More hard times in Dubai

[editor]

My how things have changed in Dubai.

The Emirate is desperately trying to boost its tourism economy now that demand has dwindled to a trickle. It's even gone so far as to start a budget tourist airline called FlyDubai.

Latest preliminary data from Dubai's Department of Tourism showed hotel occupancy rates fell 14 percent year-on-year in the third quarter of 2008.

FlyDubai's launch is part of the emirate's plan to attract 15 million visitors by 2015, Emirates chairman and head of Dubai's Department of Civil Aviation Sheikh Ahmed bin Saeed al-Maktoum said.

[BryanS]

Dubai Investors Face Uncertainty

Investors also face legal risk. If investors seek redress under English law, any ruling may be unenforceable as it is likely to be subject to review by the Dubai courts -- who may take a different view. The Dubai courts will never have dealt with a restructuring on this scale, and Dubai law may not allow for creditors to claim government assets. This may also test the Sukuk, or Islamic bond, structure, under which the investors are effectively the owners of the underlying assets, but may find it difficult to enforce their rights.

Dubai has spent the last few years seeking to build a reputation as a modern, international financial center. Much of that work has been undone by Wednesday's shock announcement. The need now is to start to repair the damage: and that means fair, transparent and equal treatment of all creditors.

http://online.wsj.com/article/SB10001424052748703499404574561921676420940.html

We'll have to see if the "western appeal" that attracted tourist and investors to Dubai also extends to those trying to claim assets - in lieu of payment (as is typical in repo and bankruptcy settlements).

[houstonmacbro]

I cannot be all that sorry for them. I mean, they built houses on fake islands out in the middle of the Gulf. They built a hotel in the middle of a lagoon. Plans for an entire offshore city.

Lunacy.

We're to feel sorry for that?

[LTAWACS]

I cannot be all that sorry for them. I mean, they built houses on fake islands out in the middle of the Gulf. They built a hotel in the middle of a lagoon. Plans for an entire offshore city.

Lunacy.

We're to feel sorry for that?

No. Not at all. Not me at least.

[Subdude]

I cannot be all that sorry for them. I mean, they built houses on fake islands out in the middle of the Gulf. They built a hotel in the middle of a lagoon. Plans for an entire offshore city.

Lunacy.

We're to feel sorry for that?

It's not really an issue of their looking for sympathy. Dubai's effective default has seriously spooked the markets. There is concern that this will set off Credit Crisis Part II.

[houstonmacbro]

It's not really an issue of their looking for sympathy. Dubai's effective default has seriously spooked the markets. There is concern that this will set off Credit Crisis Part II.

I guess at the height of all this building, I was looking at the TV shows on it and all the websites, etc. touting this place as the next Shangri La. Anyhow, I am sure they will do alright, but we all knew a bubble was coming.

What I am hearing is that the banks in most trouble are the ones from Europe. They say the US banks don't have that much exposure to it (well ... that much meaning only about $10 billion).

[houstonmacbro]

Report: Indebted Dubai World rejected asset sale

By BARBARA SURK, Associated Press Writer – 1 hr 20 mins ago

DUBAI, United Arab Emirates – Dubai World "totally rejected" the possibility of selling off some of its top performing assets in the months before the heavily indebted conglomerate turned to creditors with a plea to defer payments on some of the $60 billion it owes, a newspaper reported Sunday.

The company, whose holdings range from ports to real estate, shocked world markets on Wednesday with an announcement that it would seek, until at least May, a deferment on its debts and those of its real estate arm, Nakheel PJSC. That subsidiary has a $3.5 billion bond coming due next month.

Full article here: http://news.yahoo.com/s/ap/20091129/ap_on_bi_ge/ml_dubai_meltdown

[Subdude]

What I am hearing is that the banks in most trouble are the ones from Europe. They say the US banks don't have that much exposure to it (well ... that much meaning only about $10 billion).

True about the European banks having more direct exposure, but one of the lessons from last year is that world markets are closely linked, so that panic can spread to areas that people thought weren't directly affected. There is also some fear that this will cause a shakeout in sovereign debt markets, which could be bad news for a number of countries.

[RedScare]

This is not simply an overspending small city-state. Dubai World is also the world's largest port operator. A failure by Dubai World would affect operations worldwide, not simply in Dubai.

[Subdude]

This is not simply an overspending small city-state. Dubai World is also the world's largest port operator. A failure by Dubai World would affect operations worldwide, not simply in Dubai.

The port operator will be excluded from the financial restructuring, which will be focused on the real estate development businesses. I doubt there would be any effect on port operations, although it wouldn't be surprising to see some of the port interests sold.

[BryanS]

True about the European banks having more direct exposure, but one of the lessons from last year is that world markets are closely linked, so that panic can spread to areas that people thought weren't directly affected. There is also some fear that this will cause a shakeout in sovereign debt markets, which could be bad news for a number of countries.

I say shake it out. Hard. The fraud and malfeasances that pervades the US and International markets must be eradicated if we are ever to return to "normal." Let's get it over with.

This is not simply an overspending small city-state. Dubai World is also the world's largest port operator. A failure by Dubai World would affect operations worldwide, not simply in Dubai.

Sounds like that needs to change. Seems like a single point of failure/monopoly. If there's one thing we've learned through all this mess: don't put all your eggs in one basket.

[Subdude]

I say shake it out. Hard. The fraud and malfeasances that pervades the US and International markets must be eradicated if we are ever to return to "normal." Let's get it over with.

What fraud and malfeasance in the sovereign debt markets?

Do you really think it is a good idea to risk having a global debt crisis in the midst of a recession, and only a year after the financial panic? Given that the US is the largest borrower in the world it hardly seems prudent thing to wish for.

It probably won't be an issue anyway - the UAE central bank announced that it would provide a liquidity facility to support the Dubai banks.

[BryanS]

What fraud and malfeasance in the sovereign debt markets?

Do you really think it is a good idea to risk having a global debt crisis in the midst of a recession, and only a year after the financial panic? Given that the US is the largest borrower in the world it hardly seems prudent thing to wish for.

It probably won't be an issue anyway - the UAE central bank announced that it would provide a liquidity facility to support the Dubai banks.

My apologies for the delay. Here is a good example:

Massive Selling Before The Dubai Debacle Means Inside Information Was Leaked

The evidence of foul play ahead of Dubai's debt announcement last week appears overwhelming. A whopping 75% of debt owners might have sold ahead of time. Which means that whoever was left holding Nakheel bonds was truly out of the loop.

http://www.businessinsider.com/insider-traders-got-ahead-of-the-dubai-debacle-2009-12

Of course... those poor souls, the 25% who did not have the inside information, would not have heard anything about it in the press, because in Dubai:

You aren't allowed to question the bubble

The United Arab Emirates has a recently enacted media law which makes negative economic reporting a crime. Drafted in early 2009 as a response to market turmoil, this must be a pretty difficult law to follow right now. It applies to blogs as well.

http://www.businessinsider.com/why-dubai-was-obviously-a-bubble-2009-11#you-arent-allowed-to-question-the-bubble-10

Seems to be wrought with fraud, if you ask me. And I don't think it is ever good to keep the lie going - because we're afraid of a little pain. Drain the swamp.

...and... to that end...

S&P cuts Dubai company ratings to junk status

Rating agency Standard & Poor’s today downgraded six Dubai-government-backed companies to junk status, the latest cut by an international ratings agency as the emirate showed little inclination to support its heavily indebted companies like Dubai World.

http://www.chron.com/disp/story.mpl/business/6750674.html

It's time to close down the fun park.

[LTAWACS]

My apologies for the delay. Here is a good example:

Massive Selling Before The Dubai Debacle Means Inside Information Was Leaked

The evidence of foul play ahead of Dubai's debt announcement last week appears overwhelming. A whopping 75% of debt owners might have sold ahead of time. Which means that whoever was left holding Nakheel bonds was truly out of the loop.

http://www.businessinsider.com/insider-traders-got-ahead-of-the-dubai-debacle-2009-12

Of course... those poor souls, the 25% who did not have the inside information, would not have heard anything about it in the press, because in Dubai:

You aren't allowed to question the bubble

The United Arab Emirates has a recently enacted media law which makes negative economic reporting a crime. Drafted in early 2009 as a response to market turmoil, this must be a pretty difficult law to follow right now. It applies to blogs as well.

http://www.businessinsider.com/why-dubai-was-obviously-a-bubble-2009-11#you-arent-allowed-to-question-the-bubble-10

Seems to be wrought with fraud, if you ask me. And I don't think it is ever good to keep the lie going - because we're afraid of a little pain. Drain the swamp.

...and... to that end...

S&P cuts Dubai company ratings to junk status

Rating agency Standard & Poor’s today downgraded six Dubai-government-backed companies to junk status, the latest cut by an international ratings agency as the emirate showed little inclination to support its heavily indebted companies like Dubai World.

http://www.chron.com/disp/story.mpl/business/6750674.html

It's time to close down the fun park.

It's about time.