The request represents the clearest sign yet that the Dubai economy is still in the thick of the financial crisis. Dubai World, headed up by Chairman Sultan Ahmed Bin Sulayem is run by the city's government who had promised investors that all obligations to the $80bn debt would be met. "Investors have the full backing of Dubai World, one of the largest holding companies in the world as its ultimate parent holding company," reads a statement on the Dubai World website. It continues: "Investors can expect high returns on their investments. Investment risks are also mitigated significantly by a widely-diversified investment portfolio that stretches across many geographies and industries."
However problems were evident from as early as April when the Department of Finance at the Government of Dubai were forced to answer what they called 'an inaccurate and misleading' report by MEED that they were not able to meet their commitments: "The Government of Dubai will continue to meet all its contractual obligations, including to construction contractors, as per the terms agreed with all third parties," they said.
Urban developers Nakheel, Limitless and Leisurecorp are all incorporated within the parent company and since the financial crisis began, signs of difficulties in the Dubai construction industry have been prevalent. In September development of signature project The World Islands was reported to have halted all together with an investor committing suicide and expensive security crippling the project. Kilometre-high Nakheel Tower has also been stopped in its tracks with foundations half complete.
The unprecedented request by the government to freeze all of Dubai World's debts came with a commitment to restructure the company: "Dubai World has a portfolio of strategically important businesses and the restructuring will be designed to address financial obligations and improve business efficiency for the future," reports the Emirates official news agency, WAM. Deloitte's Managing Partner of Corporate Finance, Aidan Birkett, has been drafted in to head the restructure as Chief Restructuring Officer (CRO). "As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to "standstill" and extend maturities until at least 30 May 2010," the official statement adds.
Niki May Young