Dubai World 2009 debt standstill
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Dubai World ( ar, دبي العالمية) is an
investment company An investment company is a financial institution principally engaged in holding, managing and investing securities. These companies in the United States are regulated by the U.S. Securities and Exchange Commission and must be registered under the ...
that manages and supervises a portfolio of businesses and projects for the
Government of Dubai The Government of Dubai ( ar, حكومة دبي) is the subnational authority that governs the Emirate of Dubai, one of the seven constituent monarchies which make up the United Arab Emirates. The executive authority and head of the government is th ...
across a wide range of industry segments and projects that promote Dubai as a hub for commerce and trading. As a subsidiary of
Dubai Inc. "Dubai Inc." is a phrase used to describe a collection of diverse companies owned primarily by the government of Dubai. These state-controlled investment properties grew from what was just a vision of Sheik Mohammed bin Rashid Al Maktoum's predec ...
, it is the emirate's flag bearer in global investments and has a central role in the direction of Dubai's economy. Assets include
DP World DP World is an Emirati multinational logistics company based in Dubai, United Arab Emirates. It specialises in cargo logistics, port terminal operations, maritime services and free trade zones. Formed in 2005 by the merger of Dubai Ports Auth ...
, which caused considerable controversy when trying to take over six US ports, its property arm, Nakheel, which built
The Palm Islands The Palm Islands are three artificial islands, Palm Jumeirah, Deira Island and Palm Jebel Ali, on the coast of Dubai, United Arab Emirates. The Palm Islands were conceived around the same time as The World, another artificial island project in ...
and
The World In its most general sense, the term "world" refers to the totality of entities, to the whole of reality or to everything that is. The nature of the world has been conceptualized differently in different fields. Some conceptions see the worl ...
developments, and Istithmar World, its investment company. It is chaired by Ahmed bin Saeed Al Maktoum.


History

Dubai World was established under a decree ratified on 2 March 2006 by
Sheikh Sheikh (pronounced or ; ar, شيخ ' , mostly pronounced , plural ' )—also transliterated sheekh, sheyikh, shaykh, shayk, shekh, shaik and Shaikh, shak—is an honorific title in the Arabic language. It commonly designates a chief of a ...
Mohammed bin Rashid Al Maktoum, Ruler of Dubai. He is also the majority stakeholder in Dubai World. On 2 July 2006, it was launched as a holding company with more than 50,000 employees in over 100 cities around the globe. The group now has extensive real estate investments in the United States, the United Kingdom and South Africa. Dubai World made headlines in March 2008 after its chairman, Sultan Ahmed bin Sulayem, threatened to take the fund's money out of Europe. Dubai World's threats came shortly after the European Union attempted to lay out "a set of principles for transparency, predictability and accountability" for sovereign wealth funds. On 26 November 2009, Dubai World proposed to delay repayment of its debt, which raised the risk of the largest government default since the Argentine debt restructuring in 2001. Dubai World, the investment vehicle for the emirate, asked to delay for six months payment on $26 billion of debt. The extent of the debt rattled many markets causing many indices to drop; including oil prices. U.S. stocks fell sharply but rebounded from their lows as investors concluded that the damage might be contained. The Dow Jones industrial average lost about 155 points, or roughly 1.5 percent, in a shortened trading day, and other stock averages also sank. Oil prices plunged as much as 7 percent before recovering some ground later in the day. On 12 December 2010, Dubai named
Sheikh Sheikh (pronounced or ; ar, شيخ ' , mostly pronounced , plural ' )—also transliterated sheekh, sheyikh, shaykh, shayk, shekh, shaik and Shaikh, shak—is an honorific title in the Arabic language. It commonly designates a chief of a ...
Ahmed bin Saeed Al Maktoum, head of
Emirates Emirates may refer to: * United Arab Emirates, a Middle Eastern country * Emirate, any territory ruled by an emir ** Gulf emirates, emirates located on the Persian Gulf ** Emirates of the United Arab Emirates, the individual emirates * The Emirat ...
airline and uncle of the state's ruler, as chairman of Dubai World in a board revamp a year after the company said it would halt loan repayments, roiling markets. He replaced
Sultan Ahmed bin Sulayem Sultan Ahmed bin Sulayem (Arabic: ‏ ‏سلطان أحمد بن سليم, born 1955) is an Emirati businessman. He is the chairman and chief executive officer (CEO) of DP World and the chairman of the Ports, Customs & Free Zone Corporation. ...
. Andrew (Andy) Watson, has been serving as the managing director at Dubai World since July 2011. On 29 January 2013, Drydocks World signed a memorandum of understanding for a US$2.5 billion joint venture partnership with Indonesia to develop a maritime cluster in the Asian country that would serve, among others, the petrochemicals industry. In March 2022, its subsidiary DP World's
P&O Ferries P&O Ferries is a British shipping company that operates ferry, ferries from United Kingdom to Ireland, and to Continental Europe (France, Belgium and the Netherlands). The company was created in 2002 through mergers and acquisitions within P&O ...
division sacked 800 longstanding crewmembers and caused backlash in the United Kingdom, potentially putting the tax status of DP World's London and Southampton free ports at risk.


2009 debt standstill

With the onset of the financial crisis of 2007–2010, Dubai's real estate market declined after a six-year boom. On 25 November 2009, the Dubai government announced that the company "intends to ask all providers of financing to Dubai World to 'standstill' and extend maturities until at least 30 May 2010". The company has laid off 10,500 employees worldwide. At that time, Dubai World had debts of $59-billion, accounting for nearly three-quarters of the emirate's US$80-billion debt. This includes a US$3.5-billion loan which the company was unable to repay by its December deadline. In response to the government announced moratorium of Dubai World's debts, both Moody's and Standard & Poor's Investors Services heavily downgraded the debt of various Dubai government-related entities with interests in property, utilities, commercial operations and commodities trading. In Moody's case, the downgrade meant that the affected agencies lost their investment grade status. Concerns over the fallout from Dubai's debt problems contributed to the main European stock indexes falling over 3% on 26 November. This was followed by drops in Asian stocks on 27 November. However the European stock markets rebounded as investors' fears subsequently subsided as they decided the estimated debt wasn't big enough to trigger a systemic failure in global financial markets. "For now, the market is taking the view that the Dubai debt issue may be a storm rather than a hurricane," said Jane Foley, a research director at Forex.com in London. The American markets were closed on 26 November but American stocks fell on the afternoon of 27 November as similar fears rattled
Wall Street Wall Street is an eight-block-long street in the Financial District of Lower Manhattan in New York City. It runs between Broadway in the west to South Street and the East River in the east. The term "Wall Street" has become a metonym for t ...
in a thinly-traded half-day session. The Dow Jones Industrial Average (INDU) fell 155 points, or 1.5%, after closing 25 November at a 13-month high. The Dow had lost 233 points in the morning. Also, concerns of the crisis led to a sharp rally in the U.S. dollar and
Japanese Yen The is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar (US$) and the euro. It is also widely used as a third reserve currency after the US dollar and the ...
against most other world currencies as these currencies had been perceived as "safe haven" currencies during times of uncertainty. An unnamed senior official told news agencies on 28 November that
Abu Dhabi Abu Dhabi (, ; ar, أَبُو ظَبْيٍ ' ) is the capital and second-most populous city (after Dubai) of the United Arab Emirates. It is also the capital of the Emirate of Abu Dhabi and the centre of the Abu Dhabi Metropolitan Area. ...
, the wealthy capital of the United Arab Emirates, would "pick and choose" how to assist Dubai World. "We will look at Dubai's commitments and approach them on a case-by-case basis," the official told the Reuters news agency by telephone, adding: "It does not mean that Abu Dhabi will underwrite all of their debts." Meanwhile, India's central bank governor said an assessment of the impact of Dubai's debt problems was needed before deciding on a response. "We should not react to instant news like this. One lesson of the crisis is that we must study the developments, and I think we must measure the extent of the problem there and how it impacts India,"
Duvvuri Subbarao Duvvuri Subbarao (born 11 August 1949) is an Indian economist, Central Banker, and retired IAS officer. He was the 22nd Governor of Reserve Bank of India, served under Prime Minister Dr. Manmohan Singh. After stepping down from RBI, he was a Dist ...
said in Hyderabad, India. A public statement on 30 November 2009, of the Dubai Finance Department Director-General, that the Dubai World debts are ''"not guaranteed by the government"'' appears to correctly reflect the legal position, as the Dubai Government were not required by the lenders, and nor did they provide, any contractual guarantees in respect of the Dubai World debt: Officials in the United Arab Emirates tried on 1 December to calm investors and the public over the Dubai World debt crisis, and the company itself said it was seeking to renegotiate only the $26 billion in obligations held by its troubled real estate developer, Nakheel. It also said that it had hired
Moelis & Company Moelis & Company is a global investment bank that provides financial advisory services to corporations, governments, and financial sponsors. The firm advises on strategic decisions such as mergers and acquisitions, recapitalizations and restruct ...
, the investment boutique headed by
Ken Moelis Kenneth D. Moelis (born 1958) is an American billionaire investment banker, and founder of Moelis & Company, an investment banking firm. Early life and education Moelis was born in 1958, the son of Gaye (née Gross) and Herbert I. Moelis, presi ...
, a former
UBS UBS Group AG is a multinational Investment banking, investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres ...
banker, to be its adviser.
Rothschild Rothschild () is a name derived from the German ''zum rothen Schild'' (with the old spelling "th"), meaning "with the red sign", in reference to the houses where these family members lived or had lived. At the time, houses were designated by signs ...
is also advising Dubai World. Shares in Dubai and Abu Dhabi were down for a second day, with both key indexes declining about 6%. On 30 November, shares dropped in Dubai and Abu Dhabi by 7.3% and 8.3%, respectively. On 14 December 2009 the Dubai government received $10 billion in surprise aid from Abu Dhabi for debt-laden Dubai World, which said it would use $4.1 billion of it to repay its Nakheel unit's Islamic bond maturing on the same day. As of 24 January 2010 Dubai World's property assets have exceeded US$120 billion, so that it could cover its debt of US$57 billion.


Debt deal

Dubai World on 20 May 2010 said that it had reached an agreement "in principle" with most of its bank lenders to restructure debt worth $23.5bn (£16.4bn). It would be left with debts of $14.4bn after the restructuring. But the deal must still be approved by other banks that were not involved in the negotiations. The terms of the restructuring, include converting $8.9bn of government debt into equity. The government of Dubai and Dubai World had tabled this offer to bank lenders in March 2010 after three months of negotiations.


Managed companies

*
DP World DP World is an Emirati multinational logistics company based in Dubai, United Arab Emirates. It specialises in cargo logistics, port terminal operations, maritime services and free trade zones. Formed in 2005 by the merger of Dubai Ports Auth ...
* Economic Zones World, the parent company of Jebel Ali Free Zone * Dubai Drydocks * Dubai Maritime City * Istithmar World *
Infinity World Development Infinity is that which is boundless, endless, or larger than any natural number. It is often denoted by the infinity symbol . Since the time of the ancient Greeks, the philosophical nature of infinity was the subject of many discussions am ...
* Nakheel Properties


References

{{authority control Government-owned companies of the United Arab Emirates Sovereign wealth funds