Dubai’s creditors should be laughing all the way to the bank or, seeing as most of them are banks, all the way to wherever they stash their cash. Dubai will repay every penny of the $14.2bn it borrowed from 97 creditors.
But Dubai is paying a huge price. It’s willing to forgo its debt by turning it into shares in Dubai World and property developer Nakeel.
And how is it doing this when it owns 100 per cent of both companies?
Your guess is as good as mine. In effect it's telling us we made some horrendous investment decisions and we are writing off money we are owed - Dubai World owes $8.9bn and Nakeel $1.2bn to the Dubai government.
Dubai will also pump $9.5bn into both companies, the majority $8bn will go to Nakeel, the developer of the man-made islands of the coast of Dubai.
Dubai had no choice but to go down this road if it was to restore investor confidence. The mind boggles as to what Nakeel’s new business plan looks like and why Dubai would give it $8bn of new funds to see it through.
So no surprise when the Dubai government says it’ll make decisions for Nakeel.
Nakeel’s management should watch out. Heads will roll.
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