Dubai gets $10B from Abu Dhabi to cover debt

Posted on 14. Dec, 2009 by Ali in business

I guess there not going under after all

DUBAI, United Arab Emirates — Dubai got a $10 billion lifeline from oil-rich Abu Dhabi to save one of its prized companies from imminent default Monday, calming fears for now about the city-state’s shaky finances. Dubai’s main stock market spiked more than 10 percent on the news.

Dubai World — a sprawling conglomerate with assets ranging from the oceanliner Queen Elizabeth 2 to luxury retailer Barney’s New York — had been up against a Monday deadline to repay a pile of loans from its Nakheel property division. Some $4.1 billion of the emergency funds will be used to pay off those bills. The rest will go to shore up Dubai World itself.

Dubai officials’ reluctance to fully stand behind Dubai World’s $60 billion in debts had raised serious concerns about the emirate’s creditworthiness, and the move by Abu Dhabi appeared aimed at quashing those worries before they undercut confidence in the United Arab Emirates as a whole. The two emirates share control of the UAE, a federation of seven semiautonomous city-states.

Authorities also softened their stance Monday, vowing that the city-state was committed to “transparency, good governance and market principles.” Officials outlined a legal framework that promised to increase openness and protect creditors in future dealings with the conglomerate, offering lenders further reassurance in a country where formal bankruptcy proceedings are largely untested.

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Tags: Abu Dhabi, Dubai, Dubai World, government, Middle East, Nakheel Properties, Stock market, United Arab Emirates