Updated January 4, 2010
Dubai Before November 2008
Dubai in 2009
Dubai companies given “junk” status
Al Jazeera, Jan 4, 2010
Standard & Poor, an international ratings agency, said it has cut the credit ratings of six Dubai government-linked companies to junk status.
S&P said on Thursday it has taken the move as the likelihood of extraordinary support from the Dubai government appears “low”.
The Dubai government-related entities (GREs) lowered to junk status were DP World, DIFC Investments, Jebel Ali Free Zone, Dubai Multi Commodities Centre Authority, Dubai Holding Commercial Operations Group and Emaar Properties PJSC.
S&P also lowered its ratings on four Dubai-based banks to junk status because of their large exposures to Dubai companies including Dubai World and Nakheel, its troubled property subsidiary.
Credit ratings for the six companies and four banks remain under surveillance and could be downgraded further, the agency said.
The four banks affected at Emirates Bank International PJSC (EBI), National Bank of Dubai (NBD), Mashreqbank (Mashreq) and Dubai Islamic Bank (DIB).
The assets and liabilities of EBI and NBD were recently merged, S&P noted.
Emmanuel Volland. Standard & Poor’s credit analyst, said: “The rating actions reflect our decision to lower our assessments of the banks’ respective stand-alone credit profiles because of their high exposure to Dubai-based GREs, which we downgraded earlier today.”
S&P said it does not rate Dubai World or Nakheel, its property arm hammered in the global economic and financial crises. [more]
Dubai World Debt Not Guaranteed
BBC News, Nov 30, 2009
The Dubai government has said it will not guarantee the debt of Dubai World, which caused global panic because it cannot pay back creditors immediately.
The statement came after stock markets in Dubai and Abu Dhabi saw sharp falls.
“[Creditors] think Dubai World is part of the government, which is not correct,” said finance minister Abdulrahman al-Saleh.
Abu Dhabi’s main stock market lost a record 8.3%, while Dubai dropped 7.3% – the most in a year.
“Creditors need to take part of the responsibility for their decision to lend to the companies,” Mr al-Saleh told Dubai Television.
The central bank of the United Arab Emirates (UAE) has said it is setting up a facility to provide banks with extra liquidity, as it seeks to battle perceptions that Dubai cannot support its own companies. Mr al-Saleh’s statement caused some surprise in Dubai as people who invested in Dubai World effectively did so on the assumption that the government would guarantee them, BBC Middle East business reporter Ben Thompson said.
There is a very grey area between business and government in Dubai, he added.
Sale of Dubai property bonds frozen
Al Jazeera, November 30, 2009
Nakheel, Dubai’s property developer and part of the heavily-indebted Dubai World conglomerate, has asked Nasdaq, a US stock exchange, to stop trading its bonds.
The bonds have been taken off the Dubai bourse, Nasdaq said on their website.
Markets in Dubai, part of the United Arab Emirates (UAE), had fallen 7.3 per cent by the end of trading on Monday after the Eid al-Adah holidays.
Some major securities, including the construction and banking shares, fell to almost the 10 per cent maximum allowed.
Dubai World, the emirate’s investment arm, announced on Wednesday that it would seek a six-month freeze on debt repayments of almost $60 billion, prompting concerns about its economic health.
Al Jazeera’s Dan Nolan, reporting from Dubai, said: “It has been a bad day here. The main bourse dropped 5.6 per cent instantly.
“Analysts said before they opened that anything more than a three per cent drop would be a disaster.
“But others are pleased that it is not the full 10 per cent drop, which was certainly possible. [more]
Dubai Shares Plummet
CNNMoney.com, Nov 30, 2009
NEW YORK (CNNMoney.com) — Stocks in Dubai plunged more than 7% Monday, the first day of trading after the Persian Gulf state’s debt problems roiled financial markets around the world.
The index for the Dubai Financial Market, the emirate’s main stock exchange, ended the day down 7.3% at 1,940.36. It was the first day of trading since Dubai World, the state-run investment vehicle, requested a six-month delay on payments it owes on a roughly $60 billion debt load.
The Wednesday announcement raised fears about the health of the global financial system and rattled investors worldwide. But those concerns were eased somewhat Sunday after the United Arab Emirates stepped in to offer Dubai some support.
The UAE, a federation of seven emirates including Dubai, said it will create an emergency liquidity facility to help prevent the city-state from defaulting on its debts.
Fellow emirate Abu Dhabi also announced plans to selectively aid Dubai banks.
The moves helped revive confidence in Asia, where stock prices rallied after a sharp selloff last week. Japan’s Nikkei rose nearly 3% while the Heng Seng in Hong Kong advanced 3.2%.
[...] Dubai borrowed billions over the last several years to fuel an extravagant construction boom. But the emirate was hit hard by the credit crunch and investors are concerned about the possible fallout if Dubai World is forced to liquidate assets at fire-sale prices. [more]
Dubai’s threat to U.S. Banks
By Les Christie, CNNMoney.com staff writer
Last Updated: November 27, 2009: 10:56 PM ET
NEW YORK (CNNMoney.com) — The news that the sovereign wealth fund of Dubai requested a postponement of billions of dollars of debt this week could pose a big problem for U.S. banks.
The state-run investment company, Dubai World, owes about $60 billion. It rang up much of that in a building boom that included the world’s tallest skyscraper and the Palm Islands in the Persian Gulf, settlements shaped like palm trees.
According to CMA DataVision, which tracks credit markets, there’s a 35.82% probability that Dubai will default on that debt.
New York-based Citigroup (C, Fortune 500) has the most exposure to default risk at Dubai World, which a J.P. Morgan (JPM, Fortune 500) equity research note estimated at $1.9 billion. Citigroup declined to comment.
While other major banks in the United States are believed to have little direct exposure, the ripple effect could be more crippling, according to Richard Bove, a bank analyst with Rochdale Securities.
“There could be huge indirect exposure,” he said. “One has to assume that U.S. banks will be hurt.”
Dubai World Seeks Debt Moratorium
Al Jazeera, November 25, 2009
Property developer Nakheel was due to pay off nearly $3.5bn in bonds in December [EPA]
The government of the Gulf emirate of Dubai says it will ask creditors of its cash-strapped Dubai World conglomerate to accept a moratorium on debt worth billions of dollars.
The government announced the move on Wednesday as part of a plan to restructure the state-run company and its property developer subsidiary Nakheel.
“Dubai World intends to ask all providers of financing to Dubai World and Nakheel to a ‘standstill’ and extend maturities until at least 30 May 2010,” a statement issued by the Dubai Financial Support Fund said.
Nakheel, the developer of the emirate’s palm-shaped residential islands, was due to pay off nearly $3.5bn in maturing Islamic bonds in December.
Wednesday’s announcement pushed up the cost of insuring Dubai’s debt against default and brought down bond prices, the Reuters news agency reported.
Nakheel’s Islamic bond prices fell more than 20 points to 87.
The announcement came just hours after Dubai said separately that it raised $5bn from two local banks, the second instalment of what officials had said would be a $20bn borrowing programme.
The bond programme was unveiled in February, with the federal government of the United Arab Emirates picking up the entire first tranche.
Billions in debt
Dubai World has $59bn of liabilities, a large proportion of the Gulf emirate’s total debt.
The company, which owns Barneys New York, hired an advisory firm in August to help it explore options to shore up the US luxury chain’s financial position. [more]
Dubai Wealth Fund Under Stress
Al Jazeera, September 13, 2009
Istithmar World, the sovereign wealth fund of Dubai, is reported to be considering a halt to investments as it undertakes an overhaul of its operations. Istithmar is one of the flagship companies of state-owned Dubai World, whose real-estate unit Nakheel is seeking to refinance $3.52bn Islamic bonds maturing in December.
The overhaul could lead to the sale of the fund or its assets, the news agency Bloomberg said.Istithmar, run by David Jackson, said recently that John Amato and Felix Herlihy, its co-chief investment officers, were leaving the firm to explore other opportunities.
Jackson’s job is also under review, the Bloomberg news agency said quoting people. However, Dubai World said on Friday that Jackson would continue to lead the company. “Reports that … David Jackson had left the company were incorrect,” a company spokesperson said in an e-mailed statement.
Reversal of fortune
A restructuring by Istithmar and its parent Dubai World may mark the most public reversal of fortune for a state-controlled investment firm since global credit markets seized up in 2007.
Dubai World has $59bn of liabilities, a large proportion of the Gulf emirate’s total debt.
Dubai Gambles On A New Rail System
10 September 2009, Al Jazeera, Owen Fay
Dubai has officially inaugurated its new, state-of-the-art metro rail system, in the latest effort to jumpstart the city’s battered economy.
Several dignitaries, including Sheikh Mohammed bin Rashid al-Maktoum, the vice president of the United Arab Emirates and Dubai’s ruler, were on hand for the unveiling of the city’s latest innovation in technology.
But the system has already hit some speed bumps with the planned opening of several metro stations delayed and an estimated price tag of $7.5bn.
As Al Jazeera’s Owen Fay reports, those obstacles could cause major trouble for Dubai’s economy.
Striking Migrant Workers Jam Dubai Highway
August 31, 2009, Al Jazeera,
Hundreds of migrant workers hired by a major construction company in Dubai have gone on strike over low wages, in the first sign of unrest in the emirate since the economic crisis.
Asian labourers from development company Al Habtoor, which built the sail-shaped Burj Al Arab hotel, stopped work on Monday morning and blocked roads, causing chaos on the streets.
The labourers, now building an extension to a shopping mall in the Diera district and a convention centre in the Jabal Ali industrial zone, say their pay is not enough to survive on.
Human rights groups have criticised the oil-rich Gulf and Dubai over its treatment of migrant workers who are used to build skyscrapers and artificial islands.
“We are demanding over time [pay] or a raise in salaries,” Mohammed al-Raoub, a protester from Pakistan who earns $190 a month, said.
“I can barely manage to survive and send money to my family,” he said.
Another worker told Dubai’s The National newspaper: “The officials assured us that they are discussing the matter with the company and a solution would be found in two days.
“We had told them that there would be no trouble from our side for now.”
The paper reported that more than 2,000 workers halted traffic in the Deira district until police and labour officials stepped in to control the crowd. [more]
Expatriates Struggling To Make Ends Meet in Dubai
Lured by the promise of a well-paid investment banking job in the growing markets of the Gulf, Ghassan Darwiche left Lebanon for Qatar in 2005.
He landed a job with the Standard Chartered Bank and in 2008 transferred into the wealth management department.
He believes the move was a logical one because of Qatar’s prospering economy; global oil and gas prices were high and investment in the banking and real estate markets showed continued growth.
However, by January 2009, the department had became a “loss entity” for the bank.
“People were pulling out money because of the global financial crisis,” he said.
The bank then downgraded his department to commercial banking – credit card and insurance applications. Darwiche believed that he was being demoted and quit.
“We all want to climb the ladder. The Arab and European staff left, but the Indian banking professionals tended to stay and accept the downgrade. I didn’t want to go backward in my career,” he said.
However, three months after arriving in Beirut and finding no job opportunities for someone with his skills, Darwiche believes he would have fared better had he stayed.
“I’m one of the many victims of the financial crisis but the question now is what to do next.”
Reversal of fortunes
According to Lebanon’s finance ministry, there are some 350,000 Lebanese people working in the Gulf states, which in the past decade had become popular employment destinations.
However, with world markets in recession and foreign investments dwindling, fortunes have been reversed; the ministry says 15,000 Lebanese expatriate workers have returned in recent weeks.
They can be seen at bars and coffee shops in Beirut, lamenting about their newfound joblessness, finding solace among others in the same situation.
Hussein Zeaiter, a professor of economics at Lebanese American University, says the return of so many skilled yet unemployed workers will increase the burden on the already-struggling economy and will become a problem for the government to tackle.
“The Lebanese who work in the Gulf have high-ranking jobs. Relative to the workers from different nationalities, I think that the financial crisis will hit the Lebanese workers more due to the expertise of their majority in services and banking and finance.”
Rent, not buy
For Maroun Abu Nader, a 24-year-old graphic designer who worked at a publishing company in Dubai for eight months, being laid off “could have been a lot worse”.
He says that unlike many who worked and lived in the United Arab Emirates (UAE), he did not buy an apartment, despite the low interest rates on mortgages and loans, and did not get a car; he rented everything.
“Otherwise, I would be in debtors’ prison right now,” he says.
Abu Nader describes the scene in Dubai at the time of his departure a few weeks ago as: “Like a war without the violence“.
“People were fleeing the city en masse, terrified, leaving all of their belongings behind, unable to pay off many of the debts they incurred,” he said [more]
Recession Does Not Spare UAE Citizens
The Worsening Financial Picture of Dubai
The Economist, June 9, 2009
UAE is still in the doldrums. For the first time since the seven Gulf statelets joined together as a union in 1971, people are beginning to mutter—rather quietly, for sure— whether there may be something amiss with the autocratic, opaque system that hitherto seemed to work so well behind closed doors. “Nobody really knows what any of the statistics are,” says a Western analyst. “We haven’t seen the half of it yet,” says a Western banker, referring to the debt and the possible defaults. It is notable that almost nobody in business or government is prepared to talk publicly. Cohorts of public-relations people surround the bigwigs and shield them from scrutiny.
In the past few weeks it has become clear, nonetheless, that the bottom has yet to be reached. Standard & Poor’s (S&P), a credit-rating agency, has issued a string of recent gloomy assessments, downgrading four Dubai-based banks and noting that “the risk to Dubai’s economy has increased as the real-estate sector has entered a sharp correction period.” Property values are still about half what they were a year ago.
Some foreign building and dredging companies have not been paid for months, and some Dubai companies are offering to pay them only partially. S&P grimly notes the “increased uncertainty regarding the government’s willingness to provide support to Nakheel, a key government-related entity with sizeable repayments coming due at the end of this year.” The amount is $3.5 billion. A visiting British trade minister took the rare step, on July 4th, of publicly declaring, while insisting that Dubai would bounce back, that British contractors and suppliers “need to be paid”. Earlier this year a leading Dubai figure said that the statelet’s consolidated debt was around $80 billion, but no one has issued a detailed breakdown of accounts; only a minority of Dubai companies are listed. Others say that the true sum of debt may be closer to $120 billion.
In February Dubai’s department of finance issued the first $10 billion chunk of a bond totalling $20 billion to help stave off the creditors, open new lines of credit and reschedule debt. Now, at a time when international banks are still loth to lend, it has been reported that the second chunk will be guaranteed by the UAE’s government. More may still be needed. [more]
Dubai Ruler Fires His Outspoken Finance Chief
The Economist, May 18, 2009
The dismissal of Nasser al-Sheikh as the director of the Dubai Department of Finance has raised questions about the emirate’s plans to tackle its daunting debt-service challenge and restructure its network of government-controlled corporations. Mr Sheikh had sought to bring a more transparent approach to the task of running the emirate’s finances. It seems that this may have been his undoing, as it conflicted with the traditional way of conducting business behind closed doors. Dubai will now have to move quickly and effectively to reassure its creditors that its debt settlement plans are still on track.
The news of Mr Sheikh’s removal came in a statement from the United Arab Emirates (UAE)’s national news agency that Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, had reassigned him to the position of assistant director of external affairs at the ruler’s diwan (royal court)—effectively a major demotion. His replacement as head of the finance department is Abdul-Rahman Saleh, who previously worked as a senior executive for corporate affairs at Dubai’s customs authority. No reason was given for the change.
Mr Sheikh had been promoted to head the finance department last October as part of a wider reorganisation of senior posts in Dubai. His predecessor, Omar al-Qamzi, moved across to become director-general of the Dubai Department of Economic Development, replacing Mohammed Ali Alabbar, one of the emirate’s leading businessmen. Mr Sheikh’s original appointment came at the moment when Dubai’s real estate-driven economic boom was coming to an abrupt halt. [more]
The Biggest Economic Recession in Dubai’s History
This city once has excess from the oil profits but now it is becoming more recession prone.
Dubai’s Real Estate Crash
Unemployed Foreign Workers in Dubai Becoming Desperate
Surviving the Unemployment Crisis in Dubai
Other Must Read Articles About Dubai’s Economic Crisis and Treatment of Foreign Workers:
1. Dubai’s Recession and Expatriates’ Departures Benefit Disadvantaged Residents
5. Wall Street Journal: Real Estate Agents:-Dubai Boom is Ending.