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For the financial experts (and the rest of you too): Dubai defaults on debt (sort of)

For the financial experts (and the rest of you too): Dubai defaults on debt (sort of)

Old Nov 26th 2009, 3:04 am
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Default For the financial experts (and the rest of you too): Dubai defaults on debt (sort of)

So Dubai can't honour its debt on a timely basis.

Any views? What does this mean for Dubai in the short and long term? Is the city really much worse off than many of us imagined (or even hoped).

Will this trigger another round of layoffs and rent declines?

http://www.telegraph.co.uk/finance/g...till-call.html
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Old Nov 26th 2009, 3:32 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

[QUOTE=Ethos83;8126050]So Dubai can't honour its debt on a timely basis.

Any views? What does this mean for Dubai in the short and long term? Is the city really much worse off than many of us imagined (or even hoped).

Will this trigger another round of layoffs and rent declines?

Well from what you read in the "positive news only" papers the indications seem to have been that the payments would be made. However seems now some reality is beginning to raise its head? This week a couple of "business leaders" were dropped from one of the top Govt advisory groups without any real comment. Also the top man in stock exchange seems to have had to get his spade out of the garden shed.

Interesting days ahead?
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Old Nov 26th 2009, 5:20 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

Originally Posted by Jim Smith View Post
Interesting days ahead?
Well we all knew that this was going to happen, but like you say it's the what happens next...

I'd guess it will translate into more lay offs.
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Old Nov 26th 2009, 7:28 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

should send the directors to prison like they do with others who can't honour their debts!
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Old Nov 26th 2009, 10:28 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

The Dubai problems come on the back of another large scale debt probem in the regiona ... KSA's Saad Group and Ahmad Hamad Algosaibi & Brothers Co owe $20bn and the UK authorities are being asked to intervene (help). See story here

Turbulent times ahead for the region, the worst-hit will be the temporary workers, building contractors and labourers in my view, most of who are indians, phillies, pakistanis etc.

For the financial techies out there, the CDS levels for Dubai World have now soared to significant highs, however, some believe this story was thrown out there by Dubai's dept of finance to simply see what the reaction in the market would be to a potential default ... in actual fact, they have the capacity to pay their debts and will probably do so. (note: only yesterday Dubai raised $5bn of additional finance .... the banks involved would not have done that if repayment looked dodgy).
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Old Nov 26th 2009, 10:49 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

Originally Posted by Banker_Boy View Post
The Dubai problems come on the back of another large scale debt probem in the regiona ... KSA's Saad Group and Ahmad Hamad Algosaibi & Brothers Co owe $20bn and the UK authorities are being asked to intervene (help). See story here

Turbulent times ahead for the region, the worst-hit will be the temporary workers, building contractors and labourers in my view, most of who are indians, phillies, pakistanis etc.

For the financial techies out there, the CDS levels for Dubai World have now soared to significant highs, however, some believe this story was thrown out there by Dubai's dept of finance to simply see what the reaction in the market would be to a potential default ... in actual fact, they have the capacity to pay their debts and will probably do so. (note: only yesterday Dubai raised $5bn of additional finance .... the banks involved would not have done that if repayment looked dodgy).
yup but the 5 billion is from two abu dhabi banks and the other bond to try to raise 10 billion only managed to raise 1.9 billion so it seems that whilst abu dhabi is perfectly happy to take a stake in dubai nobody else is.

imho this will be the straw that broke dubais back. the pound is down, the ftse is down, half the european banks are down, all on fears of exposure to dubai, any confidence left in dubai just evaporated.

somebody somewhere probably thought lets drop a story just as eid starts and nobdoy will notice......OOPS
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Old Nov 26th 2009, 10:52 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

"Debt problems in Dubai hit global stocks, helped lift bonds and took the dollar away from a 14-year low against the yen on Thursday.

Gold climbed to a new record high before falling back as the dollar rose.

Banking stocks came under pressure because of potential exposure to any bad debt in the region, as did shares in European car companies, some of which are part-owned by Gulf sovereign wealth funds."

http://www.reuters.com/article/usDol...5AP0MS20091126
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Old Nov 26th 2009, 11:34 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

Originally Posted by Banker_Boy View Post
The Dubai problems come on the back of another large scale debt probem in the regiona ... KSA's Saad Group and Ahmad Hamad Algosaibi & Brothers Co owe $20bn and the UK authorities are being asked to intervene (help). See story here

Turbulent times ahead for the region, the worst-hit will be the temporary workers, building contractors and labourers in my view, most of who are indians, phillies, pakistanis etc.

For the financial techies out there, the CDS levels for Dubai World have now soared to significant highs, however, some believe this story was thrown out there by Dubai's dept of finance to simply see what the reaction in the market would be to a potential default ... in actual fact, they have the capacity to pay their debts and will probably do so. (note: only yesterday Dubai raised $5bn of additional finance .... the banks involved would not have done that if repayment looked dodgy).
but why would they do that when all it would mean is that future debt raising would be more expensive?
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Old Nov 26th 2009, 12:21 pm
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

Coincidentally (or not) trading on the London Stock Exchange was suspended at 10.35am today with the FTSE down nearly 100 points. Glad I did some selling earlier this week.
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Old Nov 26th 2009, 1:04 pm
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

Originally Posted by lionheart View Post
Coincidentally (or not) trading on the London Stock Exchange was suspended at 10.35am today with the FTSE down nearly 100 points. Glad I did some selling earlier this week.
They're claiming it's a technical problem and trading is due to re-commence about now.

Yes, could have been a good time to sell.....
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Old Nov 26th 2009, 10:06 pm
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

Originally Posted by Banker_Boy View Post
... in actual fact, they have the capacity to pay their debts and will probably do so. (note: only yesterday Dubai raised $5bn of additional finance .... the banks involved would not have done that if repayment looked dodgy).
I doubt that they have the capacity to repay and also have any intention of doing so without renegotiating the principal and terms significantly.

The $1 bn drawn down from the $5bn tranche is to pay for the Metro and complete some of the infrastructure work. We also don't know the terms of that loan yet (what's been pledged..etc)

This is very bad but not unexpected news.
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Old Nov 27th 2009, 4:58 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

The media are describing this as a 'shock' etc but of course it's nothing of the kind. This has been coming for some time.

The irony is that what happens now is almost irrelevant; it's the future that matters.

Question - would you lend fresh money to Dubai bearing in mind what you know now? Or at any time in the future? Me neither.

The big developments (Dubailand, Bawadi, etc) need billions more to even get back on track, never mind being finished. It's not going to happen.

The Dubai dream was never built on a viable business model; the Maktoums have nothing - no money anyway. All they have ever had is land - and what's that worth in the current climate?

The Dubai boom happened because people thought it was a boom, and what you bought today would be worth more tomorrow. That was fine for a while, but was never likely to be sustained.

The future of Dubai might just be as a tourist curiosity - a desert ghost town, with spectacular but unfinished edifices dotted around what was once a desert.

And as the excellent David Wighton pointed out in yesterday's Times, we might just be on the brink of an era in which Western investors bail out the Arabs - an interesting trend reversal.

Now I must shut up - before Mantronic starts agreeing with me..........

Last edited by The Dean; Nov 27th 2009 at 4:59 am. Reason: s
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Old Nov 27th 2009, 5:47 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

In the goold ol' days, the overseas banks and investors would simply take over the country and kick the Makhtoums out and claim all the assets as theirs in lieu of debt repayment. That's what happened in the Italian city states in the 1500s and 1600s (if with a great deal more violence).

What's to prevent this from happening again? Given that 85% of the population is already expat and now most of its assets are heavily indebted to overseas investors, Dubai doesn't really belong to the Emiratis anymore.

Originally Posted by The Dean View Post
The media are describing this as a 'shock' etc but of course it's nothing of the kind. This has been coming for some time.

The irony is that what happens now is almost irrelevant; it's the future that matters.

Question - would you lend fresh money to Dubai bearing in mind what you know now? Or at any time in the future? Me neither.

The big developments (Dubailand, Bawadi, etc) need billions more to even get back on track, never mind being finished. It's not going to happen.

The Dubai dream was never built on a viable business model; the Maktoums have nothing - no money anyway. All they have ever had is land - and what's that worth in the current climate?

The Dubai boom happened because people thought it was a boom, and what you bought today would be worth more tomorrow. That was fine for a while, but was never likely to be sustained.

The future of Dubai might just be as a tourist curiosity - a desert ghost town, with spectacular but unfinished edifices dotted around what was once a desert.

And as the excellent David Wighton pointed out in yesterday's Times, we might just be on the brink of an era in which Western investors bail out the Arabs - an interesting trend reversal.

Now I must shut up - before Mantronic starts agreeing with me..........
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Old Nov 27th 2009, 8:42 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

what i love the most about this, and i am LOVING this whole fiasco, is that in true dubai fashion this was released then they **** off on holiday for 10 days. So the world media are having a feeding frenzy whilst there is no response at all from dubai thus confirming everyones worst fears.

Good luck dubai cos this time you have really outdone yourselves.

google "dubai debt" on google news it makes for some very interesting reading
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Old Nov 27th 2009, 9:56 am
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Default Re: For the financial experts (and the rest of you too): Dubai defaults on debt (sort

This really is tragic comedy at its best.
Aside from the whys and hows, what I really, really can't understand is why they are ploughing on with new infrastructure projects (the Tram in particular) that hadn't even been started and are of dubious priority.
They seem to be having real trouble getting their heads around the idea of "tightening your belt"... people are *not* going to bail them out... they've got too used to making money from nothing...
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