Ports free of Dubai woes - almost

03 Dec 2009

Although Dubai's "World" may be sinking, DPW appears not to be following suit. Photo: Imre Solt

The ports industry released what must have been a collectedly-held breath when on Wednesday the Government of Dubai finally told investors that DP World and its debt "are not included in the restructuring process for Dubai World."

The Dubai authorities had put the cat amongst the pigeons the previous week when it said the state-owned development company Dubai World was seeking to delay repayment on some of its current liabilities until May 2010 at the earliest - and then promptly went off on its national Eid holiday, leaving everyone guessing.

The company asked creditors for extensions on its debt obligations following the bubble bursting on the nation's property portfolio. The first figures mentioned $59bn worth of debt, although by Tuesday this had settled to $26bn - of which $4bn is due next month. Dubai World holds a truly huge range of units, including flagship development company Nakheel, so the request for a six month reprieve sent shockwaves across the world's stockmarkets.

However, the Dubai government made it clear they were not obliged to step in and rescue what is, after all, a private company - although some still assume that Abu Dhabi will help local businesses "at the last minute" if necessary.

But the troubles aren't exactly over: DP World saw its shares slide by around 19% on Nasdaq in just a few days despite the reassuring noises from Dubai, who seem to be attempting to ringfence sister companies Infinity, Istithmar, and Ports & Free Zone World (who hold DP World as well as P&O Ferries) against the problems of the real-estate side, saying these "are on a stable financial footing".

It is worth noting that in the first six months of 2009, port operator DP World still managed to record a net after-tax profit of $188 million, even though the figure is down by around 32% on the same period last year.

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