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Abu Dhabi Bails Out Dubai World With $10 Billion (Update1) Share Business
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By Haris Anwar

Dec. 14 (Bloomberg) -- Abu Dhabi provided $10 billion to help Dubai World, the
state-owned holding company, meet its obligations, including $4.1 billion needed
to repay an Islamic bond maturing today for the real-estate unit Nakheel PJSC.

Dubai will use the rest of the money to pay "trade creditors and contractors as
well as meet interest expenses and company working capital through April 30,
2010 -- conditioned on the company being successful in negotiating a standstill
as previously announced" on Nov. 25, the Dubai government said in an e-mailed
statement today.

Dubai World said Dec. 1 it's seeking to restructure $26 billion of debt, less
than half the $59 billion of liabilities it had at the end of 2008. Nakheel,
which is building palm tree- shaped islands off the emirate's coast, posted a
first-half loss of 13.4 billion dirhams ($3.65 billion) as revenue fell and it
wrote down the value of land and property.

"It comes as a relief for the market, underpinning hopes that the implicit
government support for Dubai corporate issuance is intact," said Jason Watts,
head of credit trading at National Australia Bank Ltd. in Sydney. "Whilst we are
not out of the woods yet, it is definitely a step in the right direction."

Market Reaction

Asian stocks and U.S. index futures rose after the bailout announcement. The
MSCI Asia Pacific Index increased 0.1 percent to 119.80 at 2:10 p.m. in Tokyo.
Futures on the Standard & Poor's 500 Index advanced 0.6 percent. The euro
strengthened 0.1 percent against the yen, recovering from a drop of 0.8 percent,
and Treasuries lost gains that had sent yields on benchmark 10- year notes down
three basis points.

Nakheel's bond had surged 18 percent in the last two trading days to 53 cents on
the dollar, according to Citigroup Inc. prices, on speculation the developer
will seek to avoid a default. They traded as low as 45 cents on Dec. 9. Dubai's
benchmark stock index tumbled 19 percent since Dubai World said it would seek a
"standstill" agreement on its debt repayment.

While Dubai's government owns 100 percent of Dubai World, it hasn't guaranteed
the company's debt and creditors must help it restructure, Abdulrahman Al Saleh,
director general of Dubai's Department of Finance, said Nov. 30.

Nakheel Bond

Nakheel's repayment on the $3.52 billion bond was the biggest maturity for a
Dubai entity since global credit markets froze after the September 2008 collapse
of Lehman Brothers Holdings Inc. Nakheel accumulated debt during a five-year
real- estate boom in Dubai, when the sheikhdom borrowed $10 billion and its
state-controlled companies $70 billion to help diversify the economy. The
company had liabilities of 73.3 billion dirhams, including term loans of 16.3
billion dirhams.

Nakheel's 2009 sukuk redeems at 115.52 cents, increasing the total payment to
$4.1 billion. The amount includes a 6 percent premium to bondholders because the
company didn't do an initial public offering during the life of the bond, and
the remaining part of the annual coupon.

Dubai's government will also announce a "comprehensive reorganization law, a
framework that is based upon internationally accepted standards for transparency
and creditor protection," according to the statement. "This law will be
available should Dubai World and its subsidiaries be unable to achieve an
acceptable restructuring of its remaining obligations."

Islamic bonds, known as sukuk, are governed by Shariah laws barring investors
from profiting from the exchange of money.