The relief was palpable when Abu Dhabi injected $10bn into Dubai’s Financial Support Fund, averting a possible default of the $4.1bn sukuk issued by construction firm Nakheel.
But while this appears to have calmed the turmoil triggered some weeks ago by the Dubai government’s announced restructuring of Nakheel’s parent, Dubai World, we would caution against complacency. Not only is the rebuilding of Dubai’s reputation as a reliable international borrower likely to be a drawn-out process, but the consequences of recent events for the corporate and macroeconomic landscape are also likely to remain profound.
Therefore, sharp reversals in credit ratings – or indeed in investors’ perceptions – should not be immediately assumed.
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