Abu Dhabi may provide neighbouring Dubai with financing facilities to shore up its US$80bn of debts, according to The Telegraph.
The newspaper says that Abu Dhabi could help support its neighbour, which has embarked on the most ambitious building programme the world has ever witnessed. This could either be in the form of an immediate cash facility, or a sale-and-lease-back of some of Dubai’s properties whereby Abu Dhabi would buy a share of some of its biggest projects.
Bankers from Goldman Sachs, Morgan Stanley, UBS and Credit Suisse, are thought to be helping with potential ideas and structures.
An insider told The Telegraph: “These debts are not due for repayment all at once but it does need to be serviced. Clearly there are not many banks able to help restructure the debt so Abu Dhabi is the obvious source of help. Dubai also has plenty of assets with which a sensible deal can be done.”
On Monday senior business leaders in Dubai spoke out for the first time in response to international pressure for the emirate to reveal its level of debt, amid fears that its once-exponential growth was stalling in the wake of the global downturn.
The emirate revealed measures it was taking to cope with the downturn, including the formation of a new Advisory Council to review all areas of the economy and make recommendations of policy to the ruler. The Council will be chaired by His Excellency Mohamed Ali Alabbar, chief executive of Emaar Properties.
Speaking at the Dubai International Financial Centre (DIFC) Week, His Excellency Mohamed Ali Alabbar said the emirate has US$80bn of debt against assets of US$1.3 trillion.
“I can state categorically the government can and will meet all of its obligations going forward and I have no doubt about this country’s future,” he said.
“There has been confusion and concern about how much Dubai owes and how its debt will be financed. Concern leads to speculation. So I can say that Dubai’s current sovereign debt is US$10bn or 37bn UAE Dirhams (AED). Our key sovereign assets at their current level of undervaluation stand at $90bn or AED350bn.”
“This does not include our airports, our bridges, our metro system or our healthcare. The total debt obligation of the government’s affiliated companies is US$70bn or AED256bn. This is compared to the total asset value of the affiliated companies of US$260bn or AED950bn.”
He continued: “When we started the work in 1992, the Council was hit by rumours. We ran from them and we have been running from constant rumours for 18 years. Still there are rumours that we’re selling our property assets or selling 50pc of Emirates airline. I can categorically state this is not true.”
However he did hint at a slowdown in Dubai’s growth: “Dubai’s growth has been at a rate of 13% to 14% a year. If this comes down to 6% or 7% or 8% then fine. We’ve been running a long time and could probably do with a breather. We will use this time to learn lessons and become a stronger city.”