Arab News Blog » Foolish feudals played the un-Islamic Western capitalist game…Dubai’s default “a serious miscalculation”?
Dubai’s heavily foreign investment-dependent economy began to unravel in September 2008 following the global credit crunch…. By the close of 2008, government-backed companies responsible for Dubai’s development had accrued debts of more than 80 billion dollars.
Abu Dhabi bailout. In February this year, following Dubai’s difficulty in refinancing a 3.8 billion dollar loan, the United Arab Emirates (UAE) Central Bank, backed by Abu Dhabi, subscribed to a 10 billion dollar bond, with interest rates set at 4%. However, earlier this month, it became apparent that Dubai would need a much bigger capital injection, especially given that its largest property developer — Nakheel, a subsidiary of Dubai World — was due to refinance a 3.5 billion dollar Islamic sukuk bond on December 14.
On November 24, it was announced that Abu Dhabi had provided an addition 5 billion dollar loan:
* Significantly, insiders indicated that this loan came with strings attached, and that it was to be used to pay disgruntled foreign contractors rather than to re-finance the Nakheel debt.
* While little is known about Abu Dhabi’s reasons for these limits on its assistance, it may have been reluctant to be associated with Nakheel, a company with problems considered to be too big to solve through loans.
via Arab News Blog » Dubai’s default “a serious miscalculation”?.
