Middle East
Capital Markets, Featured Work, Islamic Finance, Middle East - Monday, December 21, 2009 14:54 - 0 Comments
Dubai ducks default – a relief but an opportunity missed
Asiamoney, December 2009
Dubai went to the brink – and it’s still there. Abu Dhabi’s decision in December to supply Dubai with $10 billion for debt repayment allowed it to forestall, at the very last moment, a default on the world’s largest ever sukuk – the $3.52 billion Nakheel Developments issue which matured on December 14. But it doesn’t repair Dubai’s tarnished reputation as a financial centre and issuer, or give any reason to suggest investors will rush back to help Dubai refinance the $100.6 billion of outstanding debt Moody’s believes Dubai Inc owes, $12.5 billion of it due next year. And it leaves significant questions unanswered about the credibility of the sukuk industry that has become a bedrock of global Islamic finance.
It is in some sense a shame that Nakheel didn’t enter formal default. While that sounds absurd, professionals across the Middle East and the Islamic finance industry globally had become increasingly sanguine about a potential Nakheel default, believing it would have answered vital questions about just what happens when a sukuk turns bad. Continue…
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