokesman said the meeting was an overview of potential ways to move forward and that creditors needed to form a panel for talks to proceed.

Dubai sent shockwaves through global markets on November 25 when it requested a standstill on $26bn of debts linked to Dubai World and its property units Limitless and Nakheel, developer of three palm-shaped islands.

A $10bn bond from Abu Dhabi last week helped Dubai stave off default on a $4.1bn Islamic bond from Nakheel and provided enough funds to service debts until April.

Banks had lent to Dubai government-linked firms on the understanding they were backed by Abu Dhabi or by the federal government of the oil-exporting UAE, of which both Dubai and Abu Dhabi are a part.

While the support eventually came, the delay and the lack of communication shook global markets and may have damaged the reputation of the Gulf business hub.

Bankers predicted that Monday's meeting would mark only the start of what could be lengthy negotiations.

"Providing clarity is clearly the number one priority," said Raj Madha, banking analyst at EFG-Hermes.

The meeting began late in UAE's trading day but Dubai's Emirates NBD and Abu Dhabi Commercial Bank, lenders with significant exposure to Dubai World's debts, closed down 4.8 percent.

Construction stocks were also hit. Dubai's index ended down 0.2 percent and Abu Dhabi down 0.8 percent.

"A lot of banks will get information and background to the group (on Monday)," said a Dubai-based lawyer. "There will be a lot of questions asked but I don't think many will be answered."

UAE Economy Minister Sultan bin Saeed al-Mansouri said Dubai, which faces more debt maturities next year, may get further aid from the federal government or Abu Dhabi and played down the impact on the UAE economy as whole.

"This issue has to be studied in a proper manner, evaluated and based on that, an answer will be provided on the federal level or the local level because the way we see this is one economy not separated from each other," he told reporters on the sidelines of a conference.

He said the UAE would not change economic forecasts for 2010 due to the crisis as it did not have a "huge reflection" on the economy of the world's No. 3 oil exporter.

The UAE's oil revenues amount to some $50bn a year at an estimated average oil price of $60 a barrel. But Abu Dhabi is home to the vast majority of that oil while Dubai has little.

A steering committee of Dubai World's largest lenders last met the firm on December 7. The committee consists of London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland, and local lenders Emirates NBD and Abu Dhabi Commercial Bank.

Dubai may still repay lenders in full, an Abu Dhabi-based newspaper reported on Sunday, citing unnamed sources.

The National daily said two top Dubai officials, on a confidence-building mission to Britain and the United States in recent days, told financial leaders in London that repaying all bank loans in full "was discussed as a medium-term possibility".

"They made clear there were a number of options the government of Dubai saw as feasible and desirable for Dubai World and repayment in full was one of them," the newspaper quoted a person who attended the talks as saying.

But a full repayment seems the most unlikely of available options and bankers expect Dubai World to propose the extension of maturities for at least a year or more while paying interest.

Dubai World's troubles have raised question marks about transparency in the region as a whole and fears among investors that other government-linked firms could also face problems.

Speculation has continued to mount over which assets Dubai Inc, the network of government-owned companies, is willing to sell to help pay off its debt obligations.

Luxury hotelier Jumeirah Group, is not for sale, said its owner Dubai Holding, which belongs to Dubai's ruler. (Reuters)