Dubai Shows No Guarantee Gazprom, Pemex Bonds Backed by State

Norval Loftus left the meeting with Dubai officials in London on Oct. 27 believing the bonds he held from state-controlled property developer Nakheel PJSC were backed by the government.

“People were asking about Nakheel and getting a yes answer,” said Loftus, the head of convertible and Islamic bonds at Matrix Group in London, which manages $2.5 billion of assets. Now the securities are down more than 50 percent from their peak as Nakheel’s parent Dubai World seeks to reschedule $3.52 billion of principal that’s due today.

Nakheel’s debt restructuring, and Dubai’s refusal to guarantee timely repayment, is prompting investors from Mexico to South Korea to demand higher premiums for state-run company debt.