Dubai World, the indebted conglomerate at the heart of this sheikdom's credit problems, may sell off domestic and overseas assets acquired during a multiyear buying spree as it struggles to raise cash, according to a senior government official.
Dubai Finance Department Director-General Abdul Rahman al-Saleh did not say which pieces of the company are for sale. However, he emphasized that the assets in question would be Dubai World's alone — underscoring the government's position that it is not responsible for debts racked up by a company it created and backed during the city-state's boom years.
"Like any company that has commitments, part of getting liquidity is selling some assets. Of course local or foreign assets," he said in an interview aired by al-Jazeera Monday.
A Dubai World spokeswoman declined to comment.
The sale of any major Dubai World holdings would mark a stark about-face for the conglomerate, which repeatedly downplayed questions it would need to unload pieces of its global empire even as Dubai's financial concerns grew more acute over the past year.
That perception began to shift last week, when the company said tersely that its restructuring would include an assessment of options to reduce its debt load, "including asset sales."
"This is the inevitable next step, really," said Christopher Davidson, a professor at the University of Durham who has written extensively about the history and politics of the UAE.
Al-Saleh's latest comments are the clearest sign so far that the city-state's leadership is growing more comfortable with the idea of selling off pieces of the company.
Dubai's government shocked global markets when it announced plans to restructure the debt-laden company on the eve of an Islamic holiday in the Middle East and Thanksgiving in the United States.
The news stoked fears, at least temporarily, that the world's economic recovery was on shakier footing than many believed.
The government said the company would request a delay in paying some of the $60 billion in debt coming due. Included in that restructuring was $3.5 billion worth of bonds that must be paid or refinanced by next week.
The sheikdom's finance chief said Monday the primary aim of the restructuring is to ensure the company remains viable for years to come.
"It is premature to announce any plans now, but the main goal is that Dubai World will continue in the future as a company with a new framework to face challenges," al-Saleh said. He did not elaborate.
Al-Saleh's comments sent Dubai stocks tumbling, with the city-state's main bourse plunging 5.8 percent at the close Monday.
Shares of market indicator Emaar Properties, builder of the world's tallest skyscraper, dropped by the maximum allowed 10 percent. Dubai's government owns just under a third of the developer.
Dubai World's story was essentially that of Dubai — a heavy reliance on borrowed money in recent years to carve out markets far beyond the tiny emirate's shores.
The company runs the world's fourth-biggest seaport operator, DP World, with operations on six continents. Its wide-ranging investment portfolio includes luxury retailer Barney's New York, a stable of high-end U.S. hotels, and stakes in Las Vegas casino operator MGM Mirage and Cirque du Soleil. Its holdings are so diverse and spread out that its slogan boasts: "The sun never sets on Dubai World."
At home in Dubai, the company's property arm Nakheel built man-made islands in the shape of palm trees and a map of the world. The iconic British cruise liner Queen Elizabeth 2 sits unused in a downtown Dubai port awaiting renovations to turn it into a floating hotel.
Davidson said he expected some of the company's overseas property would be among the first on the auction block.
"It's damaging for their reputation, but it doesn't do much alter the status quo back home," he said.
Many lenders at home and abroad lent Dubai World money on the assumption that, as a company controlled by the government, it had implicit state backing.
"Banks believed the Dubai government ... would not want to risk its reputation, but (the) government effectively called their bluff" when it asked for new repayment terms, said Jan Randolph, director of sovereign risk at IHS Global Insight.
Al-Saleh reiterated the Dubai government's position that there is no state guarantee in Dubai World.
He said Dubai World's problems stemmed from a reliance on previously easy-to-get, short-term loans that were used to finance long-term projects like luxury high rises and even more manmade islands.
"Most of Dubai World loans range from three to five years, whereas the projects that were financed range from 25 to 30 years," he said. "The difference between the finance terms and carrying out the projects led to this crisis."
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