Dubai, which was on the brink of adefault in 2009, may ��muddle�� through a financing strategynext year as state-linked companies sell assets and refinancedebt, Bank of America Merrill Lynch said.
��A perilous exercise of identifying fiscal deficitfinancing sources may be showing that a mix of domestic bankingsector and Abu Dhabi support helped Dubai muddle through so far,and this (opaque) strategy could continue into 2012,�� London-based analyst Jean-Michel Saliba wrote in a report today.
Dubai��s government yesterday denied a report that it plansto restructure debt of state-owned companies next year and saidit was ready to support them through ��various options.�� State-owned Dubai Holding Commercial Operations Group LLC, Jebel AliFree Zone FZE and DIFC Investments LLC, which have a combined$3.8 billion of debt maturing next year, are all facingrefinancing risks and may experience ��ratings volatility�� asthey move closer to the maturity dates, Moody��s InvestorsService said Dec. 6.
The emirate, the Persian Gulf��s trade and tourism hub, wason the brink of a default in 2009 and is recovering after a $20billion cash injection from the United Arab Emirates�� centralbank, the Abu Dhabi government and its banks. Dubai and itsstate-owned companies, excluding finance companies, haveoutstanding debt of $101.5 billion and may need furtherfinancial support to meet these obligations, Moody��s said.
��Serious Repercussions��
��While a restructuring could help some of the weakercompanies obtain more sustainable capital structures, the impacton the rest of the Dubai Inc. structure will make it difficultto envisage a default without serious repercussions on the costof debt to the various other healthy corporates in need ofmarket access,�� Bank of America said.
State-controlled companies including Dubai Holding LLC andDrydocks World LLC are still in talks with lenders torestructure debt, while Dubai World reached an agreement withcreditors on about $25 billion of liabil! ities in March afterroiling global markets in 2009 by seeking to delay payments.
The yield on Dubai��s 6.7 percent dollar bonds due October2015 rose six basis points, or 0.06 percentage point, to 6.08percent, the highest in more than a week, at 5:28 p.m. in Dubai,according to data compiled by Bloomberg. Dubai��s five- yearcredit default swaps were little changed at 445, according toCMA, which is owned by CME Group Inc. (CME) and compiles prices quotedby dealers in the privately negotiated market.
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