Creditors Slammed For Lending Dubai World So Much Money!

On TimesOnline: Fear of creditor wipe-out as Dubai jettisons conglomerate

Some interesting comments

• The Government of Dubai has refused to honour the debt obligations of its largest company, prompting fears that international creditors could be wiped out.
  
  Dubai World, the state-owned conglomerate, was effectively abandoned to its fate by the Emirate's Government yesterday despite previous assumptions that Dubai would stand behind the company. That has raised the likelihood that lenders to Dubai World, which has liabilities of $60 billion, could lose billions of dollars.

....

• Analysts at RBC Capital Markets said: “The bottom line is that creditors have almost no legal legs to stand on to maximise recovery values.”
  
  Royal Bank of Scotland (RBS), the bank bailed out with £53.5 billion of British taxpayer money, has been the largest loan arranger for Dubai World in the past two years, securing $2.3 billion of financing. Much of that debt will have been syndicated to other banks but RBS could lose more than £100 million as a result of Dubai’s actions. RBS declined to comment yesterday.

I was most shocked at the following statement.

• Abdulrahman al-Saleh, director-general of Dubai’s Department of Finance, said: “Creditors need to take part of the responsibility for their decision to lend to the companies.

Huh?

What on earth is happening here?

Sigh!

I really wonder if I could ever do the same!

Can I put my bankers to blame for lending me too much money????

Duh!

• The crisis at Dubai World was prompted by the need to repay a $3.5 billion Islamic bond held by Nakheel, the property developer behind the Palm Jumeirah islands, in two weeks.
  
  Nakheel said yesterday that it was suspending trading in all three of its Islamic bonds.
  
  However, Dubai World did make a small repayment on a $2 billion Islamic bond owed by the Jebel Ali Free Zone Authority yesterday.
  
  By cutting Dubai World loose, Dubai has effectively reduced its sovereign debt from $80 billion to about $20 billion...