Nov. 26 (Bloomberg) -- Dubai World, with $59 billion of liabilities, is seeking to delay debt payments, sending contracts to protect the emirate against default surging by the most since they began trading in January.
The state-controlled company will ask creditors for a “standstill” agreement as it negotiates to extend maturities, including $3.52 billion of Islamic bonds due Dec. 14 from its property unit Nakheel PJSC, Dubai’s Department of Finance said in an e-mailed statement. Moody’s Investors Service and Standard & Poor’s cut the ratings on several state companies, saying they may consider the plan a default.
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Why is Dubai still causing concern?
Yesterday was the first day investors were able to trade in many Middle East markets since news broke on Wednesday that Dubai World, one of the region's largest property companies, was unable to pay its debts. Many suspect the news was released before the holiday, Eid, to limit the global reaction; instead investors panicked even more due to a lack of information. Their worst fears were confirmed yesterday when the Dubai government finally issued a statement but refused to stand behind the company.
What about western markets?
European and US stockmarkets have calmed down since last week, but the episode has reignited fears that our financial system is not through the worst. British banks such as HSBC, Standard Chartered, RBS and Lloyds are most exposed, although they have told City regulators that their losses are manageable. Other countries with large international debts such as Greece, Ukraine and the UK have seen investors take fright, sparking fresh fears that the next phase of the crisis will move from companies to countries.
This MUST have been filling your airwaves last week, wasn't it?
