Debt-Burdened Dubai May Need Years to Rebuild Creditors’ Trust

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Dubai may be seeing light at the end of the tunnel after markets welcomed its offer to repay around $25 billion in debt by 2018. The recovery still risks taking years as the sheikhdom rebuilds creditors’ trust.

Flagship holding company Dubai World, which owes this money, will get $9.5 billion in government funding over the next three years, the emirate announced yesterday. Dubai World’s property unit Nakheel PJSC was at the forefront of a building boom-to-bust which led to the worst property slump during the global recession after credit markets seized up.

Dubai, the second-biggest of the seven states that make up the United Arab Emirates, may still need assistance from its wealthier neighbor Abu Dhabi after getting $20 billion last year. Other sources of credit will be harder to tap after Dubai and its state-controlled companies amassed $109 billion in debt to turn the Persian Gulf city state into a financial and tourism center as oil reserves dwindled.