The government of Abu Dhabi and the Central Bank of the UAE has announced that it has agreed to provide $10 billion to the Dubai Financial Support Fund, allowing Dubai World to repay $4.1 billion of Islamic sukuk bonds that are due to be paid on Monday.Sheikh Ahmad Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee, confirmed the financial agreement in a statement.
He also announced that Dubai government would use some of the funds provided "for the satisfaction of obligations to existing trade creditors and contractors", adding that discussions with affected contractors would begin soon.
He said that despite the restructuring of $26bn of Dubai World debt, the emirate would "continue to be, a strong and vibrant global financial centre".
The deal will also see the UAE central bank injecting liquidity as needed into banks that face exposure to Dubai World.
He added: "Like other global financial centers, Dubai has faced recent market challenges driven by the global economic slowdown and a severe real estate market correction.
"Recently, Dubai World announced that it might not be able to commercially support its obligations. Since that time, the Government of Dubai has worked closely with the Abu Dhabi Government and the UAE Central Bank in addressing and assessing the impact of Dubai World on the UAE economy, banking system and investor confidence."
Sheikh Ahmed said: "Specifically, the Government of Abu Dhabi has agreed to fund $10 billion to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World.
"As a first action for the new fund, the Government of Dubai has authorised $4.1 billion to be used to pay the sukuk obligations that are due today.
"The remaining funds would also provide for interest expenses and company working capital through April 30, 2010 - conditioned on the company being successful in negotiating a standstill as previously announced.
Sheikh Ahmed also said that Dubai would announce a comprehensive reorganisation law, a framework that is based upon internationally accepted standards for transparency and creditor protection.
"This law will be available should Dubai World and its subsidiaries be unable to achieve an acceptable restructuring of its remaining obligations," he said.
"Today's actions, taken together, demonstrate our strong commitment as a global financial leader to transparency, good governance, and market principles. There will certainly be challenges periodically, just as there are challenges in other major financial centers around the globe. We believe today's actions will best serve the interests of all stakeholders."
He added: "Our best days are yet to come. The Government of Dubai remains committed to its high standards and its obligations. We are confident in our economic model, and we are confident in the long-term health and outlook for our economy."
Separately, Nakheel said in a statement that it will honour all obligations related to the 2009 Nakheel Development Limited Sukuk using funds that will be provided by the Dubai Financial Support Fund.
In accordance with the terms of the Sukuk, the repayment will occur within the next 14 days, it said in a statement posted on the Nasdaq Dubai website.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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