United Arab Emirates banks, which are owed about 55 billion dirhams ($15 billion) by Dubai World, may be able to absorb losses if they are repaid 60 cents on the dollar, Moody’s Investors Service said.
“U.A.E. banks would incur losses amounting to only around 9 percent of their capitalization as of year-end 2009,” Moody’s wrote in a report e-mailed today. “This would hurt 2010 profits, but not jeopardize solvency.” The banks’ Tier 1 ratio, a measure of financial strength, is unlikely to drop below the required minimum of 8 percent even if they take a 40 percent “haircut,” according to the ratings firm.
Dubai World may offer its creditors 60 cents on the dollar after seven years, Zawya Dow Jones news service said Feb. 14, citing unidentified people familiar with the plan. A spokeswoman for the emirate said that day no such offer had been made. More than 90 banks worldwide, including Emirates NBD PJSC, the U.A.E’s biggest lender by assets, and third-ranked Abu Dhabi Commercial Bank PJSC, are owed money by Dubai World. The holding company announced plans to alter terms on about $26 billion of debt Dec. 1, roiling global financial markets.
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