Bloomberg News

Dubai Shares Drop Most in a Month on Debt Restructuring Report

December 06, 2011

Dec. 6 (Bloomberg) -- Dubai’s shares fell the most in more than a month after a report that the emirate may restructure some bonds sold by state-owned companies next year and on concern Europe’s crisis may spread.

Emaar Properties PJSC, the developer of the world’s tallest skyscraper, slumped 3.6 percent. Dubai Islamic Bank PJSC declined the most since Nov. 1. Dubai’s DFM General Index dropped 1.2 percent, the most since Nov. 1, to 1,382.92 at the 2 p.m. close in the emirate. The yield on Dubai’s 5.591 percent dollar bonds due June 2021 rose six basis points, or 0.06 percentage point, to 6.12 percent at 5:15 p.m. in the emirate, according to Bloomberg data.

Dubai may issue the bonds to help meet $3.8 billion in payments, the Financial Times reported, citing a senior government official it didn’t identify. The official was confident a commercial deal could be reached with bondholders, it said. The Dubai government’s media office declined to comment when contacted by Bloomberg News. Shares also tumbled after Standard & Poor’s said it may strip France and Germany of their Aaa credit ratings.

“The timing of the report is not that great, as it comes on the back of S&P’s news about potential downgrades of some European Union countries,” said Dubai-based Ibrahim Masood, who helps manage about $400 million at Mashreqbank PSC. “Investors think it may be a smart idea to take some risk off the table.”

Meeting Payments

Dubai and its state-owned non-financial companies have outstanding debt of $101.5 billion and may need further financial support to meet these obligations, Moody’s Investors Service said in a report today. The emirate was on the brink of a default in 2009 before it was bailed out with $20 billion from the United Arab Emirates central bank, the Abu Dhabi government and its banks.

State-controlled companies including Dubai Holding LLC and Drydocks World LLC are still in talks with lenders to restructure debt, while Dubai World reached an agreement with creditors on about $25 billion of debt in March.

S&P put Germany, France and 13 other euro-area nations on review for a downgrade, saying “continuing disagreements among European policy makers on how to tackle” the region’s debt crisis risk damaging their financial stability. The MSCI Emerging Markets Index slumped 1.3 percent.

Crude oil for January delivery dropped as much as 0.6 percent to $100.38 a barrel. Gulf Arab oil exporters including the U.A.E. and Qatar supply about a fifth of the world’s oil.

Emaar tumbled the most since Oct. 3 to 2.72 dirhams. Dubai Islamic, the U.A.E.’s biggest bank complying with Shariah rules, dropped 1 percent to 1.99 dirhams.

The Bloomberg GCC 200 Index decreased 0.3 percent. Abu Dhabi’s ADX General Index decreased 0.8 percent. Saudi Arabia’s Tadawul All Share Index declined 0.2 percent and Qatar’s QE Index slipped 0.4 percent. Oman’s MSM30 Index gained 0.1 percent and Kuwait’s SE Price Index advanced 0.5 percent. Bahrain’s market was closed for an Islamic holiday.

--With assistance from Alaa Shahine in Dubai. Editors: Shanthy Nambiar, Claudia Maedler

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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