Friday, 27 November 2009

Dubai default is about to be announced

Dubai Holding credit-default swaps rose to 1,175 basis points from 1,085 basis points, CMA Datavision prices show. CMA started to track Dubai credit swap at the beginning of this year.

Lending and investment banking in the Gulf are declining as oil prices and stock markets in Dubai and Abu Dhabi are hit by the worst global economic slump since the 1930s. Dubai is also bracing for a real-estate slowdown after a five-year boom as banks cut back on mortgage loans and speculators exit the market.

The largest state-owned companies in the United Arab Emirates -- of which Dubai is one of seven sheikhdoms -- have $20 billion of debt due this year, according to a Merrill Lynch & Co. report published in October.

“Will Abu Dhabi’s government, or even the federal government, follow this step by supporting banks in other emirates?” analysts led by Sofia El Boury at Shuaa Capital PSC, the U.A.E.’s biggest investment bank, wrote in a note released today. “At this point, we do not have a clear direction of how things will proceed.”