Dubai is Just a Bit Misunderstood, That’s All | zero hedge

We are likely to see quite a lot of mileage out of this particular bit of clip art. True, we have managed to relegate the “Dubai crash” to the dustbin of over hyped crises, but Dubai does not seem particularly disposed to accept that as her ultimate destiny. The Nakheel bond is but a pair of weeks from default and creditors show no sign whatsoever of entertaining any sort of negotiated restructure, much less the suggestion of a moratorium to which creditors could only be heard to cackle loudly. We are certain all will, however, work out for the best. (“Nothing to see here. Please disperse.”) Ah, would that it were so easy:

Fears are growing among western banks that Dubai Holding, the personal investment vehicle of the emirate’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, will be the next state-owned Dubai company to default.

The conglomerate went on a debt-fuelled spending spree in the past decade, borrowing $12 billion (£7.3 billion) to fund ambitious projects in Dubai and to create a private equity arm that bought stakes in Tussauds and the budget hotel chain Travelodge.

Details of the main lenders to Dubai Holding are not public but bankers in Dubai say the group borrowed from international banks, including Royal Bank of Scotland and HSBC, as well as local lenders.

One official close to the company conceded the firm was “a bloody mess” and its boss, Mohammed Gergawi, a close confidant of Maktoum, had been “in denial” about the problems it faced. “It’s true that we were a very large holding company with very few checks and balances on what we did and how we operated,” he said.1

Read: True, the absence of even a semblance of fiscal restraint has completely devastated the Sheikh’s private slush fund but…

The once-sprawling conglomerate has been split into four divisions: property, leisure and hotels, investments and free zones — tax-free business parks in Dubai.2

…we have divided the rotting meat into four separate hulks so that’s all settled then.

Forgive us for being such recovery deniers, but would it be imprudent of us to point out that the collapse of Bear Stearns destroyed barely a third of the capital at issue in Dubai?  And if the Sheikh himself cannot curb his blood lust for $12 billion in debt to fund his personal market economy dalliances (Travelodge? Seriously?)… well… what exactly are we to surmise about the fixed-income empire he has built around himself?  Still, we’re certain that this won’t remotely jitter the steely nerves of Nakheel’s creditors, or cause them to adopt more aggressive positions vis-à-vis restructuring negotiations.

via Dubai is Just a Bit Misunderstood, That’s All | zero hedge.

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