UAE faces up to $184 billion total debt: BofA-Merrill Lynch

[GoFlyKiteNow]

UAE faces up to $184 billion total debt: BofA-Merrill Lynch
27 Nov 2009, 1911 hrs REUTERS


LONDON: The United Arab Emirate (UAE) has total debt amounting to $184 billion at the end of 2009, according to estimates by Bank of
America-Merrill Lynch, which said the region faces a heavy redemption schedule until 2013.

Dubai's shock announcement this week that it is seeking to suspend payments on debt of its state-owned conglomerate Dubai World and property subsidiary Nakheel has roiled global markets, raising fears that the emirate which funded a spectacular building boom on a mountain of debt could default.

BofA-Merrill Lynch said in a report that the restructuring undertaken by Dubai would be a serious blow to the Gulf region's economic recovery prospects, adding that the scale of the region's debt was now the issue.

"The lack of official debt data may add up to uncertainty and cause higher risk premiums," it said.

Of the $184 billion UAE debt, Dubai holds $88 billion while Abu Dhabi accounts for $90 billion. BofA-Merrill Lynch said the debt servicing cost will be higher than these estimates as their numbers only include the principal payments.

The bank said Dubai faces almost $50 billion of debt amortization
in the next three years: $12 billion in 2010, $19 billion in 2011 and $18 billion in 2012.

"We estimate the total debt for Dubai World as $26.5 billion, 80 percent of which needs to be paid back in the next three years," added BofA-Merrill.

 

[dysentry]

A metropolis in the desert, what were they thinking?

 

[longbow]

Coastal/Monaco living on Sentosa which is smack in the middle of world largest shipping port and refining center. What were they thinking?

A metropolis in the desert, what were they thinking?

 

[longbow]

Just pledge the oil to the Chinese and they will send you a $100B check.

 

[GoFlyKiteNow]

A metropolis in the desert, what were they thinking?

Dubai..basically they are OK in fundamentals. It so happened that they are one of the more "spectacular" victims of the financial crisis. Actually it is the western banks who got hit for riding the speculator bubble. The emir is just punishing some business interests for being reckless. He can easily bail out the companies if he wants to.

The country is dynamic, It has a pro business culture, well manages trade and industrial planning. It is also a big financial center.

This crisis is a hiccup. Nothing major to worry about. Couple of weeks later, things will be business as usual. The country has huge potential. Also its emirates sister Abu Dhabi is booming and overall has about 400 billion in reserves at the minimum.

Besides, there are other countries which are in worse shape and condition than Dubai. This situation is nothing for UAE as a whole.

 

[longbow]

I do agree with you. UAE as a group has the money but it is a matter of how liquid they are. If western banks are pulling out of both Abu Dhabi and Dubai (they lump them together and CEO wants out) then Abu Dhabi itself will have its hands full. Nevertheless it is matter of timing. Banks want money NOW. If they can stall for a few months then they might be able to make the payments.

Do not understand what you mean by Emir being good for business. Isn't the crux of the problem one in which the gov entity cannot pay the debts? And the emir is the guy in the middle of it all. It is not a case where local businessmen speculate on property development and are now caught. Here, Dubai World, nakeel (sp?) are owned by Dubai. These are sovereign wealth funds. And Emir is the sovereign. So if he lets his own companies default then he is a scum and foreigners will pull out en-mass because if your own leader is unwilling to uphold law then all that pro business talk is hot air. As for trade and industrial planning, read that there is oversupply of everything.

I think emir is trying to salvage the situation but he has no money (not enough and no oil). Abu Dhabi has oil and $$$ but it is run by another family and has nothing to do with Dubai (perhaps shared interest). Read that the 2 families have competiting interest.

As much as UAE is rich in per capita income, $184 Billion is a lot of money.

To take into perspective, it produces 2 million barrels per day or 730 million barrels x $75 = $54B a year total oil output. Factor in a 10 percent extraction cost and we have $45B a year for UAE. We are talking about $184B in debt! And the problem is that the foreign banks are in panic mode and want their money fast - why they are asking for debt stand still. UAE could sell their investments to bailout Dubai (further loss as most investments are probably underwater). Also remember that Abu Dhabi itself is also loaded with debts as it is trying to do a Dubai 2 (note their new airline).

I think if they need fast cash just go ask China. They are the only country with the hard currency and are very interested in getting future source of oil production - talk about synergy. China was prepared to bid US$120B for Rio Tinto. If UAE were to offer to lock in their oil production specifically for the Chinese at market price (10% discount) the Chinese could give them this cash overnight. Also if international markets sees that China is willing to backstop this debt, banks might feel more confident. Remember that the Chinese have been willingly investing tens of billions on oil projects around the world. Here they will have access to a large stable supply for a long time.

Here is a Feb 2009 article where China lends Russian oil companies US$25B in exchange for oil supply.


http://96.0.53.247/pdf09/feb/18/page 35.pdf

Dubai..basically they are OK in fundamentals. It so happened that they are one of the more "spectacular" victims of the financial crisis. Actually it is the western banks who got hit for riding the speculator bubble. The emir is just punishing some business interests for being reckless. He can easily bail out the companies if he wants to.

The country is dynamic, It has a pro business culture, well manages trade and industrial planning. It is also a big financial center.

This crisis is a hiccup. Nothing major to worry about. Couple of weeks later, things will be business as usual. The country has huge potential. Also its emirates sister Abu Dhabi is booming and overall has about 400 billion in reserves at the minimum.

Besides, there are other countries which are in worse shape and condition than Dubai. This situation is nothing for UAE as a whole.

 

[GoFlyKiteNow]

"" I do agree with you. UAE as a group has the money but it is a matter of how liquid they are. If western banks are pulling out of both Abu Dhabi and Dubai (they lump them together and CEO wants out) then Abu Dhabi itself will have its hands full. Nevertheless it is matter of timing. Banks want money NOW. If they can stall for a few months then they might be able to make the payments.

Do not understand what you mean by Emir being good for business. Isn't the crux of the problem one in which the gov entity cannot pay the debts? And the emir is the guy in the middle of it all. It is not a case where local businessmen speculate on property development and are now caught. Here, Dubai World, nakeel (sp?) are owned by Dubai. These are sovereign wealth funds. And Emir is the sovereign. So if he lets his own companies default then he is a scum and foreigners will pull out en-mass because if your own leader is unwilling to uphold law then all that pro business talk is hot air. As for trade and industrial planning, read that there is oversupply of everything.""

----------------=====-----------
It ( DP World etc; - not UAE ) did not say IT CANNOT or WILL NOT pay its debts. It asked for a moratorium of six months to make debt repayments.

Th Emir of UAE allowed this announcement to take place after consultation with UK and US authorities. He also sacked a few high ranking finance officials in his ministry and DP world etc, while refusing to bail anyone out.

These people are rich by all counts. Understand that.

When they have 300 billion USD in reserves with less than 15 million population, it has much more, impact, resilience and disposable potential in comparison to having a trillion with a 1.3 billion population overhang.

 

[ahleebabasingaporethief]

Coastal/Monaco living on Sentosa which is smack in the middle of world largest shipping port and refining center. What were they thinking?

Not to mention the POISONOUS FUMES blowing in from Shell refinery on P Bukom or from Jurong Island.

What were the buyers thinking off? Just plain showing off I suppose. Later in life after years of breathing in the fumes than they will know.​

 

[Cestbon]

Just pledge the oil to the Chinese and they will send you a $100B check.

Dubai oil are drying up

 

[jw5]

Just pledge the oil to the Chinese and they will send you a $100B check.

They will probably need to send the oil to the doorstep before the cheque is released.

 

[jw5]

Dubai oil are drying up

That's probably why they went in such a big way into tourism.
Good strategy but too aggressive and not so good execution.

 

[Leongsam]

Dubai oil are drying up

Should be "Dubai oil IS drying up.".

"Oil" is a non countable noun.

 

[po2wq]

That's probably why they went in such a big way into tourism.
Good strategy but too aggressive and not so good execution.

sounds very much like sg in trying 2 achief 6m popn ...

mayb dey shud open 2 ir's instead ...

 

[Logisex]

Dubai's oil is indeed drying up, which is why the Emir is trying to create other forms of income asap.

China realised that their previous leaders have made a fatal mistake of not looking for alternatve source of energy (which could severely affect their growth and political power). That is why they are now actively looking for oil before its too late.

One needs money and the other needs oil. Yu know what will happen next.

 

[jw5]

Dubai's oil is indeed drying up, which is why the Emir is trying to create other forms of income asap.

China realised that their previous leaders have made a fatal mistake of not looking for alternatve source of energy (which could severely affect their growth and political power). That is why they are now actively looking for oil before its too late.

One needs money and the other needs oil. Yu know what will happen next.

They'll get in bed together?

 

[dysentry]

Dubai only looks good on the surface. They don't have the legal and political framework to ensure long-term viability. Imagine debtors go to jail, there's no bankruptcy there.

It's just quick money people were chasing, and it drew in the machiavellian scum from around the globe.

 

[dysentry]

http://finemrespice.com/node/31

Milton Friedman's beach club: Dubai, in other words, is a vast gated community, the ultimate Green Zone. But even more than Singapore or Texas, it is also the apotheosis of the neo-liberal values of contemporary capitalism: a society that might have been designed by the Economics Department of the University of Chicago.

A Total Discount of the Importance of Institutional Strength

It has been no secret for the last many years that the legal system in Dubai, despite its western appearance and facade of impartiality, is entirely arbitrary and capricious. For years Dubai has touted the benefits of its "moderate" and "western" legal system to attract foreign white collar workers (primarily from the UK), a judicial sell-side pitch that belied the jurisdiction's naked favoritism for the local Emirati caste and the fact that a thick layer of Anglo-Saxon foundation in fact just powdered a bulbous Islamic judicial system.

2008 GDP for all of the UAE was around $270 billion. This makes Dubai's debt alone nearly 30% of UAE's GDP on top of the 22% public debt:GDP ratio that the UAE already endures. This doesn't even count another $75 billion of external debt floating around. Fortunately for the UAE it enjoyed about a $40 billion surplus in 2008 owing to the benefits of being an extraction economy. Further, a slug of $65 billion in direct foreign investment buoys the entire UAE. Wonder how sticky that is.

Despite this, Dubai itself enjoys almost none of the benefits of other area extraction economies. It's organic oil revenue is small to non-existent.



A Deleterious Disregard for Even the Most Basic Fixed Cost Analysis

You are building an oasis in the desert. Let us repeat that. The desert. They run the UAE Desert Challenge race there. It is an adversary that never sleeps and is constantly fighting to reclaim for its accretive redish sands the human footprint in the region. Simply keeping the roads clear, much less maintaining infrastructure that approaches what western Europeans would consider a "resort" is a obscenely expensive endeavor.

Dubai was already chalking up records for the most power consumption per capita (on the order of 20,000 kWh per year) and the highest water consumption per capita (the desert, get it?) in 2007 and still hitting 15% annual gains in both figures with ease. We won't even comment on Dubai's 2005 distinction for the world's largest per capita carbon footprint. If you can imagine this, over the last ten Dubai contracted three separate consulting firms to study the feasibility of supplementing their power needs with solar technology. None resulted in a report that suggested even highly subsidized solar power would generate net energy returns on investment. (Given the local weather, this bodes poorly for solar power).



U.S. Levels of Entitlement Accounting Delusion

The Emirati caste enjoy nearly 100% subsidies for housing, higher education (up to the PhD level along with 100% coverage of foreign travel and living expenses to study abroad) and what amounts to lifetime employment guarantees. It is no accident that a large fraction of Emirati work in government jobs. Firing an Emirati is so difficult even United States Postal Workers and Teacher's Unions would be envious.



Something Approaching a Wholesale Overappreciation of Local Construction and Engineering Competence

Dubai depends almost entirely on an extremely base foreign worker class for construction. This has given Dubai the distinction of mounting the most expensive (even size and scope adjusted) projects in the world. Presented for your review, one of many such examples: