Bankruptcy service

Dubai asks for a postponement of six months for the debt of Dubai World – about 60,000 million dollars, `holding’ state real estate of the country. The European and Asian bank is exhibited to the real estate bubble of this ghost city.

Dubai has struck a hard blow to the European and Asian bank that, as well, has dragged to the main stock-exchange places of the Old Continent and Southeast Asia. The tap jumped after the request of the Government to postpone six months the bulky debt that accumulates Dubai World, great `holding’ state person in charge of some of the more outlandish real estate projects of the world.

And it is that, Dubai took advantage of the time credit bubble of the last decade to generate spectacular economic a growth essentially based on the real estate market.

In the last months, and in spite of the evident deterioration that came undergoing the market from the house to world-wide level, city-been it had assured time and time again the investors who could fulfill all requirements of gross debt, that ascends to a total of 80,000 million dollars. Dubai has asked for a postponement of six months (until next the 30 of May) to fulfill its commitments of payment, after “congealing” (to suspend) a debt for 59,000 million dollars.

Between affected bonds is a debt of 3,500 million dollars pertaining to Nakheel, a subsidiary of Dubai World, that had to become the next December effective. The bond was considered a crucial test of the capacity of Dubai to pay its debts, in the middle of a collapse of the market of real estate that has expanded throughout the economy of the Arab Emirate.

In the last Dubai hours it has obtained 5,000 million dollars of two banks of Abu Dhabi, like part of a program of financial aid that ascends to 20,000 million. The bonds are equivalent to a rescue of Dubai on the part of the United Arab Emirates headed by Abu Dhabi (Abu Dhabi and Dubai are both main semiindependent Emirates that integrate the United Arab Emirates), according to informs The Wall Street Journal.

The debt postponement has affected completely already the delicate credibility of the city been, drowned by its high indebtedness and the collapse of its real estate market. In fact, according to the market of Credit Default Swaps (CDS), a species of certainly engages the investors to protect itself of possible non-payments, the bonds to five years of the Government of Dubai went off until the 571 basic points.

This means that an investor must pay 571,000 dollars to assure sovereign debt by value 10 million. The fear has extended to other sovereign bonds of the region, like those of Abu Dhabi, whose CDS they raised until the 169 basic points against the 136.4 of yesterday, Qatar (129.5 against 103.7), Arabia (114.7 against 90.4) or Bahrain (222 against 194.5). The greater perception of risk also has been affected otos emergent markets, like those of East Europe.

Stock-exchange falls

The possible fall of Dubai has dragged to the European and Asian bank, since very it is exposed to the great dubaití real estate bubble. These organizations, mainly the German bank and the one of Hong Kong, cheap granted numerous credits for the development of the huge real estate complexes constructed to the heat of the easy money and.

Like result, their actions have undergone a corrective duro to the loss that, as well, has dragged to the main markets: to average session, the Ibex yielded a 1.7% and it was placed below the 11,800 points, the German Dax lowered a 2%, like 40 MILLRACE French. London lost a 1.6% until a technical problem forced to close the park. Peculiarly, stock-market of New York and the one of Dubai also remain closed to agree with festive.

Exhibition of the European bank: 13.000 million Euros

According to the analysts of Credit Suisse, the exhibition of the European bank to the debt of Dubai ascends to 13,000 million Euros. “A loss of 50% of this exhibition would be equivalent to an increase of 5% of the provisions for 2010, or a blow of about 5,000 million Euros after taxes”. The German bank also is very exhibited to the countries of the East of Europe, Greece and Spain.

The banks German have used during the financial crisis between the 40 and 45% of the volume of liquidity that the European Central bank (BCE) has injected in the market in its operations of refinancing.

This number, that the Bundesbank facilitated in the presentation of its first report of financial stability, shows the difficulties of the institutes of credit of Germany, the greater economy of the zone of the Euro, from the beginning of the crisis in August of 2007 and after its intensification with the bankruptcy of Lehman Brothers in September of the past year. In fact, the Bundesbank esteem that the Germanic financial system will lose other 90,000 million Euros.

“A planned” market

To the peculiar Capitalism practiced in Dubai “free market of central planning” has been called him, I generate that, as alerted those in favor of Capitalism to droughts, it was going to leave like the rosary of the aurora.  The small Emirate of the Gulf, in that two little million of people live, has built the miracle to grow of maintained way – that nonsustainable during 10 years to rates who cleared hipo, superiors even, sometimes, to those of the Asian tigers.

Dubai, like the rest of their neighbors of the Gulf, lived on the fishing and “hunting” Rep them until the irruption of petroleum in second half of century XX. Emir Zayed Sultan To the Nahyan, one of the abiertos agent chief executives of the Middle East more towards the West, glimpsed next to the today Emir Mohammed Rashid To the Maktoum a modern and flourishing Dubai that did not depend exclusively on petroleum. To it both strave, with more conviction the second, abriendo the country to the foreigners.

During the last Dubai lustrum it has been a paradise for investors, western bankers and executives. To the arrival of strangers it accompanied a unique city-planning program to him in the world. The Dubai of 1999 is not looked in anything like the one of 2009. In the desert the skyscrapers have grown as glazed ears of wheat.

The best architects of the world have worked to borders of the Persian giving some of the best raised towers in which he goes of century. The Burj Dubai is, with its 818 meters of height, the highest structure never constructed by the man.

Skyline of Dubai is only the appetizer. The two companies that have thrown of the car of the construction and which today they are become indebted, Dubai World and Nakheel, both state ones, undertook a project to horse between the reality and the fiction: to take terrain to him to the sea by means of artificial islands. And not islands anyone but artistic islands, with form of palm like the famous Jumeirah Island or drawing a map of the world on the bay.

During years he was not spoken of another thing and the investors spilled on the Emirate a battery of fresh dollars. All almost went to the real estate sector, that entered a bullish spiral locating the squared meter of Dubai between most expensive of the world. Until the bubble, induced by the state megaproyectos and the money in abundance that arrived from Europe and the United States, exploded the past year suddenly.

The western money stopped flowing, the villas against the coast stopped being sold and the luxurious buildings of offices began to remain empty. To day of today, one of each four houses in Dubai is empty and that the prices have fallen until a 50% on those of 2007. The two great governmental companies cannot do against everything what they had borrowed in the good times and not even accumulate a millionaire debt that nobody can guarantee, the Property of the Emirate.

The income of petroleum are one minucia in comparison with the numbers that the business of the construction handles. Petroleum contributes only 5.1% of the GIP inflated by the real estate bubble.

With a so black panorama to Dubai World and Nakheel they do not have left much more option than to present/display the bankruptcy and to pay what they can with the real estate patrimony that they own. The Emirate is a State and, like so, it cannot break but it will have to tighten well hard the belt and to attend the aim of a dream that has finished in nightmare.

This entry was posted on Thursday, December 10th, 2009 at 4:49 pm and is filed under bankruptcy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.