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Thu 26 Nov 2009 01:38 PM

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Cost of insuring Dubai's debt rises further

Credit default swaps jump on Thursday after gov't seeks standstill deal on debts.

Dubai five-year credit default swaps have jumped to almost 470 basis points on Thursday, a jump of 30 bps on the previous session's close, CDS monitor CMA Datavision said.

The cost of insuring the emirate's debt has been surging after the government said on Wednesday it was seeking to restructure the debt of state-owned conglomerate Dubai World and its real estate subsidiary Nakheel.

Some traders in Dubai and London said the five year CDS was being quoted as high as 500-550 bps. This means it would cost around $500,000 a year to insure $10 million of the emirate's debt.

The government's announcement on Wednesday, which said consultants Deloitte had been appointed to help with the restructuring, sent the cost of insuring Dubai's debt against default soaring and bond prices tumbling.

State-run Dubai World has $59 billion of liabilities, its subsidiary Nakheel said in August, a large proportion of Dubai's total debt of $80 billion.

On Thursday, the government confirmed that DP World and its debts would not be included in the restructuring process for Dubai World.

CMA said Qatari 5-year CDS had also widened around 10 bps to 114.8 bps though Abu Dhabi CDS which surged on Wednesday was stable around 134.5 bps.

Bahrain's five-year credit default swapsjumped 37 basis points to 231.5 bps on Thursday as regional sovereigns suffered the fallout from Dubai's move to restructure the debt of a major conglomerate, CDS monitor CMA said. (Reuters)

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