Abu Dhabi bails out Dubai
14 December 2009
The emirate of Abu Dhabi has agreed to provide US$ 10 billion to two state-controlled developers, Dubai World and Nakheel, in neighbouring Dubai. THe funds will be used to service the companies' debt, following the announcement in November that Dubai World was seeking a six-month standstill on repayments.
Nakheel has a sukuk (bond complying with Islamic law) that matures this month and Abu Dhabi's funds will enable the developer to pay the US$ 4.1 billion due. A spokesperson from Nasdaq Dubai said, "Nakheel confirms that it will honour all obligations related to the 2009 Nakheel Development Ltd Sukuk (Islamic bond) using funds that will be provided by the Dubai Financial Support Fund. In accordance with the terms of the Sukuk, repayment will occur within the next 14 days."
News of the funding sent shares on local stock markets soaring. The Dubai Financial Market's main index opened up +10%, while in Abu Dhabi shares opened up + 6.1%.
A Dubai government spokesperson said, "Abu Dhabi has made it clear it is there to support Dubai and Dubai World. What is important is that we have two partners that will help each other and help the UAE," he said.