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Thu 11 Nov 2010 05:42 PM

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Dubai Group missed Citi Oct debt payment - sources

Dubai Holding unit missed an October interest payment on a $330m loan on which Citibank was the sole bookrunner

Dubai Group missed Citi Oct debt payment - sources
Dubai Group missed Citi Oct debt payment - sources
US: A pedestrian walks by a Citibank office in San Francisco, California. Citigroup has reported a US$5.1bn first quarter loss and plans to cut 9000 jobs as the bank continues to struggle with home and car loan losses. (Justin Sullivan/Getty Images)

Financial services firm Dubai Group, part of a conglomerate owned by Dubai's ruler, missed an October interest payment on a $330m loan on which Citibank was the sole bookrunner, sources said Thursday.

"The payment on the Citibank facility in October wasn't paid," said a source with direct knowledge of the matter. A second person confirmed the October payment had not been made.

The five-year loan, which matures December 13, 2011, was used to fund Dubai Group's acquisition of a 49-percent stake in Bank Islam Malaysia. Bank Islam earlier this year said Dubai Group was trying to sell the stake.

Dubai Group, owned by Dubai Holding, said on Thursday it had set up a co-ordinating committee of lenders to discuss its debt obligations, in a statement to Reuters, adding it would continue to service its debt.

"These discussions are making good progress and Dubai Group is confident of a positive outcome that is beneficial to all stakeholders," it said.

Dubai Group has a $1.5bn murabaha Islamic financing facility, in which 24 banks have participated, due in August 2011. The arrangers included Al Hilal Bank, First Gulf Bank, Noor Islamic Bank, Qatar's Al Khaliji Commercial, Royal Bank of Scotland and Standard Bank.

A banking source, speaking on condition of anonymity, said the bulk of the exposure still lay with the top eight banks on the deal. "We knew they were in difficulty, in significant financial trouble," the source said.

Another source said the co-ordinating committee is likely to comprise Al Hilal, Al Khaliji, Noor Islamic and RBS.

Dubai Group, which focuses on banking, insurance and investments, has stakes in Dubai-based investment bank Shuaa Capital, Greek group Marfin Investment Group and Australian company Citigold Corp.

Its announcement of the coordinating committee comes on the heels of a raft of restructuring in the Gulf Arab emirate after a property collapse combined with the global downturn

Flagship conglomerate Dubai World reached a $25bn restructuring deal with creditors in September.

The state-linked firm shocked global markets last November when saying it was unable to meet almost $25bn in debt obligations. Dubai World's Nakheel property unit narrowly avoided default on an Islamic bond last year after a last-minute cash injection from neighbouring emirate Abu Dhabi.

"For the last year, everybody has been in the dark and struggling to figure out what is going on," a Dubai-based banker said. "It is useful to know steps are being taken to address debt issues because it gives a little comfort to the market."

Dubai Holding's other units, including Dubai International Capital (DIC) and Dubai Holding Commercial Operations Group (DHCOG), raised concerns with investors earlier this year when they sought delays for credit obligations.

DHCOG, Dubai Holding's main unit, delayed repayment on a $555m loan until November 30, while DIC also requested a repayment extension on a $1.25bn loan.

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Al Shamal 9 years ago

Can't pay or won't pay ? If the latter, remember please that it is harm (a sin against Islam) not to pay your debts and your soul will not rest until you do. If the prior, and you truly can't pay, work hard, be truthful and He may be merciful.

Saeid 9 years ago

@Al Shamal,

I believe it's a case of 'can't' rather than 'won't'. So god almighty will forgive them for not paying.

Ram 9 years ago

Al Shamal's comments were beautiful. It shows the true strength of Islam. BTW I am not a Muslim. Wish the majority followed the tenets as enunciated by him. Fairness, justice and peace together is a sine qua non for the growth of any economy.

ali fakha 9 years ago

I am wondering why every one waiting just any thing against dubai as if no other country or state having financial problems in the world except Dubai. why no one look what happens to Greece and what about USA itself the giant in this planet? More than 200 banks closed already and the jobeless percentage keep increasing in addition to crimes and many more .
If dubai delay one payment, does it mean end of the world.
By the way I am not UAE national, I am expat who work in this country like all expats. We should thank this place as we got a job while our countries are not able to offer us jobs . Who ever does not earn and save money during his work in Dubai, it is his problem and not the government of Dubai. Dubai government does not force any one to stay. Who dont like this place, can leave instead of wroking and earning money and then wait any chance to talk bad about dubai.

Scaramanga 9 years ago

@ Ali ,

Try not to bury your head in the sand too much my friend . Look at the facts and look at the statistics of what has happened and what is still happening.

People and investors have seen their hard earned money go to nothing and their investments have not materialised.
Do not believe that people can not get work in other countries because believe me they can . We as expats offer our services and offer our professions for money , i'm not grateful to anyone , i supply a service and i'm paid for it , when that service is not needed i will take it elsewhere.

Basic supply and demand my friend and if a few in Dubai had understood this basic business economic then they wouldn't be in such pickle.

Sandpiper 9 years ago

Ali Fakah my friend, the reason why people are talking about Dubai economy on this site is because its Arabian Business.com, by definition a site about regional economic issues. Oh, and the collapse of the Dubai economy is spectacular by any measure, its not a case of "delaying one payment" its a case of defaulting on billions and billions of $, its historic, thats why everyone is talking about it, here and in business circles around the world.

Usman 9 years ago

Whenever any comments on Dubai financial health appears , there are 3 types of commentators.

1. UAE Nationals
2. Expats who have invested in real estate
3. Expats who have NOT invested a single dirham in UAE

Thus their sentiments revolves around it. UAE National are generally optimistic. Expats who invested (probably in post 2007 era) in RE seems to be more complaining while Expats who remit all the money back home seems to be grateful to DXB (UAE) .

Benny 9 years ago

Where is all the money paid by all these investors in projects that never materialized? Dont tell me that this is with small developers. It is with the biggest. Why consultants, contractors, banks, etc.. where not paid with the money collected? There is for sure something more than wrong in what happened. When will the gvt clean the house and recover all that money from those who took it? The money recoeverd can help pay and fix the situation. Next to that there is an urgent need to build trust again. We all the time hear about this is a Muslim country, well then fix the things based on muslim principles. Show honesty and pay back or deliver. I dont thing there is anything wrong in doing the right things?

Red Snappa 9 years ago

The issue fellow members of the debate is the 105, 109 or even 115 billion US dollars of Dubai state debt, who knows I've read so many estimates from different sources that I'm not quite sure, versus the size of the population. The importance of scale, even a a generous census would probably put the population at 1.8 million of which Emirati citizens represent a maximum of 12 per cent, that is a colossal per capita debt burden.

The population of Greece is 11.25 million and Ireland is 4.5 million who are also in difficult financial circumstances. Nobody is holding anything against Dubai, the global crisis caught up with many, but it truly has a large problem. Domestic asset values continue to fall and there are too many of them, meanwhile any serious foreign investors are still waiting for the true value proposition to appear.