Dubai gets $10 billion injection


DUBAI — Dubai said Monday that it has received $10 billion in financing from Abu Dhabi, which will pay part of the debt held by conglomerate Dubai World and its property unit Nakheel.

Out of this, $4.1 billion will be used to repay Nakheel’s Islamic bond, or sukuk, that matures Monday. The remainder of the funds will be used to finance Dubai World’s needs up until the end of April 2010.

“We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices,” Sheikh Ahmed bin Saaed al-Maktoum said in a statement.

Dubai rocked world markets in late November when it requested a freeze on debt payments by Dubai World in order to restructure the conglomerate. Nakheel’s bond had been seen by many as a litmus test for Dubai’s ability to repay more than $80 billion of government and corporate debt.

“I think Abu Dhabi saw the adverse market reaction to Nakheel debt restructuring news play out over several days and perhaps decided they had seen enough,” said Saud Masud, senior real estate analyst at UBS AG.

Expectations that Nakheel could reach a positive outcome helped boost shares in Dubai on Sunday. The Dubai Financial Market’s main index closed up 3.3% at 1695.35, extending Thursday’s 7% rally. However, the benchmark is still down about 19% since Dubai World requested the debt freeze.

“This is very positive news, and will be welcomed relief to bondholders in particular. We are expecting a strong positive reaction to U.A.E. and regional markets,” said Ali Khan, managing director at Arqaam Capital. “Details yet to emerge, however headline is very positive.”

In its statement, Dubai said it will focus on addressing the concerns of Dubai World’s creditors and will start discussions with creditors and contractors shortly.

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