Haha, DubaiWorld debt hits RUSH DP Ports
LIBERATOR
of nowhere, brings disaster to RUSH owned DP Ports. This Richard
Barley drinks a lot of beer I hear.
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http://webapps.dpworld.com/portal/page/portal/DP_WORLD_WEBSITE
http://online.wsj.com/article/SB20001424052748703499404574559983480163744.html
Dubai World's Debt Move Sends Big Ripples in Its Wake
By RICHARD BARLEY
Dubai has delivered investors a wake-up call. The Gulf State's
decision to seek a six-month standstill on debt of conglomerate Dubai
World isn't only a reminder of the deep problems in Dubai itself but
highlights the biggest risk for markets in 2010: less-predictable
actions by governments. With sovereign finances stretched, investors
need to remember that governments can and will change the rules when
necessary. Asset prices, buoyed by a faith in policy support, may need
to adjust to that.
Dubai World, whose activities span real estate, ports and leisure, has
$60 billion of debt. The immediate casualty is a $3.5 billion bond due
to be repaid in December from real-estate developer Nakheel. It isn't
yet clear which other parts of Dubai World's empire will be affected.
Port operator DP World said Thursday that its debt, which includes
$3.25 billion of bonds, won't be included in the restructuring.
The Dubai World decision has raised doubts about other Dubai
government-related debt. Moody's has estimated the emirate may need to
restructure up to $25 billion of debt, particularly in real estate.
Credit Suisse estimates European banks could have $40 billion of
exposure to Dubai. But it is difficult to assess the full impact as
Dubai doesn't publish consolidated data on public-sector debt. The
uncertainty is reflected in Dubai's credit-default swaps, which have
soared to 5.7 percentage points from 3.18 percentage points in two
days.
Until now, corporate-credit and stock markets have remained sanguine
in the face of global jitters over sovereign credit quality in
countries such as Japan, Greece, Ukraine and Dubai itself. But the
Dubai World announcement, which came the same day as Dubai said it had
raised $5 billion in bonds from Abu Dhabi banks, has shaken investors.
Some Western European stock indexes fell about 3% Thursday, Eastern
European currencies declined and the Markit iTraxx Crossover index
widened by some 0.30 percentage points.
Dubai's decision may mark a watershed. Throughout the crisis,
governments have looked to prop up some assets. At a sovereign level,
countries have banded together to provide support to peers in trouble,
such as Latvia. Dubai itself set up a Financial Support Fund for its
government-related companies.
But this support carries a cost. Governments are under pressure to
rein in borrowing, particularly as central banks start to withdraw
stimulus measures, thereby removing some of the support for government-
bond markets. As a result, they may no longer be able to provide such
wide-ranging support.
The outcome could be more nasty surprises as governments cast other
nonviable investments adrift.