By James Exelby
Debt recovery in UAE remains concern in the absense of legal precedent.
Laws and regulations relating to creditors’ rights in the event of a debtor insolvency remain untested in the United Arab Emirates, rating agency Standard & Poor’s said on Tuesday. “While the creditworthiness of borrowers has always been of paramount concern to creditors, recent developments in the debt markets, including the deteriorating credit of some major corporate borrowers, [and] the recent credit crunch [has] put a spotlight on creditors’ prospects for recovery of principal and interest after a borrower default,” said the agency.
“From the creditors' perspective, it is no longer only a question of whether a particular borrower will default, but also whether - and to what extent - they will be repaid principal and interest after a default, and how long it will take.” The report is part of an ongoing analysis of more than 30 national insolvency regimes in Europe, Asia, North America, and Latin America by the agency. “While it would be an overstatement to claim that the UAE is an unfriendly jurisdiction for secured creditors, the laws and regulations addressing creditors’ rights - and the effect of a debtor's insolvency on those rights - are not as evolved as those in many more developed jurisdictions,” the ratings agency said.
“In addition, as of the time of writing there has never been a major corporate insolvency in the UAE, the local laws and regulations relating to creditors’ rights in the event of a debtor insolvency remain substantially untested,” it added.