Dubai state-linked companies may find it harder to complete the refinancing of $15bn in debt this year as new central bank loan rules force lenders to curtail their exposure to the government.
Banks in the UAE can lend no more than 100% of their capital to local governments and the same to government-related entities known as GREs, the UAE central bank said on April 4. There was no limit under previous rules. The exposure of Emirates NBD, the nation’s biggest bank, to sovereign loans was 130% of regulatory capital at the end of 2011, its financial statements show.
Many UAE banks suffered from an increase in bad loans linked to debt restructuring by state-owned businesses including Dubai World, which shook global markets in 2009 with its request to delay payments on $25bn in loans. Sovereign and GRE issuers have about $32bn of debt maturing in 2012, including $15bn in Dubai, the International Monetary Fund said in a March 14 report.
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