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http://www.ft.com/cms/s/0/c6befbbc-00ff ... 07658.html

Dubai to take up $10bn UAE loan
By Simeon Kerr in Dubai and Robin Wigglesworth and Andrew England in Abu Dhabi

Published: February 22 2009 17:33 | Last updated: February 22 2009 17:33

The United Arab Emirates is to lend Dubai $10bn to ease the emirate’s debt repayment schedule in an effort to rescue the struggling economy, officials say.

The UAE central bank subscribed to half of a $20bn five year bond programme launched by the Dubai government. The unsecured paper yields a 4 per cent dividend. “This program will secure the necessary funding for Dubai to meet its financial obligations and continue its development program,” the Dubai government said on Sunday.

Federal backing is designed to help restore confidence in the Dubai economy, the foundations of which are based on real estate, tourism and trade, making it particularly exposed to the global credit crunch.

“Things have been getting more difficult for Dubai on a daily basis...they had to make the decision before it became too late,” said an official in Abu Dhabi.

Government-owned Borse Dubai’s $3.4bn refinancing went down to the wire last week, illustrating the grim state of credit markets and highlighting the sense of tapping a federal facility.

The loan should ease the cost of insuring against a default, which in recent weeks saw five-year credit default swaps on Dubai debt rising to levels similar to Iceland.

Dubai, which maintains some autonomy within the federation, walked away from plans for a similar federal facility last November. Dubai officials declined to comment.

The federal government, located in the UAE’s wealthy capital of Abu Dhabi, has long been expected to help Dubai, which lacks oil resources but has built a vibrant, services-focused economy.

To date, the UAE government has made up to Dh120bn available to banks in all seven emirates and also agreed to rescue Dubai’s two mortgage companies, Amlak and Tamweel.

But Abu Dhabi earlier this month injected Dh16bn into its own banking sector, rather than supporting all financial institutions in the UAE, triggering a wave of concern over Dubai.

Borse Dubai last week refinanced the $3.8bn it borrowed to buy Scandinavian exchanges group OMX, but it faced challenges while raising the $2.5bn to help retire the debt.

Local banks at the eleventh hour put in $1bn to the loan syndicate. Speculation rose that the federal government had contributed to the deal.

Bankers have since said that the Borse Dubai’s main shareholder, the holding company for government assets, Investment Corporation of Dubai, persuaded local banks to lend.

Nonetheless, new federal money might help restore faith in Dubai’s troubled real estate sector, where more than half the developments have been abandoned as financing dries up and demand disappears. Property prices are in freefall, dropping on average a quarter from the third to fourth quarters last year.

Dubai grew rapidly during the petrodollar boom of the past six years, borrowing heavily to finance infrastructure expansion and to fund overseas investments.

”Thanks heavens, the money is coming,” said a senior banker in Dubai.

Thank heavens...

Things are not so heavenly one way or the other. Europe and UAE region are getting hit also with a delay of about 3 to 6 months in the real economy compared to the States, where it all began in the property market.

I expect the economy to get much worse. This recession could develop further being a depression for Europe and US. Even the Gulf region will need many more billions of dollars to cope with that decline in tourists and foreign investments.

My sense tell me that this 10bn is far way from enough to cover the crisis. The rescue may get closer for Dubai when the price of a barrel of oil comes up again to moderate levels, ~ $80 a barrel. For as long as thats gonna take, AD has to cover the sheets for Dubai.

Sheikh Mo just standing merely in his panties...thank heavens they got a climate with 25 degrees Celcius in winter seasons

RobbyG wrote:Thank heavens...

Things are not so heavenly one way or the other. Europe and UAE region are getting hit also with a delay of about 3 to 6 months in the real economy compared to the States, where it all began in the property market.

I expect the economy to get much worse. This recession could develop further being a depression for Europe and US. Even the Gulf region will need many more billions of dollars to cope with that decline in tourists and foreign investments.

My sense tell me that this 10bn is far way from enough to cover the crisis. The rescue may get closer for Dubai when the price of a barrel of oil comes up again to moderate levels, ~ $80 a barrel. For as long as thats gonna take, AD has to cover the sheets for Dubai.

Sheikh Mo just standing merely in his panties...thank heavens they got a climate with 25 degrees Celcius in winter seasons

Totally agree with you Robbie and things will continue to get worse, far worse.

"The spread on Dubai’s benchmark five-year credit default swaps last week broke the 1,000 basis points barrier, similar to the spread of Icelandic bonds"

thts scary... tht means tht the whole credit market worldwide believes that dubai is going to default on its loan.. n will not be able to refinance it.. various dubai govt. entities have around USD 20bn to refinance this year.. if any one defaults, it will have a devastating effect on the confidence in the dubai's ability to sustain... its being seen in the same boat as iceland..

"The spread on the CDS of Dubai Holding, a conglomerate controlled by Dubai’s ruler, Mohammed bin Rashid Al Maktoum, has widened even further than the sovereign debt."

it will be interesting to see how DH CDS behaves..

Thats indeed very troublesome. Haven't seen the spreads yet so thanks for that.

Where do you view the spreads Xdude?

With all the rumours going round, recently on the Oracle - Max Keiser's show it was also mentioned that Dubai was bailed out by Abu Dhabi. My gut feelings says they keep continue doing that. The real question however is; How much money does AD have for supporting all these emirates sinking deeper into debt liabilities...

Any figures on the reserves?

RG..
This article talks abt the spreads..

http://www.ft.com/cms/s/0/0ee4f97c-fb8e ... 07658.html

You can view the spreads if you have access to any of the screens of the financial information providers like reuters / bloomberg..

Many thanks for that link. Very interesting.

This raises another concern. Inflation.
With all these debt servicing agreements that initially gained great interest from banks, they (the banks) now tend to hold of the boat. Its signifies they've seen the balance sheets and have very serious troubles about the (future) credit ratings. Simply look at current US property (commercial and residential) valuations.

Logically the banks want a risk reward for lending money to Dubai's government and it does not come cheap.
To give an example; Warren Buffet took on major debt servicing agreements for Goldman Sachs with top of the range rewards, 5 percent stake in GS @ ~10 percent interest, preferred shares, options etc. This is just one company he supports. In 15 years time, Buffet Berkshire Hathaway makes another trillion dollars in profits from trades like these.

Anyway, UAE inflation is gonna skyrocket. Think about where this money has to come from. Its a tourist industry, with free trade and no taxes....not for long I can tell you. Dubai is seriously going to change policies to service its debt in the near future. And its not only due to (foreign) banks who lend them the money, but also Abu Dhabi wants its dough back eventually.

If the UAE keeps the Dirham pegged to the Dollar, the US will service away some of its debt on current inflationary policy. Thats good for a debtor and a Keynesian point of view.
However, for a person who did a great job keeping out of debt in recent years, it's the opposite. They are losing buying power as the dollar (and Dirham) face value remains the same, but the nominal value decreases significantly when the dollar falls against a basket of other currencies, once the global economy recovers again.

Sad decade for UAE residents. They have to pay eventually, as well as tourists and companies doing business in Dubai.

The inflation in Dubai is higher than official figures show. Unofficially my personal opinion is that its around 15%

If it's so difficault to refinance $2b, imagin how hard it's gonna be to refinance the remaining $18b.

arniegang wrote:The inflation in Dubai is higher than official figures show. Unofficially my personal opinion is that its around 15%

Close, very close.

2008: IMF calculation UAE CPI ~ 12%
2009: IMF estimate UAE CPI ~ 8%

The article below also points out that property prices will continue to remain on level (despite significant price drop) based on UAE inflation AND inflation from US monetary policy.
Basically, the Dirham/Dollar peg is supportive of price levels for property valuations. The only 'real loser' eventually is the renter. The Renter pays top inflated prices due to that same inflation.

Think about this. Both countries are inflating their way out of debt liabilities. Again Arnie, you sold your properties at the optimum moment. Congrats

http://www.gowealthy.com/gowealthy/wcms ... 13998.html

mind you; The article is from mid 2008, so the major credit crisis is a significant delay for inflation. The same price levels for realty may not be obtained earlier than 2015 in my opinion

Just saw CNN Today.

Saoudi Arabia is the complete opposite of the UAE. SA didn't put all of the petrodollars into Sovereign Wealth Funds. They say to have minor issues with financing of projects. All major projects are according to budget and planning said the official.

Lots of oil keeps you greasy

RobbyG wrote:Thank heavens...

Things are not so heavenly one way or the other. Europe and UAE region are getting hit also with a delay of about 3 to 6 months in the real economy compared to the States, where it all began in the property market.

I expect the economy to get much worse. This recession could develop further being a depression for Europe and US. Even the Gulf region will need many more billions of dollars to cope with that decline in tourists and foreign investments.

My sense tell me that this 10bn is far way from enough to cover the crisis. The rescue may get closer for Dubai when the price of a barrel of oil comes up again to moderate levels, ~ $80 a barrel. For as long as thats gonna take, AD has to cover the sheets for Dubai.

Sheikh Mo just standing merely in his panties...thank heavens they got a climate with 25 degrees Celcius in winter seasons

while most what you said, is accurate - you are wrong with the last point


the GOVERNMENT of dubai, as well as all the governments of the UAE have PLENTY of money, but they're holding it very close (the current canal thats about to run under SZR is testamant)..... the effected parties are all non-governemnt parties.

sheikh mo is fine, he's chilling, and he's watching the dog eat dog world in action, its very hard to survive these days especially for the bullcrap real estate market bubble that was created by russian hookers posing as real estate agents and equally sleazy male hot shots.


dubai's going to get more "real" after this all subsides, but dont go thinking sheikh mo's stressing.... no troubled waters under that bridge.

arniegang wrote:

RobbyG wrote:Thank heavens...

Things are not so heavenly one way or the other. Europe and UAE region are getting hit also with a delay of about 3 to 6 months in the real economy compared to the States, where it all began in the property market.

I expect the economy to get much worse. This recession could develop further being a depression for Europe and US. Even the Gulf region will need many more billions of dollars to cope with that decline in tourists and foreign investments.

My sense tell me that this 10bn is far way from enough to cover the crisis. The rescue may get closer for Dubai when the price of a barrel of oil comes up again to moderate levels, ~ $80 a barrel. For as long as thats gonna take, AD has to cover the sheets for Dubai.

Sheikh Mo just standing merely in his panties...thank heavens they got a climate with 25 degrees Celcius in winter seasons

Totally agree with you Robbie and things will continue to get worse, far worse.

It almost sounds like a wish?

ebonics wrote:

RobbyG wrote:Thank heavens...

Things are not so heavenly one way or the other. Europe and UAE region are getting hit also with a delay of about 3 to 6 months in the real economy compared to the States, where it all began in the property market.

I expect the economy to get much worse. This recession could develop further being a depression for Europe and US. Even the Gulf region will need many more billions of dollars to cope with that decline in tourists and foreign investments.

My sense tell me that this 10bn is far way from enough to cover the crisis. The rescue may get closer for Dubai when the price of a barrel of oil comes up again to moderate levels, ~ $80 a barrel. For as long as thats gonna take, AD has to cover the sheets for Dubai.

Sheikh Mo just standing merely in his panties...thank heavens they got a climate with 25 degrees Celcius in winter seasons

while most what you said, is accurate - you are wrong with the last point


the GOVERNMENT of dubai, as well as all the governments of the UAE have PLENTY of money, but they're holding it very close (the current canal thats about to run under SZR is testamant)..... the effected parties are all non-governemnt parties.

sheikh mo is fine, he's chilling, and he's watching the dog eat dog world in action, its very hard to survive these days especially for the bullcrap real estate market bubble that was created by russian hookers posing as real estate agents and equally sleazy male hot shots.


dubai's going to get more "real" after this all subsides, but dont go thinking sheikh mo's stressing.... no troubled waters under that bridge.

Ofcourse everybody is entitled to their own opinion but neither you nor I know the real situation since its a Royal secret. But judging from the situation it certainly doesn't look good. Isn't Nakheel personally owned by Sheikh Mo? Look at the mess they are in right now, many existing projects future looks doubtful inclding Palm Jumeriah, The World, palm Jebel Ali, Jum. Village, Al Furjan etc. RTA, a government agency, hasn't put out a single contract this year. 6 of their upcoming projects were pushed back and contractors are facing enormous delays in getting paid. And lets not forget the troubles of other government owned companies like Emaar, DP, Limitless etc.

You really beleive that Sheikh Mo is intentionally sitting back and getting amused? How do you think he feels about his personally compiled verse, that was supposed to be floating around PJA, getting cancelled?

sage & onion wrote:

arniegang wrote:

RobbyG wrote:Thank heavens...

Things are not so heavenly one way or the other. Europe and UAE region are getting hit also with a delay of about 3 to 6 months in the real economy compared to the States, where it all began in the property market.

I expect the economy to get much worse. This recession could develop further being a depression for Europe and US. Even the Gulf region will need many more billions of dollars to cope with that decline in tourists and foreign investments.

My sense tell me that this 10bn is far way from enough to cover the crisis. The rescue may get closer for Dubai when the price of a barrel of oil comes up again to moderate levels, ~ $80 a barrel. For as long as thats gonna take, AD has to cover the sheets for Dubai.

Sheikh Mo just standing merely in his panties...thank heavens they got a climate with 25 degrees Celcius in winter seasons

Totally agree with you Robbie and things will continue to get worse, far worse.

It almost sounds like a wish?

It sounds a tad frightful, but fear and joy are both on the same edge.

Its just like driving a supercar you never driven before. At 200km/h straightout everything is fine (depends per individual) but try that with 300km/h, they don't feel in control and fear overcomes you.

Same with property crisis. You learn what real risk is when you come investing in the Dubai property market. Like some CEO of Infinism said; Dubai is like Silicon Valley on steroids from a risk perspective...

So I don't think Arnie sees this as a wish Sage. It will be some form of bemusement for the unknown. Maybe a slight sense of joy even, since he bailed out from the top and took the best of Dubai 'from a risk perspective'

Did I sense that right Arnie?

Do you reckon Dubai had to hand over a blank signed cheque for the loan, then spends the rest of eternity worrying about it?

Wednesday Jones wrote:Do you reckon Dubai had to hand over a blank signed cheque for the loan, then spends the rest of eternity worrying about it?

What are you saying Jonesy?

Dubai doesn't have covered checks. Abu Dhabi covers them for them right now. Dubai used all its leverage to fund the property boom of recent years. Thats over now for a few more years.

I'm being facetious.

Its the absolutely mad approach that this country has when people borrow either loans, mortgages or credit cards, to hand over a blank cheque. What happens when you lose your job:

No money coming in, bank account frozen, loan/mortgage payment/credit card payment default, cheque presented by the bank, police investigate, emigration ban, prison - shafted.

It's happening to far too many people.

UAE bank governor urges stimulus
By James Drummond in Abu Dhabi

Published: March 9 2009 10:45 | Last updated: March 9 2009 10:45

The governor of the central bank of the United Arab Emirates has urged the government to embark on a fiscal stimulus plan beyond support already extended to the banking system, according to a statement released on Monday.

The call comes as a gap between the assets and deposits of UAE banks has failed to close despite central bank intervention. The gap opened up when billions of dollars of hot money was withdrawn from the system last year after an anticipated revaluation failed to materialise.

Sultan bin Nasser Al Suwaidi told the Dubai Economic Council on Sunday that the federal government needed to stoke the economy to attract more deposits, according to a Monday statement.

“The present situation requires a stimulus package to the banks and economy in order to improve the reputation of local banks outside the UAE, and hence it would encourage more foreign (investors) to deposit money into local banks,” Mr Suwaidi was quoted as saying.

Mr Suwaidi is a federal employee based in wealthy Abu Dhabi, the capital of the UAE, and his statement also seems designed to reassure those concerned about the extent of support for Dubai, the most exposed of the seven emirates which make up the federation.

To date, the UAE government has promised to guarantee deposits in local and foreign banks and has made up to Dh120bn ($32.7bn) available to banks in all seven emirates. It has also agreed to rescue Dubai’s two mortgage companies, Amlak and Tamweel and subscribed $10bn of a $20bn Dubai bond announced last month.

Copyright The Financial Times Limited 2009

http://www.ft.com/cms/s/0/3fcc1732-0c96 ... fd2ac.html

I don't think the CDS market is that developed in UAE.....Probably only confined to large government cos.... Hence to say that the increase in CDS spreads has repercussions for the entire economy would be unfair1 But could anyone direct me th the website that has details bout the CDS index in UAE?
And secondly who are the CDS underwriters in UAE? My guess is some government entity...Who buys CDS protection, Governemnt companies, so the pricing is also debatable!
Anyoen knows wats the notional value of the CDS market in UAE?