Dubai's debt is still large but not as scary as it was two years ago.
The emirate has been quick to dismiss suggestions that it might restructure bonds worth $3.8bn due to mature next year, even though its total debt appears to have remained largely unchanged since the 2009 crisis at flagship conglomerate Dubai World.
The emirate still needs to deleverage, but this time it holds more cards.
It remains hard to get a clear picture of Dubai's borrowings. Moody's reckons that total debt of the government and related entities stands at $102bn. That would amount to around 125 percent of GDP. Just months after Dubai World asked creditors for a standstill in 2009, the IMF estimated Dubai's total debt at $109 bn.
Dubai also now enjoys strong access to debt markets, unlike in 2009. The emirate hasn't even come close to exhausting its funding options. It owns cash-generative assets like Emirates airline, ports operator DP World, and its utilities.
The bailout of Dubai World confirmed a cash backstop from Abu Dhabi. Meanwhile, Dubai's internal resources continue to surprise, after it announced in August it would pay a $4bn loan in full despite having a partial refinancing offer.
But lenders shouldn't discount haircuts entirely. The economy is growing again but may slow down - Citi expects GDP to grow by only 2 percent in 2012. The emirate has also spent two years trying to decide which assets it sees as strategic - thus benefiting from the sovereign guarantee.
Analysts are divided but Moody's puts roughly half of the $68bn debt that is owed by related entities out of reach of government support. That includes the investment arm of Dubai Holding, which has an estimated $6.2bn of bank debt and is owned by the ruler.
Dubai's long-awaited bankruptcy law is also edging closer to completion.
Indeed, Dubai appears to be creating the conditions to end the pattern started at Dubai World - meeting bond repayments, then pledging to repay bank debt in full by extending out maturities.
Ongoing financing needs may mean Dubai can't afford to impose substantial haircuts on its creditors across the board.
But the emirate's days of splashing cash on crappy assets are unlikely to end without lenders suffering some pain somewhere along the way.
(Una Galani is a Reuters Breakingviews columnist. The opinions expressed are her own)For all the latest banking and finance 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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