Opinion: Bond repayment will be Dubai’s test

Dubai Inc has fallen from grace over the past year in the eyes of international investors.

The spreads on debt issued by Dubai government-owned companies widened massively from September, surpassing 1,000 basis points in February. Although spreads have since narrowed, they remain much wider than those for similarly rated companies around the world and their counterparts up the road in Abu Dhabi.

We are concerned by the damage sustained by Dubai’s business model. On balance though, we think fears over Dubai Inc’s creditworthiness are overdone, primarily because of the proven willingness and ability of the United Arab Emirates federal government to support Dubai.