North Africa/Middle East

The price drop in bonds related to Dubai World's real-estate subsidiary has posed a question for investors: Does the discounted debt represent an attractive buying opportunity or an ill-advised journey into the uncharted world of debt restructurings of this size in the Persian Gulf? Bonds of real-estate subsidiary Nakheel dropped in value after the Gulf city-state said last week that it was delaying payment of state-run Dubai World's debt, The Wall Street Journal reported.

Dubai's debt problems clouded national day celebrations in the United Arab Emirates on Wednesday -- at least for a shaken financial community trying to work out whether any of their loans enjoy government protection, Reuters reported. Flags, fairy lights and fanfare marked the UAE's 38th anniversary at a moment when Dubai's request for a payment delay on $26 billion of debt owed by government-owned Dubai World has exposed the frailties of "quasi-sovereign" lending.

Dubai World broke six days of market-roiling silence early Tuesday morning, saying it was negotiating to restructure $26 billion in debt and anticipated a deal quickly, The Wall Street Journal reported. The announcement, just after midnight local time, came after Dubai government officials said the emirate wasn't obligated to step in and support the state-owned conglomerate. Stock markets across the United Arab Emirates tumbled in the first trading day since the government announced last week that it would ask for a six-month standstill on debt payments for Dubai World.

The United Arab Emirates central bank on Sunday said that it stood behind domestic and foreign banks operating in Dubai after last week’s announcement that Dubai World needed more time to pay back some of its $60 billion in debt, The New York Times reported. Dubai surprised the financial world on Wednesday when it said it would ask creditors of Dubai World, the conglomerate behind its rapid expansion, to agree to a six-month standstill on the debt. Global markets sank on the news.

A Saad Group subsidiary says it is unable to make payments on a US$650 million (Dh2.38 billion) Islamic bond maturing in 2012, The National reported. Saad Trading, Contracting and Financial Services, part of the struggling family-owned conglomerate based in Saudi Arabia, said yesterday it was “impossible for the issuer to perform its payment obligations under the sukuk”. It made the disclosure in a statement to the Bahrain Stock Exchange, where the Golden Belt 1 sukuk is listed.

Kuwait's Investment Dar, the Islamic financial firm that owns half of British luxury carmaker Aston Martin, plans to present a proposed debt restructuring plan to creditors this month, the company said Sunday. The meetings organized by Dar and the nine-member Coordinating Committee representing creditors will take place in Kuwait and Dubai on November 24 and November 25 respectively, the company said in a statement. The creditors will have a period of time to review and approve the plan after the meetings, Dar said.

Creditors of companies that go bust in the Emirates are likely to be paid less than in most other Arab countries, creating a deterrent to investment, says a report from the World Bank, The National reported. Policymakers in the country have been urged to focus their efforts on reforming the UAE’s insolvency framework to lay the foundations for a better business environment. Creditors get an average of 10.2 cents (37 fils) in the dollar if a company in the UAE files for bankruptcy, data from the World Bank’s International Finance Corporation shows.

Administrators of Bahrain-based The International Bank Corporation (TIBC), owned by the heavily indebted Algosaibi Group, say they are confident they can repay creditors as doubts persist whether there are enough assets to meet obligations, Reuters reported. TIBC, owned by Saudi group Ahmad Hamad Algosaibi & Bros (AHAB), plays a key role in the corporate debt defaults of AHAB and Saad Group, involving an estimated $22 billion in obligations.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar, BusinessWeek reported.

The Kuwait Islamic investment firm that owns half of British luxury car maker Aston Martin says it has appointed a chief officer to restructure its debts, BusinessWeek reported. The Investment Dar said in an announcement Sunday, the new manager, Mike Grant, brings to the company over 20 years of experience. The company is one of several Kuwaiti banks and investment houses to run into trouble as the global economic meltdown hammered this small oil-rich state in the Gulf.