Dubai is broke

Asks creditors for a stay on US$59 billion debt repayment

The glittering jewel in the middle of the United Arab Emirates is broke. In a development that shocked both markets and its bankers, the Dubai government announced it has asked its banks for a six-month stay on its schedule of debt repayments. The news comes in the middle of negotiations between creditors and Dubai World, the corporate arm of Dubai, which has led many of the emirate’s most ambitious real estate projects, including man-made islands shaped like the continents, an indoor ski slope, and the world’s highest building. Such grandiosity, along with the plummeting value of its assets in the past year, have left Dubai World US$59 billion in debt. (The emirate’s total debt is estimated to be around US$80 billion.) The announcement makes clear that Abu Dhabi, the oil-rich governing emirate of the UAE, will not unconditionally bail out its more profligate neighbor. It also comes just weeks before Nakheel, the developer of Dubai’s signature palm-shaped islands, which also owns Barneys of New York and the MGM Grand, was scheduled to make payment on its $3.52 billion of Islamic bonds.

New York Times

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