Monday, December 14, 2009

Blink, Dubai-style 

Abu Dhabi rides in to Dubai's rescue at the last moment.
[T]he Government of Abu Dhabi has agreed to fund $10 billion to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World.

As a first action for the new fund, the Government of Dubai has authorized $4.1 billion to be used to pay the sukuk obligations that are due today. The remaining funds would also provide for interest expenses and company working capital through April 30, 2010 � conditioned on the company being successful in negotiating a standstill as previously announced.
The rest is used to support Dubai creditors elsewhere. The announcement also includes a plan to create a workout for Dubai World if they cannot meet their obligations. It's a big acknowledgment by the UAE and Abu Dhabi that they are backers of Dubai's troubled credit, but James MacIntosh notes it seems to have enough vagueness that there should still be the lesson that a private company in Dubai is private.

"Brinksmanship", says Seabee, who I think is unconvinced by that argument. We'll see.