Major European stock markets are rebounding 1 December led by banking shares after troubled United Arab Emirates’ conglomerate Dubai World announced it was in talks with lenders to restructure $29 billion worth of debt. Bourses were relieved by Dubai World’s effort to contain the damage of a massive debt default, and by the lesser amount being restructured. Banks will need to agree rapidly on new terms to avoid default on a $3.5b bond by Nakheel, one of the companies owned by Dubai World, coming due 14 December.
Markets reacted badly at the end of last week when Dubai World said it was suspending debt payments on $60b worth of debt. A Dubai government official said the government was under no obligation to rescue banks from bad loans, Monday 30 November.
The government of Dubai announced a unilateral moratorium on the $59 billion debt mountain of its biggest corporate entity, Dubai World, a conglomerate that owns ports and real estate around the world, 26 November. The government says it has appointed DeLoitte LLP to advise it on restructuring Dubai World.
The news caused stock markets in Europe to decline sharply because of worries that Dubai’s massive investments in companies ranging from Porsche and Daimler to the London Stock Exchange may need to be liquidated. Banks were particularly hit. Rating agencies downgraded the debt of several Dubai government-run companies in response.
Dubai’s ruler, Mohammed Bin Rashid al-Maktoum, dropped several key aides involved in Dubai’s real estate boom 23 November, in order to assert closer control over a sprawling financial empire.
Links to other sites: Bloomberg, Reuters, Wall Street Journal
