Fears grow for Dubai state-related groups

With Dubai World cut adrift from implicit government support, there are concerns about potential defaults by other state-related entities. The name mentioned most by bankers and investors in the region is that of Dubai Holding, the personal investment vehicle of the ruler, Sheikh Mohammed bin Rashid al-Maktoum.

“Dubai’s actions have introduced the risk that restructuring of other corporates could follow,” Barclays Capital said in a report this week. “We would focus on those with weak fundamentals and upcoming maturities and we view Dubai Holding as being most at risk.”

Dubai Holding’s Commercial Operations Group was downgraded by Moody’s, the rating agency, to two notches above junk last week. The cost of insuring $10m for five years against default ballooned to $1.1435m a year on Tuesday, making it the riskiest Dubai corporate bond according to the market.