DUBAI: Dubai Holding’s main unit will not be repaying a loan that was due on Thursday, saying lenders have agreed to extend the $555 million credit, in the latest blow to investors in Dubai’s troubled debt program.
Lossmaking Dubai Holding Commercial Operations Group (DHCOG), part of the Dubai ruler’s personal business empire, said in a brief statement on Thursday that the extension was on commercial terms.
"It just adds to the uncertainty of the debt restructuring of Dubai Holding and it doesn’t comfort investors at the time when a deal is being finalized," said Marwan Shurrab, chief trader at Gulfmena Alternative Investments.
DHCOG reported a $6.2 billion 2009 loss last month. The business and its parent are part of a matrix of firms known informally as Dubai Inc., which was badly battered by the financial crisis and remains in negotiations with creditors.
DHCOG, whose assets include the Jumeirah hotel group and business parks and hospitality units, said in June it may sell assets in the wake of its huge loss.
Credit rating agency Moody’s on June 30 downgraded DHCOG to B2 in its highly speculative category of ratings, taking account of weakness in Dubai’s real estate market and uncertainty over the company’s debt restructuring.
"My first thought is that a $555 million, two-month facility for an entity that lost around that much each month last year is only a lifeline whilst the company gets its act together," Daniel Brody, chief investment at SilkInvest in London.
"A reminder that we are not out of the woods yet," he added.
Dubai announced a shock standstill last year on repaying $26 billion in debt as it restructured flagship conglomerate Dubai World. It has since unveiled a $9.5 billion rescue plan for the unit.
Analysts say the focus of investor concerns has now shifted to Dubai Holding, which spans financial investments, hospitality and real estate, and is estimated to have about $15 billion in debt.
Another Dubai Holding business — private equity arm Dubai International Capital (DIC) — asked lenders in May for a three-month delay in repaying debt. DIC had a $1.25 billion loan maturing in June, according to Reuters data, and $2.6 billion in debt overall, according to a source familiar with the matter.
In a June interview with CNN, Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum said he was not worried about debt restructuring in the emirate.
The global financial crisis has led to a region-wide real estate slump which hit cities like Dubai hard.
The Gulf Arab emirate, famous for extravagant real estate projects like man-made islands in the shape of palms and a world map, borrowed heavily to fund its transformation into a regional trade and tourism hub.
It is estimated to have about $101 billion in total debt, according to a Reuters poll.
