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Tuesday, 15 December 2009

If you aren't succesful, move on

One of the main factors that discourage entrepreneurs from starting a business in the Gulf is the taboo of failure. Young men and women worry that if their project is not a success they will be forever labeled as failures rather than pioneers who tried their best. But the truth is that the taboo of failure does not only run in the young. It exists largely because it is not tolerated at the highest levels.

I always believe that each person should be encouraged to do their best. If they aren’t successful in a particular task, they should move on and keep the valuable lessons they gained from their experience.

In the Gulf it is no secret that many investment firms, real estate developers and banks have messed up. These companies over stretched their arms so far that they actually missed their targets and ended up in heavy debt. In some cases these firms had to resort to government bailouts - a term that was never used in the Gulf's dictionary.

Abu Dhabi wealth fund takes stake in Hyatt Hotels

Abu Dhabi's biggest sovereign wealth fund has bought more than 10 percent of the Hyatt Hotels Corp. shares floated by the iconic hotelier last month.

Chicago-based Hyatt disclosed the sale Monday in a filing with the U.S. Securities and Exchange Commission. The deal was made public on the same day oil-rich Abu Dhabi agreed to pump $10 billion in bailout funds into its struggling neighbor Dubai.

The filing said the Abu Dhabi Investment Authority bought nearly 4.8 million, or 10.9 percent, of Hyatt's Class A common shares. Its overall stake in the company is considerably lower, however, because the wealthy Pritzker family holds the bulk of other stocks known as Class B shares that give it voting control over the company.

Dubai Story Reeks of Insider Trading

Three weeks ago, as we were eating turkey, Dubai blew itself up. Quite deliberately. It caused quite a hiccup. Now the problem seems to have been solved thanks to some bailout money from the ‘family’ in Abu Dhabi.

This sounds like the plot of a movie. It’s got all the pieces for a ‘hit’. Intrigue, big money, great location shots (London/Dubai/the desert), the characters are investment bankers, local politicians, Clifford Chance lawyers and Iranian investors. The Iran connection brings in the CIA and therefore the opportunity for high-tech surveillance and gunplay. The necessary sex/romance angles are there.

But this is not the movies. This is the crazy real world. A month ago Nakheel bonds were trading at 110%. They fell below 40 cents two weeks ago. This morning the bonds were trading north of 70. Some of the bonds look to be paid at par.

Citi's Dubai Mistake: A Sign of More Bad Things To Come? Read more:,8599,1947652,00.html#ixzz0ZlIIWvFS

Perhaps Citi should have slept on Dubai. A year and a half ago, Citigroup became the first U.S. bank to relocate one of its rising stars, Alberto Verme, an investment banking executive, to the booming gulf-coast state. At the time, Citi's CEO Vikram Pandit said the move was a sign that the bank was "convinced of the region's long-term and immense growth opportunities."

It turned out to be a much shorter growth opportunity than Pandit and Citi thought. A few months ago, Verme, stripped of his title as co-head of investment banking, was relocated to London. Mohammed al-Shroogi, who headed Citi's United Arab Emirates operations, left in September. Late November, Dubai World, which is a for-profit development company controlled by the ruling family of the gulf state, indicated it may have to default on a portion of its $60 billion in loans. The rush to Dubai has left Citi on the hook for billions of dollars of losses in the financially troubled gulf state. According to research firm Creditsights, Citi has made an estimated $5.9 billion in loans in the U.A.E., which includes Dubai as well as its oil-rich neighbor Abu Dhabi. Of that, $1.9 billion was made to Dubai World. In the end, it might not lose that much. On Monday, Abu Dhabi said it would provide $10 billion in financing to help Dubai pay off its debts.

Also, to be sure, Citi's potential losses in Dubai are not enough to bring down the bank. Citi has $2 trillion in assets. And the Dubai losses look puny compared to huge hits the bank took in subprime lending and the mortgage market in general. But Citi was far more aggressive in courting Dubai business and left itself open to far more losses in what now appears clear was a financial house of cards than any other U.S. bank. JPMorgan, the U.S. bank with the next highest loan exposure to Dubai, has $2.5 billion in loans outstanding in the U.A.E., less than half of what Citi may have to write off.

Read more:,8599,1947652,00.html#ixzz0ZlIT5MKZ

Dubai Shares Drop, End 3-Day Rise, on Dubai World Debt Concern

Dubai shares fell for the first time in four days as investors seek greater clarity on the restructuring of Dubai World’s debt.

Dubai Investments PJSC, owner of stakes in more than 40 companies, fell 9.1 percent and discount-carrier Air Arabia PJSC declined the most in two weeks. The DFM General Index retreated 1.5 percent to 1,843.27, paring the gain in the past four days to 20 percent. The measure has lost 12 percent since Dubai World asked creditors for a “standstill” agreement on its debt repayments on Nov. 25. The ADX General Index dropped 1 percent.

Abu Dhabi provided $10 billion to help Dubai World, the state-owned holding company, avoid defaulting on a $4.1 billion bond payment by Nakheel PJSC. The rest of the money will cover Dubai World’s interest and operating costs until the company reaches a standstill agreement with its creditors.

The Gulf Curve

The Gulf Curve Musings for 15th December, 2009

Dubai World Promises, but the Damage May Be Done - Bailout Comes Too Late as Investors Likely to Be Wary of Taking on Emirate's Debt Again

Dubai World's promise to repay Nakheel's debt and a separate move by the emirate to set out a legal framework for future talks may not be enough to repair the damage to Dubai's reputationamong international investors over the handling of its debt restructuring, investors and observers said.

While Dubai's moves go a long way toward restoring confidence, they aren't "a magical pill that will clear the air and erase the confusion," said Jawad Ali, a partner at law firm King & Spalding in Dubai, which represents at least one Dubai World creditor.

Sheik Ahmed bin Saaed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee, in a statement said that Monday's actions were taken to reassure investors and others that "our government will act at all times in accordance with market principles and internationally accepted business practices."

On Monday, Abu Dhabi agreed to provide Dubai $10 billion to settle some of Dubai's obligations, including a $4.1 billion debt payment related to an Islamic bond, or sukuk, that matured Monday. (Abu Dhabi and Dubai are the two biggest emirates of the United Arab Emirates. Abu Dhabi, one of the world's biggest oil producers, serves as the federation's capital.)

Thatcherism: The closing of the Thatcher era (This article was first published on April 28, 2009.)

“The British people had given up on socialism. The 30-year experiment had plainly failed – and they were ready to try something else.”

So mused Margaret Thatcher on the eve of her first general election victory on May 3 1979. But in the run-up to the 30th anniversary of the Iron Lady’s arrival in Downing Street, many British people have concluded that once again “a 30-year experiment” has “plainly failed”. This time, however, it is the experiment with Thatcherism.

The closing of the Thatcher era is an event of global significance. Many of the policies pioneered by her government in Britain were copied in the rest of the world: privatisation, deregulation, tax-cutting, the abolition of exchange controls, an assault on the power of the trade unions, the celebration of wealth creation rather than wealth redistribution.

Mrs Thatcher came to power 18 months before Ronald Reagan and the two swiftly developed an ideological love affair. But the real triumph came when Thatcherite ideas started to catch on in improbable and inhospitable environments – such as the Soviet Union and France.

In the early 1980s, while Mrs Thatcher pioneered privatisation, France under President François Mitterrand pushed through wholesale nationalisations of banks and industrial conglomerates. But while she sailed determinedly on with her free-market policies, famously proclaiming “the lady’s not for turning” Mitterrand was forced into a U-turn in 1982. At the end of his period in office, he too was a privatiser.

By the end of the Thatcher era, free-market reforms were being pursued in China, eastern Europe, India and the Soviet Union. On her last visit as prime minister to Mikhail Gorbachev’s Russia, Mrs Thatcher noted wryly that the new mayor of Moscow seemed to be a disciple of her own economic guru, Milton Friedman. Two of her closest advisers published a book with the exuberant title of Privatising the World. She herself exulted: “People are no longer worried about catching the British disease. They are queuing up to obtain the new British cure.”

But, almost 20 years after she left Downing Street, the British economy is once again in deep trouble. Almost everything that Mrs Thatcher opposed – nationalisation, raising taxes, Keynesian economics – is back in fashion. One by one, the signature policies and achievements of the Thatcher years are being dismantled in Britain.

Her celebrated decision to cut the top tax rate to 40 per cent has been reversed. There will now be a top rate of 50 per cent – and opinion polls suggest that the change is very popular. Britain has also now, in effect, nationalised its large banks, just as the French once did under Mitterrand.

No reform captured the spirit of the Thatcher era more completely than the “Big Bang” of financial deregulation in 1986, which set the stage for the inexorable rise of the City of London. But the City is now in the doghouse and there is a rush to re-regulate the financial services industry. Mrs Thatcher once proclaimed that “printing money is no more”. But the printing presses are rolling again – except that these days it is called “quantitative easing”. Forbidden from public speaking by her doctors, Lady Thatcher is in no position to defend her legacy or instruct her remaining disciples.

Thatcherism is also out of fashion internationally. When Nicolas Sarkozy was elected president of France in 2007, he quietly encouraged the idea that he was the French version of Lady Thatcher. But these days he likes to be photographed clutching a copy of Das Kapital. Mrs Thatcher venerated the free enterprise of the US. But the new US president seems strangely enamoured of the European social system.

Perhaps most damagingly, Thatcherism has lost the moral high ground. The Iron Lady once proclaimed, slightly sinisterly: “Economics is the method. The object is to change the soul.” She meant that British people had to rediscover the virtue of traditional values such as hard work and thrift. The “something for nothing” society was over.

But the idea that the Thatcher era re-established the link between virtuous effort and just reward has been destroyed by the spectacle of bankers driving their institutions into bankruptcy while being rewarded with million-pound bonuses and munificent pensions.

The same problem has dogged the international versions of Thatcherism. Privatisation in Russia degenerated into a morally dubious grab for assets by a new class of oligarchs. Outrage about executive pay has been building for years in the US.

So is the Thatcher era definitively over? The economic cataclysms and policy reversals of recent months suggest that it surely must be.

And yet there is still room for doubt. When Mrs Thatcher came to power, she and her advisers had been thinking for years about the policies and ideas they intended to pursue. By contrast, today’s political leaders are fighting the economic crisis with whatever tools come to hand. The decisions to nationalise Britain’s banks and to print money were emergency measures – not the products of a carefully thought-out ideology or political programme.

One of Mrs Thatcher’s most famous phrases was: “There is no alternative.” As yet, no major political figure in the UK or the rest of the western world has really articulated a coherent alternative to the free-market principles inherited from Thatcherism.

Until that happens, the Thatcher era will not be definitively over.

This article was first published on April 28, 2009.

Deutsche Bank full of praise for Emaar’s investments

Emaar Properties is in a stronger position than it seems, due to a merger cancellation, assets abroad and alternative financing options, a Deutsche Bank report says.

The Dubai master developer, which is building the world’s tallest tower, last week announced the cancellation of merger plans with Dubai Properties, Sama Dubai and Tatweer, the property units of Dubai Holding.

The merger scrapping was welcomed by most analysts and Emaar shareholders. The company’s stock rose 15 per cent the next day to Dh2.94, the largest gain in 13 months.

CityCentre fuels hope in Las Vegas

When Barack Obama, the US president, attacked corporate junkets to places such as Las Vegas earlier this year, he was acknowledging public anger against the lavish behaviour of some companies that were bailed out by US taxpayers. Mr Barack’s comments did little to endear him to resort owners dependent on conventioneers and tourists.

Nonetheless, MGM Mirage was hoping the president might include a quick stop in Las Vegas when he heads west to Hawaii for the Christmas holiday next week to visit CityCenter, an US$8.5 billion (Dh31.22bn) complex of hotels, condominiums, shops, restaurants and gaming activities built in partnership with Dubai World. A presidential visit would give a much needed fillip to a city hit hard by recession and foreclosures and where much local hope is invested in CityCenter, which will officially open tomorrow with a big party and fireworks.

The sprawling “city within a city” is so big, it covers 27 hectares, that it has already held several opening nights for its component parts, including a party for the Vdara Hotel and Spa hosted by Vanity Fair magazine and attended by celebrities include the British movie star Orlando Bloom.

What Dubai debt rescue boils down to

Abu Dhabi’s eleventh-hour US$10 billion (Dh36.72bn) rescue package has averted what could have been a lengthy legal battle over the $3.52bn in bonds that Nakheel was due to pay Monday, and given time to restructure the rest of Dubai World and its debts.

Analysts and executives said the new aid had also set important new legal and economic precedents. Yesterday’s announcement was followed by a new decree establishing a legal framework for Dubai World’s reorganisation that could help other companies and creditors by filling several gaps in the UAE’s bankruptcy laws.

Most importantly, analysts said, the aid package marked a new level of financial co-operation between Abu Dhabi and Dubai that could fundamentally change the way the two emirates approach development, with greater co-operation and planning.

Mobius Says Dubai Pledge Is ‘Giant Step,’ Worst Over

Dubai’s pledge to adopt global standards on transparency and creditor protection is a “giant step in the right direction” and the worst of the emirate’s debt crisis is over, investor Mark Mobius said.

“They said that going forward they wanted to become more transparent and keep people fully informed,” Mobius, who oversees more than $30 billion as chairman of Templeton Asset Management Ltd., said in a phone interview from Riyadh today. “That is a very giant step in the right direction. By making that statement, Dubai will be able to have a foremost position here in the Middle East.”

The emirate said it’s committed to “transparency, good governance and market principles” in a statement today that announced a new bankruptcy law and a $10 billion bailout of state-owned company Dubai World. Dubai’s benchmark equity index surged the most in 14 months, while the $3.52 billion bond of state-controlled Nakheel PJSC more than doubled to 109.5 cents on the dollar after the statement.

Dubai May Need More Help to Repay Debt After Abu Dhabi Bailout

Dubai, the recipient yesterday of a $10 billion bailout from Abu Dhabi, has yet to convince investors it will meet all of its obligations.

Debt from Dubai state-controlled entities DP World Ltd., Dubai Commercial Operations Group LLC and Nakheel PJSC remains as much as 29 percent lower than before the emirate said on Nov. 25 it was seeking a “standstill” from creditors. Standard & Poor’s said it won’t automatically reverse downgrades made to ratings on state entities since the announcement.

Dubai’s cash needs are “not going to stop and go away,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. “There is still debt that needs to be settled in 2010 and 2011.”

Abu Dhabi's Aid to Dubai Eases its Own Pain

After enduring weeks of its own bond-market pain, this city-state came to the rescue of its cash-strapped neighbor Dubai on Monday, a move that could be as good for Abu Dhabi in global markets as it is for Dubai.

By underwriting Dubai World, the parent of Dubai's port operator and the conglomerate at the heart of Dubai's debt woes, Abu Dhabi triggered an immediate bout of investor optimism that promises to ease its own borrowing costs. The move also appeared aimed at protecting the United Arab Emirate's reputation as a global transportation hub, according to one person familiar with the situation.

On Monday, Dubai said the government of Abu Dhabi would provide $10 billion to meet the debt obligations of Dubai World, which previously said it would restructure $26 billion in debt. Monday's funding brings Abu Dhabi's direct and indirect support for Dubai to $25 billion so far. That sent stock markets in both countries soaring.

Gulf States Aim To Decide On Single-Currency Peg By 2010-Kuwait Finance Minister

Gulf states will aim to decide by 2010 on whether to peg a planned unified currency to a basket, the U.S. dollar, or another single currency, Kuwait's Finance Minister told Zawya Dow Jones in an interview.

"There's work to be done to decide whether or not it [the unified currency] will be connected to a single currency or basket," Mustafa Al Shimali, the Kuwait Finance Minister told Zawya Dow Jones in an interview Monday. "We hope a decision will be taken by 2010."

Al Shimali added that the currency will be discussed Tuesday, when the leaders of six Gulf countries will discuss the union and other regional issues, including a power grid.

Saudi Arabia, Kuwait, Qatar and Bahrain are forging a monetary union among the world's biggest oil-exporting region.

The United Arab Emirates and Oman have opted out of the project. Al Shimali had said recently that Kuwait will work toward convincing the two countries to rejoin.END

Kuwait to price U.S. oil cargoes on ASCI:sources

Kuwait, the world's No. 4 oil exporter, will switch the basis on which it prices oil cargoes bound for the United States to the Argus Sour Crude Index (ASCI), following a similar move by top world exporter Saudi Arabia, sources familiar with the plans told Reuters on Monday.

Kuwait will soon start pricing its U.S. exports against ASCI, a basket of sour crudes produced in the U.S. Gulf of Mexico, the sources said. They did not specify whether the switch would take effect immediately, but said state-run oil company Kuwait Petroleum Corporation sent a letter to U.S. buyers, informing them of the switch.

U.S. refiners have been expecting the switch in Kuwaiti pricing. Aramco, the Saudi state oil company, has already made the switch to ASCI for the basis of its U.S. exports, dropping West Texas Intermediate (WTI) prices published by Platts.

Exxon bid highlights oil majors' shine for natural gas

Exxon Mobil Corp's (XOM.N) $30 billion takeover of XTO Energy Inc (XTO.N) is a major vote of confidence in natural gas and the latest sign that the world's top oil companies are looking to invest more in the cleaner-burning fuel.

Gas prices across the world have slumped in 2009, largely due to a surge in U.S. output from unconventional gas companies like XTO. But global demand for natural gas is expected to surge back more than 50 percent by 2030, making it the fastest-growing major energy source of the next few decades and promising fat profits for reserve holders.

In anticipation of a demand surge, the oil majors have started opening their wallets for expensive gas projects like gas liquefaction plants and pricey gas shale wells.

"This is about the next 10 to 20 to 30 years of what we believe has now emerged as a very important part of the global resource portfolio," Exxon Mobil CEO Rex Tillerson said on a conference call with investors on Monday.

Money Still Flowing from Abu Dhabi and Qatar

Dubai’s troubles get all the attention, but Abu Dhabi and Qatar investment funds are still making headlines these days.

On Monday, Abu Dhabi invested $10 billion to help save Nakheel, Dubai’s troubled developer. But that’s only the latest in a long line of deals for Dubai’s less-flashy sister Emirates, which has continued to fund projects through the downturn, even when Dubai shut down its money spigot.

For example, last month an Abu Dhabi-controlled company invested $134 million in a 72-story tower project in New York City. The project, designed by Christian de Portzamparc, is a block from Central Park and neighbors the Essex House, the hotel now owned by troubled Jumeirah Group of Dubai.

Saudi’s switch to sour crude standard ripples out to Gulf - More expensive to refine the heavier grade of oil, but costs less than ‘sweet’ commodity

Futures exchanges in the United States and London hope their new sour oil contracts will take off as Saudi Arabia starts pricing sales in the U.S. against sour crude after 15 years of linkage to the sweet type.

Nearly two-thirds of global oil supplies now are heavy sour, a high-sulfur crude that contrasts with the sweet, high-grade, low-sulfur type. The heavier or more sour the oil, the more expensive it is to refine.

Dan Brusstar, energy research director at CME Group, which owns the New York Mercantile Exchange, said a key reason for launching Argus sour futures was a decision by Saudi Arabia’s national company, Aramco, this fall to adopt the new Argus Sour Crude Index as its measure for pricing U.S. deliveries starting in January.

Abu Dhabi May Demand More Power for $10 Billion Dubai Lifeline

Four days before Dubai World sought to delay $26 billion of debt repayments last month, Sheikh Mohammed bin Rashid Al Maktoum set out to race his horse, Al Ayed, across 120 kilometers (75 miles) of Persian Gulf desert. He had to withdraw when the mount became fatigued.

Now Sheikh Mohammed must prove that the transformation of Dubai from fishing village to global business hub isn’t also running out of steam. He has to find a way for oil-poor Dubai to cover at least $80 billion in debts and liabilities, a sign of the gap between his ambitions and the resources to fund them.

Sheikh Khalifa bin Zayed Al Nahyan of Abu Dhabi, who threw the state holding company a $10-billion lifeline yesterday, has no such concerns. He controls 8 percent of the world’s oil and one of its biggest sovereign wealth funds. He’s also Sheikh Mohammed’s kinsman and, as president of the United Arab Emirates, his boss. Abu Dhabi’s support may come with a price that undermines Sheikh Mohammed’s go-it-alone vision for Dubai.


As Gregg noted earlier today, the cash-strapped Dubai investment authority known as Dubai World has received a $10 billion indirect bailout from Abu Dhabi, a fellow emirate of Dubai's and the capital of the United Arab Emirates. The Abu Dhabi bailout will go to the general Dubai Financial Support Fund, which aids struggling emirate companies, but Dubai World will receive a large chunk.

The announcement sparked a rally in shares of bonds issued by Nakheel, a real estate arm of Dubai World, which owed a $3.52 billion Islamic bond today and had seemed unable to pay the full amount as of days ago. Such a dramatic turn has market watchers chattering: the Financial Times' Alphaville blog notes that anyone who bought shares of the once-depressed Nakheel 2009 bond (or its sister bond due in 2011) has "made several large sacks of money."

Back in November, Abu Dhabi participated in a bond sale to help Dubai raise debt, but only for $5 billion, of which only $1 billion was remitted immediately. So what changed since then, and who stood to gain?

Political strings attached to Abu Dhabi aid (Full article)

For more than two weeks there was little word from Abu Dhabi, even as fears over Dubai’s debt travails wiped billions of dollars off regional stock markets and bankers warned about the contagion effect.

Yet many investors had bet on the United Arab Emirates’ oil-rich capital being Dubai’s lender of last resort. Abu Dhabi’s silence exacerbated the uncertainty as the clock ticked down on the deadline for Nakheel, Dubai’s troubled real estate developer, to repay its $3.52bn Islamic bond.

It also placed the relationship between the UAE’s most important and competitive city states under the spotlight.

Monday’s news that Abu Dhabi is lending $10bn (€6.8bn, £6.2bn) to help dig Dubai out of its immediate hole will help soothe nerves. But the nature of what many bankers interpret as a last-minute agreement will do little to assuage concerns.

In the end, many observers believe Abu Dhabi felt it had little choice but to act as it witnessed the dramatic fall-out from the decision by Dubai World, Nakheel’s parent, to ask for its debt repayments to be delayed.

Now the question on many minds is: what price will Dubai pay for Abu Dhabi’s support? At the very least, experts believe that Abu Dhabi will have oversight on how the $10bn is spent – and the funding is conditional on Dubai World succeeding in negotiating a standstill with its creditors. Some predict wider consequences.

“We believe Abu Dhabi has and will attach political conditions to its financial rescue, including possibly seeking strategic equity stakes in Dubai assets and reining in Dubai’s independence in foreign policy,” says John Sfakianakis, chief economist at BSF-Crédit Agricole Group.

When the UAE central bank subscribed to the first $10bn of a $20bn bond programme issued by Dubai earlier this year, it was seen as thinly veiled intervention from Abu Dhabi. Two Abu Dhabi-controlled banks last month subscribed to a further $5bn. But the capital was apparently kept in the dark about Dubai World’s request for a credit standstill on November 25.

Talks between the two governments and central bank officials began in “earnest” two weeks ago, observers say.

“Lot of loose ends were tied up in the last 48 hours, but the basis of what we have been talking about – the structure and the pieces and the elements – we have been working on for the past two weeks,” says a source close to the Dubai government.

Another source, however, says a senior official with Dubai World was still preparing creditors for the worst on Sunday.

Abu Dhabi has always insisted that it would not allow another member of the UAE to fail. But officials have also made clear there would be no blank cheque and Dubai would have to rein in the excesses that fuelled its problems.

The source close to the Dubai government says: “What I can tell you will happen in the future is: future decisions will be closely co-ordinated with the two governments.”

Additional reporting by Robin Wigglesworth

Chinese trade flows along new ‘Silk Road’

At a kindergarten in the heart of Abu Dhabi, Emirati boys and girls sit in front of their teachers and welcome visitors with an enthusiastic “ni hao” – hello in Mandarin.

The government school is an illustration of the attention Gulf states are giving to their burgeoning relationship with China. In theory, the children could represent the next generation leading trade between the oil-rich Middle East and resource-hungry Asia, with the communist republic at the forefront.

Analysts point to rapidly increasing trade between the two fast-growing regions as they speak of the emergence of a new “Silk Road”.

Focus turns to debt restructuring

Abu Dhabi’s decision to offer Dubai financial succour has bought time for the debt-laden emirate to restructure its troubled Dubai World conglomerate, but the former boom town still faces a severe test.

Dubai World holds most of the emirate’s credit pile, and despite the $10bn (€6.8bn, £6.1bn) support extended on Monday by Abu Dhabi, the United Arab Emirates capital, the conglomerate must still restructure its debts.

Abu Dhabi’s move temporarily staves off the spectre of default, but bankers remain concerned that other state-owned companies, known collectively as “Dubai Inc”, may have to restructure their own debts. Meanwhile, other looming maturities will continue to strain the emirate’s finances and economy.

Dubai’s lifeline

Last month, Dubai caused a squall in the capital markets: the emirate stunned investors with a request for a standstill on some of the debts of Dubai World, a state-owned company. This week, Abu Dhabi, its oil-rich neighbour and the senior partner in the United Arab Emirates, started to clear up that mess, providing $10bn in funding to its cash-strapped neighbour.

During Dubai’s boom, investors had assumed that state-associated companies enjoyed implicit guarantees from Dubai. The botched announcement of the intention to restructure Dubai World’s debts therefore stoked fears about the solvency of the city-state. Guarantees from Abu Dhabi, with its hundreds of billions of dollars in savings, should soothe investors’ concerns.

The ultra-rich emirate, which had already given $15bn of support to Dubai this year through its banks and through the UAE central bank, gave these funds with a host of warm words about its “partner” in the UAE. What price Abu Dhabi extracted from Dubai in private may never be known, but the money was given with no public strings attached.

Decree ushers in insolvency reforms

The Dubai government set out sweeping new laws on Monday that would allow its debt-laden conglomerate Dubai World and any subsidiaries to file for insolvency.

The new bankruptcy framework, which Dubai’s ruler issued by decree, was broadly welcomed as the creation of a regime based on “internationally accepted standards for transparency and creditor protection”, as the government described it.

The credit agency Fitch said the laws could reduce the dependence on state bail-outs