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Dubai International Capital (DIC), which is the investment arm of Dubai Holding, a conglomerate owned by the ruler, Sheikh Mohammed bin Rasid al Maktoum, announced it has secured agreement with its six lending banks to push back the repayment of the debt from June until September.
In a short statement, the company said: "The extension period would allow the implementation of a consensual longer-term plan that would enable DIC to maximise the value of its business for the benefit of all its stakeholders."

DIC and its banks agreed to the three-month delay at a meeting in Dubai yesterday. The banks, which are led by HSBC and Emirates Bank, were represented by Deloitte while Lazard, the London-based investment bank, was acting for DIC. The company has agreed to continue to pay interest and amortisation to keep the loans current, a DIC spokesman said.

The move comes amid increasing efforts by government-related entities to restructure loans as Dubai seeks to manage its $109bn debt burden.

Foreign banks, including British banks, have a large exposure to Dubai's debts, which adds to the concern about the financial institutions that are already under pressure from Europe debt crisis.

Just six months ago Dubai World, the bigger conglomerate behind Dubai Ports World, stunned global markets by announcing the need for a standstill agreement on its debts.

Last week, Dubai World said it has agreed in principle with its main creditors to restructure $23.5bn of debt and that it will now seek a final deal with all its creditors by end June.

Dubai Holding is smaller than Dubai World but, since it is owned and controlled by Sheikh Mohammed bin Rasid al Maktoum, its inability to pay its debts is more surprising. The conglomerate is thought to have around $12bn of debt due of which $2.6bn is held by DIC, including the $1.25bn that has just been delayed.

Dubai Holding is divided into DIC and Dubai Holding Commerical Operations which oversees Dubai Holding's property, business-park and hospitality investments, including hotel operator Jumeirah At its peak in 2008, DIC held assets of thought to be in the region of $13bn.

Over five years its high-profile investments have included £800m in Tussauds Group, the owner of the London waxworks, that was merged with Blackstone's Merlin Entertainment Group in 2007 and in which DIC owns a 20pc stake; £700m in Doncasters, the engineering group;and £675m in Travelodge. Through its smaller public equity arm, DIC owns stakes in HSBC Holdings, DamilerChrylser and EADS.

Despinaki wrote:You want to say that someody has to pay $1.25bn for the light!

RobbyG wrote:In a short statement, the company said: "The extension period would allow the implementation of a consensual longer-term plan that would enable DIC to maximise the value of its business for the benefit of all its stakeholders."

We have ... we will never ever lend to the camel traders ever again unless adequate security (preferably Treasuries/Bunds/Gilts) are place as security in the event of another standstill/bankruptcy/default

• Another reason some have espoused as the cause of the crisis was the pressure from the U.S. Treasury Department for East Asia to open its economies to foreigners. These changes provoked a flood of capital —that is, the kind of capital that looks for the highest return in the next day, week, or month, as opposed to long-term investment in things such as factories. In Thailand, as an example this short-term capital helped fuel an unsustainable real estate boom. Just as suddenly as capital flowed in, it flowed out. And, when everybody tries to pull their money out at the same time, it causes an economic crisis.

The native population is a minority with 85% of Dubai’s population being composed of expatriates. For many, this would be considered a success story as Dubai has attracted the world to its tiny emirate, but in this apparent success lays the myth of economic development, which has now brought the desert empire to its knees.
Dubai has merely exploited limited natural resources and has been importing talent from abroad with little skills and knowledge-transfer to drive its economy. Dubai was always nothing more than a mirage in the desert; it's growth and survival was dependent upon the talent and expertise of foreign entities. It could only offer specialist services such as banking and finance as a means to guarantee it's future, along with tourism. As these sectors rely heavily on the goodwill and confidence of foreigners, if in any way this sentiment was affected, Dubai’s desert empire would crumble.

This is exactly what happened with the Global credit crunch. In order for financial companies to shore up their losses they have withdrawn their money from expensive and lavish projects. Service companies which relied on loans are now seeing this dry up as one bank after another either collapses or requires government bailouts.