The restructuring of the $60bn (£36.4bn) of debt at the emirate's core holding company, which includes investment vehicle Istithmar and property developer Nakheel, will be the largest and toughest ever in the Gulf region. The few precedents are not encouraging for those who funded Dubai's grandiose vision.
Shocked creditors had expected timely repayment. Now, they are scrambling to form steering committees to liaise with Dubai World's new restructuring chief, Deloitte's Aidan Birkett. In practice, lenders can't really turn down the request for a six-month standstill and have little option but to wait for Dubai World to formulate a plan to address its sprawling debts.
Even if loans are secured and the underlying paperwork is comprehensive, the region's laws are unfriendly to creditors. It is almost impossible to seize collateral. The courts have consistently rejected claims by lenders to Kuwait's Global Investment and Investment Dar, financial firms which defaulted at the start of the year with combined liabilities of $5.5bn. In the Kingdom of Saudi Arabia, authorities even prioritised the claims of local lenders over the foreign banks which are estimated to be owed $16bn by two leading merchant families, the Saads and Algosaibis.
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