While as I wrote a couple of weeks ago, almost all of Dubai's construction remains stopped, Dubai has made some progress at tackling its massive debtload.
Yesterday, Abu Dhabi announced it would provide $10 billion to its sister emirate to help it make some of the $15 billion in interest and principal payments that comes due for Dubai in 2009. Neither side has announced what if anything Dubai has offered Abu Dhabi in exchange for this, but at the very least, Dubai will have to tame some of the social liberties and urban excesses that have emerged over the past few years.
While this bond offering will help provide some short term cash and reduces the chance of a bankruptcy, Dubai is by no means in the clear. The cost of insuring Dubai's debt has surged over the past few weeks, and most estimates I have seen showed the cost of insuring Dubai's debt to have reached nearly 10% over the weekend. That was the world's highest rate.
The stock market, which declined 72% in 2008, rallied nearly 8% today. The cost of debt insurance declined to ~7.5% today on the news.
We'll see what happens next...
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3 comments:
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