The leading state investment company of the emirate of Dubai has requested a six-month delay in debt payments, raising doubts about the financial stability of the emirate after years of strong growth. Dubai World, whose total debt amounts to $59 billion, has asked creditors for a delay in debt repayment until May of next year.
Dubai World has been severely affected by the global credit crisis and recession and has chosen the global consulting and auditing firm Deloitte as an advisor for its financial restructuring. Next month, it was supposed to repay an amount of $3.5 billion. The request for a repayment delay has prompted leading global rating agencies Standard & Poor’s and Moody’s to downgrade the ratings of several state-owned companies in the emirate of Dubai. After six years of strong growth, Dubai’s economy, one of the seven emirates that make up the United Arab Emirates, has been experiencing a decline in activity since the second half of 2008, which has also led to a significant drop in real estate prices. Analysts warn that the government of Dubai is now paying the price for an economic model based on the influx of foreign capital and megalomaniac construction projects. (H)
