Creditors must take responsibility for Dubai World, says Department of Finance

30 November 2009

State official says banks must take responsibility for loans

The director general of the Dubai Department of Finance has said the government will not guarantee Dubai World’s debts and creditors must accept responsibility of their loans to the company.

“Creditors need to take part of the responsibility for their decision to lend to the companies. They think Dubai World is part of the government, which is not correct,” said Abdulrahman al-Saleh on Dubai TV on 30 November.

At the time of issuing the bonds, Dubai World and its subsidiaries benefited from investment grade ratings due to what the ratings agencies regarded as the high potential for state support.

But In its October prospectus to promote its $2.5bn sukuk, the Dubai government had already made it clear it was “under no obligation” to repay debts run up by government-related firms such as Dubai World.

On 25 November, Dubai World asked its creditors to agree to a standstill on repayments of about $25bn of debt until 30 May 2010.

Al-Saleh said Dubai World’s creditors would be affected by the restructuring only in the short term.

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