Big spending Dubai may have to be bailed out by Abu Dhabi

The Telegraph ^ | 11/25/2008 | Louise Armitstead in Dubai

[bruinbirdman]

Abu Dhabi may provide Dubai with a banking facility with which its leveraged neighbour would use to pay down its immediate debt obligations as part of potential "bail-out" plans being discussed between the emirates

Details are hazy but Abu Dhabi could help support Dubai, which has embarked one of the biggest and most ambitious building programmes the world has ever seen, but sources close to the situation said an immediate cash facility to finance Dubai's $80bn debts was an option.

Another was a sale-and-lease-back of some of Dubai's properties whereby Abu Dhabi would buy a share of some of Dubai's biggest projects.

An insider said: "These debts are not due for repayment all at once but it does need to be serviced. Clearly there are not many banks able to help restructure the debt so Abu Dhabi is the obvious source of help. Dubai also has plenty of assets with which a sensible deal can be done."

Bankers from Goldman Sachs, Morgan Stanley, UBS and Credit Suisse, are thought to be helping with potential ideas and structures.

Insiders played down the image of Abu Dhabi and Dubai as feuding neighbours.One said: "Abu Dhabi has been a big supporter of Dubai's expansion and made it clear that it considers this as a model for development for the rest of the region. Everyone expected a correction, just perhaps not so suddenly. The question is not will Abu Dhabi help but what's the best way to do it."

Yesterday Dubai revealed for the first time details of its previously secretive finances, including that its sovereign debt was $10bn while the state-affiliated companies had $70bn debt.

Dubai also explained measures it was taking to cope with the downturn, including the formation of a new Advisory Council tasked with reviewing all areas of the economy

[E. Pluribus Unum]

Just last week I said that one of the upsides to the economic collapse would be getting to see the oil-drunk-rich UAE/Dubai dudes (I refrained from using insensitive, anti-Arabic eupemisms) in smoldering ruins.

My dream has come true.

[SecondAmendment]

Don’t dog on the UAE too much, they are much better than most European and and Asian countries !

I was there (in Dubai) last week an I was shocked to see how aggressively the free market and capitalism have taken root there. Income tax is at 5% ! People are there from all over the world. And they are extremely tolerant of western ideas. To my shock I even found a huge Christmas store in the Mall of the Emirates (the one which also has an indoor Ski slope).

The only depressing thing I can say about them is that we have lost some of the energy (no pun intended) and entrepreneurial zeal which they have seemed to absorb via a continuous swing to the right, while we continue to slide backwards to the left, abandoning the very ideology fueling the massive growth over there.

[bruinbirdman]

They are trying to diversify out of a commodities based economy. But it reminds me of Denmark and Sweden. Socialist government that determines who gets to participate in limited capitalism.

yitbos