Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200810/20081014/article_376699.htm
Dubai to solicit help to pay off growing debt
Created: 2008-10-14
Author:Matthew Brown
DUBAI may depend on support from neighboring Abu Dhabi and the federal government of the United Arab Emirates to help pay for a surge in borrowing, Moody's Investors Service Inc said yesterday.
Government-controlled companies owe at least US$47 billion in total, more than Dubai's gross domestic product, according to Moody's data based on economic statistics from 2006.
''We believe that leverage raised primarily through state-owned corporations will continue to grow faster than GDP for at least the next five years, during which time the Emirate's susceptibility toward execution, financing and geopolitical risks will be at its most pronounced,'' Philip Lotter, Dubai-based senior vice president at Moody's, said in a report released yesterday.
Dubai has borrowed to fund real estate projects including Burj Dubai, the world's tallest tower, and to buy stakes in Deutsche Bank AG, European Aeronautic Defence and Space Co, and Standard Chartered Plc, as it seeks to reduce dependence on its dwindling oil reserves, according to Bloomberg News.
Abu Dhabi, by contrast, owns more than 90 percent of the UAE's oil reserves and nearly 8 percent of the world's total. The Abu Dhabi Investment Authority, its sovereign wealth fund, has assets of between US$250 billion and US$875 billion, according to the International Monetary Fund.
Dubai controls its economy through state-owned companies that dominate each major industry.
Dubai Holding LLC, which groups assets belonging to Dubai Ruler Sheikh Mohammed bin Rashid al-Maktoum, owns hotel chain Jumeirah Group and Dubai International Capital, which unsuccessfully bid for Liverpool Football Club earlier this year.
''In most countries there are identifiable delineations between the public and private sectors,'' said Tristan Cooper, Moody's Middle East sovereign analyst. ''In Dubai, however, the state corporatist model plus the fact that the ruler and his closest relatives form the core of the government, make it difficult to draw such distinctions.''
The cost of insuring Dubai Holding's bonds has increased nearly four-fold since May, according to traders of credit default swaps.
Contracts protecting Dubai Holding Commercial Operations medium-term notes for four years traded at 679.3 basis points on Friday, up from 172.99 at the beginning of May, CMA Datavision prices showed yesterday.
Government-controlled companies owe at least US$47 billion in total, more than Dubai's gross domestic product, according to Moody's data based on economic statistics from 2006.
''We believe that leverage raised primarily through state-owned corporations will continue to grow faster than GDP for at least the next five years, during which time the Emirate's susceptibility toward execution, financing and geopolitical risks will be at its most pronounced,'' Philip Lotter, Dubai-based senior vice president at Moody's, said in a report released yesterday.
Dubai has borrowed to fund real estate projects including Burj Dubai, the world's tallest tower, and to buy stakes in Deutsche Bank AG, European Aeronautic Defence and Space Co, and Standard Chartered Plc, as it seeks to reduce dependence on its dwindling oil reserves, according to Bloomberg News.
Abu Dhabi, by contrast, owns more than 90 percent of the UAE's oil reserves and nearly 8 percent of the world's total. The Abu Dhabi Investment Authority, its sovereign wealth fund, has assets of between US$250 billion and US$875 billion, according to the International Monetary Fund.
Dubai controls its economy through state-owned companies that dominate each major industry.
Dubai Holding LLC, which groups assets belonging to Dubai Ruler Sheikh Mohammed bin Rashid al-Maktoum, owns hotel chain Jumeirah Group and Dubai International Capital, which unsuccessfully bid for Liverpool Football Club earlier this year.
''In most countries there are identifiable delineations between the public and private sectors,'' said Tristan Cooper, Moody's Middle East sovereign analyst. ''In Dubai, however, the state corporatist model plus the fact that the ruler and his closest relatives form the core of the government, make it difficult to draw such distinctions.''
The cost of insuring Dubai Holding's bonds has increased nearly four-fold since May, according to traders of credit default swaps.
Contracts protecting Dubai Holding Commercial Operations medium-term notes for four years traded at 679.3 basis points on Friday, up from 172.99 at the beginning of May, CMA Datavision prices showed yesterday.
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