The metropolitan state, devoid of oil resources, is a victim of its excesses in real estate.
The Dubairotes have a hangover. Country of excess, their emirate is now on the verge of bankruptcy, unable to honor its financial commitments. The shock of announcing the debt rescheduling of two of its flagship groups – the Dubai World conglomerate and its Nakheel real estate subsidiary – until Wednesday, May 30, 2010, at least on Wednesday, was magnified by the fact that nobody did expect such a cataclysm. The markets thought the eye of the cyclone had moved away.
Dubai World’s debt, estimated at $ 59 billion, accounts for most of the emirate’s debt, estimated at between $ 80 billion and $ 90 billion (€ 39 billion). Its subsidiary Nakheel, promoter of the construction of the famous palm-shaped artificial islands, is unable to repay, by December 14, an Islamic bond worth $ 3.5 billion. A $ 1.2 billion issue of Limitless, another Dubai World real estate development subsidiary, also expires in the spring.
As a further sign of this serious financial crisis, Dubai has urgently raised $ 5 billion in treasury bills, subscribed by two banks in Abu Dhabi under its $ 20 billion treasury bill announced early in the year.
Little and big moneyers on the planet are in their little shoes. Dubai World is the backbone of the economy of this small Gulf nation, a pillar of the United Arab Emirates federation. The unbridled expansion of this catch-all holding (transport, ports, real estate, leisure …), in Dubai as abroad, had been financed by a colossal indebtedness to the investors, in particular with the big brother, the emirate neighboring Abu Dhabi, and international banks.
URBANISTIC PROJECTS STOPPED
The debacle in Dubai caused a surge in the premium to consolidate payday loans. In addition, the immediate drop by the agencies Moody’s and Standard & Poor’s of the financial rating of the six main national companies of the emirate will not fail to increase their borrowing. However, these companies must honor commitments of $ 50 billion over the next three years, representing three-quarters of the pocket-money nation’s gross domestic product (GDP).
The moratorium illustrates the collapse of the only area of the Gulf that does not have oil or gas rents to protect itself from the fallout from the global economic downturn. Indeed, within the federation, Dubai does not have the oil resources of Abu Dhabi, one of the largest producers of crude in the world.
Armed with the Dubai model, a symbol of easy money and double-digit growth since the early 2000s, the residential real estate has never recovered from the debacle of September 2008. Lack of liquidity, d ambitious urban projects piloted by Nakheel, in particular, the tallest tower in the world, were stopped. Construction companies have not been paid for months.
The real estate crisis has resulted in the wake of the local banking system, highly exposed to the stone. In addition, the formidable portfolio of industrial and real estate assets abroad, particularly in the United States, has suffered from the effects of Western economic uncertainties. By diversifying into the tertiary sector because of a lack of oil surpluses, Dubai is paying the highest price.
The blow is tough for the emir, Sheikh Mohammed Ben Rachid Al-Maktoum. Dubai World President Ahmed Ben Sulayem, his right hand, and confidant is now on an ejection seat. The serious financial crisis that the metropolitan state has already been right another man like, Sameer Al-Ansari, the president of Dubai International Capital, the main sovereign fund. In the light of the omnipresence in the business life of the ruling family who pulls all the strings, the sovereign is now in the front line.
To get out of the rut, Dubai will have to rely on Abu Dhabi. Speaking at the beginning of the month to a delegation of businessmen, Sheikh Mohammed has tried to reassure them about the strength of a pivotal couple of the federation.
Remain that in exchange for new help, the suzerain may require raising the capital of the last two jewels of the crown of Dubai, Emirates Airlines, and Dubai Ports.