Markets in the UAE went into a tailspin in the second week of December after talk emerged on the potential restructuring of Dubai debt; and as ratings agency Moody's issued a report that the emirate's state-linked firms could need further financial support to repay obligations due next year.
However, perhaps in an unofficial show of solidarity, the firms and even Ahmed Saeed Al Maktoum, the chairman of Dubai's supreme fiscal committee, have reaffirmed their commitment to repaying the debt, around US$10 billion of which, according to Moody's estimates, are due next year.
Nakheel has emerged as the latest of the emirate's state-linked companies to report a paying down of its debt, announcing on the 8th December that it has paid nearly US$2 billion-worth of overdue payments to its trade creditors, marking "significant progress" in its recapitalization plan. The plan included the issuance AED4.8 billion (US$1.3 billion) in Sukuk, of which the first tranche amounting to AED3.8 billion (US$1.03 billion), was issued in August this year.
"Nakheel has to date made payments of AED7.3 billion (US$1.99 billion) to its trade creditors," said the company in a statement, adding that this follows initial payments to creditors owed AED500,000 (US$136,117) or less, which commenced in March 2010.
Meanwhile, the firm will reportedly also pay a 5% profit rate, as a first installment for its AED3.8 billion Sukuk by the end of this year.
On the 7th December, Ahmed Saeed announced that the Dubai government is not considering restructuring debt of the state-linked firms, although it could refinance part of the financial obligations due next year, if the need arises.
Jafza, a Dubai World subsidiary, also clarified that it is in discussions with financial institutions and "others" to refinance its UAE dirham-denominated US$2.04 billion Sukuk.
Hisham Abdullah Al Shirawi, the chairman of Jafza, voiced his confidence in the company's ability to refinance the obligation, due in November next year, without any government support. The firm has also not ruled out asset sales to help raise funds for its repayment.
source: islamic finance news