Dubai - a follow up on the Debt Crisis

For those of you who have kept an eye on this blog - you would have read my prior blog about Dubai.

It turns how that some of the forecasts that I made in that article have now become fact..

Dubai World - state owned conglomerate that has approximately USD$59Billion in debt that it is aiming to renegotiate with its lenders. This represents close to 75% of their loan portfolio that Dubai World is struggling with.

Currently - USD$59Billion is NOT a large amount of money when spread around various lenders across different countries. However, this is only the first company to mention any difficulties, and these difficulties have effected 75% of their loans.

My grave fear is that other privately owned companies will begin to have similar difficulties with loans as they mature in the next 12months. And with projects such as the one pictured - there is no doubt that there is plenty of debt across Dubai.

I have read several financial statements from December 2008 of property development Companies in Dubai, many have managed to get through this year whilst repaying in excess of USD$5Billion in short term loans.

With these same companies looking to report early next year - I would anticipate that there will be some nasty surprises and the amount of debt that is falling due within the next 6 to 12 months will be alarming for investors.

As I documented in my prior blog - Dubai has become heavily reliant on its wealthier neighbour emirate Abu Dhabi. However, Abu Dhabi's silence over the past 4 days is suggesting that it is not overly willing to give handouts to Dubai.

As Dubai's risk profile around the world has now increased significantly, companies that are aiming to refinance debt will be forced to pay MUCH higher interest rates - leading to further difficulties in repayments across the board.

I would expect that the current known debt that Dubai is having difficulties with is just the tip of a very large ice berg.