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World. Shaikh Ahmad Bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee said in a statement: Like other global financial centres, Dubai has faced recent market challenges driven by the global economic slowdown and a severe real estate market correction. Recently, Dubai World announced that it might not be able to commercially support its obligations. Since that time, the Government of Dubai has worked closely with the Abu Dhabi Government and the UAE Central Bank in addressing and assessing the impact of Dubai World on the UAE economy, banking system and investor confidence. The following provides a comprehensive set of actions: First, the Government of Abu Dhabi and the UAE Central Bank have agreed to provide important support. Specifically, the Government of Abu Dhabi has agreed to fund $10 billion (Dh36.7 billion) to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World. As a first action for the new fund, the Government of Dubai has authorised $4.1 billion to be used to pay the sukuk obligations that are due today. The remaining funds would also provide for interest expenses and company working capital through April 30, 2010 conditioned on the company being successful in negotiating a standstill as previously announced. In addition, the Government of Dubai is particularly focused on addressing the concerns of Dubai World trade creditors within the Emirate of Dubai. To help address these concerns, today the Government of Dubai is announcing that the remainder of the funds provided will be used for the satisfaction of obligations to existing trade creditors and contractors. Discussions with affected contractors will begin in short order. Next, the Central Bank is also prepared to provide support to local UAE banks.
Reorganisation law
Finally, today the Government of Dubai will announce a comprehensive reorganisation law, a framework that is based upon internationally accepted standards for transparency and creditor protection. This law will be available should Dubai World and its subsidiaries be unable to achieve an acceptable restructuring of its remaining obligations. Todays actions, taken together, demonstrate our strong commitment as a global financial leader to transparency, good governance, and market principles. There will certainly be challenges periodically, just as there are challenges in other major financial centres around the globe. We believe todays actions will best serve the interests of all stakeholders. We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business
practices. Dubai is, and will continue to be, a strong and vibrant global financial centre. Our best days are yet to come. The Government of Dubai remains committed to its high standards and its obligations. We are confident in our economic model, and we are confident in the long-term health and outlook for our economy. The actions taken today are consistent with our market development, and we believe they are the actions that will best serve the interests of all stakeholders.
OPINION OF GOVERNMENT
In Dubai, the most serious consequence of the 2007-2009 international credit crises was a 40%- 50% bust in urban real estate market values following a 72 month residential and commercial property boom. On November 25, 2009 - the Dubai government announced that the emirates largest company - Dubai World of which the Dubai Government is the major shareholder -"intends to ask all providers of financing to Dubai World and [its subsidiary] Nakheel to 'standstill' and extend maturities until at least 30 May 2010". The Government also stated that Dubai World which with US$60-billion in debts accounts for almost 75% of the emirate's US$80-billion total debt - would be subject to a group re-structuring planned and managed by Deloitte consultants. Concurrently - selected Dubai World group assets would be marketed and sold byRothschilds - in order to reduce the conglomerates US$60billion debt burden. The most pressing of the companys debts is a US$3.5-billion Islamic finance bond facility which the company is assumed to be unable to repay upon its 14 December 2009 maturity. As part of the re-structuring process the Dubai Government announced a moratorium of Dubai World's debts which prompted both Moody's and Standard & Poor's to substantially downgrade the debt of various Dubai government affiliated entities with investments in property, utilities, business, and commodities with some losing their priorinvestment grade status. The statement on 30 November 2009 by the Dubai Finance Department Director-General that the Dubai World debts are not guaranteed by the government is a simple statement of legal fact but does not mean that the Dubai Government will not eventually support the companies residual creditors. The strategy of the financial advisors of the Dubai Government seems to be to put as much pressure as possible on the Dubai World banks and Islamic bond [sukuk] holders to accept the reality that their legal debt enforcement options are restricted to the assets of Dubai World and that for this reason they need to agree to a change in the loan contract conditions including a delay in repayment of at least part of the principal and a temporary suspension of interest payments - until some of the more liquid Dubai World assets or companies can be sold or re-financed and the proceeds paid to creditors. The Finance Directors statement reported in the following news report on 30 November 2009 that lenders to the conglomerate bear some responsibility for the current crisis does not expressly exclude eventual Dubai Government support but makes it abundantly clear that the Dubai World lenders and creditors are going to have to come to the party and co-operate with the embattled companys restructuring and assets sales plans which can only proceed with their [the Dubai World creditors] consent. A top Dubai finance official says heavily indebted Dubai World is not guaranteed by the emirate's government. Abdulrahman al-Saleh, director general of Dubai's Finance Department, says lenders to the conglomerate bear some responsibility for the current crisis. He says they lent money based on the viability of the firm's projects, not because of government guarantees. Al-Saleh said while Dubai owns Dubai World, it has been known since the conglomerate was established that it was independent and that it "is not guaranteed by the government."