Dubai World to receive $9.5 billion in government aid

Thursday, March 25, 2010

The government of Dubai announced that it intends to provide $9.5 billion to Dubai World to allow the government-owned investment company to restructure its debt.

The announcement comes as part of Dubai World's plan to restructure more than $23 billion of debt, including converting nearly $9 billion of debt into equity, after its collapse last fall. The package includes $8 billion of funding to Nakheel, Dubai World's real estate subsidiary, as well as $1.5 billion to Dubai World as a whole. The restructuring plan also seeks to, within eight years, repay all of Dubai World's creditors.

According to the government of Dubai, $5.7 billion of the aid was from a former $10 billion loan to Dubai World, with the remainder being internally funded. The plan would transfer ownership of Nakheel, formerly a subsidiary of Dubai World, to the direct control of the Dubai government.

Response to the deal was largely positive, with one analyst saying the move "boosts sentiment because this is a strong commitment." Christopher Davidson, author of books on Dubai and Abu Dhabi, said that while the new funding would "keep the wolves outside the gates a little longer," the government could not be the sole funder of Dubai World and Nakheel.

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"Dubai receives bailout from Abu Dhabi" — Wikinews, December 14, 2009

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Sources

"New Funding Proposed to Restructure Dubai World" — The New York Times, March 25, 2010
"Dubai World gets $9.5bn government backing" — BBC News Online, March 25, 2010

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