Clock Ticks for Dubai Debt and Nakheel

Dubai is facing off against its bankers. As the government tries to restructure a vital $3.5 billion bond, due in December, for troubled real-estate company Nakheel, bankers seem to have two options.

They can agree to new terms and lend more. Or they can burn bridges with the government and accept that they will struggle to win future business in Dubai and oil-rich neighbor Abu Dhabi. The problem is, giving Dubai more debt is risky for the likes of Barclays, Deutsche Bank and Credit Suisse.

First, it is unclear quite how much Dubai owes altogether. Nakheel recently said in a filing that its government-controlled parent, Dubai World, alone has consolidated liabilities of about $60 billion.