Dubai World’s Debt

Dubai World, the holding company in charge of developing Dubai’s premier tourism and housing projects such as The World Islands and The Palm Islands is yet to confirm how it will repay $59 Billion in debt that it owes creditors, $22 Billion of which it has delayed repayments upon and needs to “re-schedule”. In laymans terms, they need more time and perhaps a lower interest rate to be able to pay the money back while the 2008 Financial Crisis continues to hamper its ability to earn off its investments.

So… what does Dubai World own besides the Islands projects? You’d be surprised:

• Nakheel: which oversees the Islands and similar development projects
• Dubai Drydocks
• Dubai Maritime Facility (due for completion in 2012)
• Istithmar World: specializes in global diversified equity and alternative investments
• Leisurecorp: Which owns a variety of golf and leisure locations globally
• Dubai World Africa: Which owns the Cape Town V&A Waterfront
• And many many more…

Dubai World shocked markets in November stating that it will have to delay debt repayments until at least May 30, and talks are still ongoing with its major creditors. Abu Dhabi stepped in during December with a $10 Billion loan that prevented Dubai World from defaulting on a $4.1 Billion bond repayment and keep it afloat until the restructuring talks have concluded in an agreement.

How much is $59 Billion? Only 63 countries in the world have a GDP more than $59 Billion, and it represents 36% of the United Arab Emirates’ GDP. Dubai World is an aggressive effort on the part of the United Arab Emirates to distance its reliance on oil as an economic driver, Abu Dhabi’s $10 Billion rescue in December shows that it can still rely on its friends for capital but things won’t be easy to manage in their boardroom until the global recession has been forgotten and people around the world have an appetite for buying into their property and tourist portfolio.

The story is interesting not only because of the huge sums involved but also because it shows that no matter how big or small your purse and ambition, the fundamentals of living within one’s means apply.