Ratings agency Moody’s Investors Service has said it estimates the total exposure of UAE banks to debts held by state-owned conglomerate Dubai World to be $15bn.
The agency also says the domestic banks could survive a 40 per cent loss on those loans, following reports earlier in the month that Dubai World could offer to repay just 60 per cent of the value of its debts (MEED 14:2:10).
A 40 per cent loss “would hurt 2010 profits, but not jeopardise solvency”, according to John Tofarides, a bank analyst at Moody’s.
Tofarides adds that, while uncertainty surrounding the final deal to be offered to banks continued, “market participants would continue to assume the worst”.
A spokeswoman for the Dubai government said on 22 February it would not insist on being treated as a preferred creditor to Dubai World as it tries to restructure $22bn debt. So far the emirate has provided at least $10bn in financial support to Dubai World through the Dubai Financial Support Fund.