The Central Bank has pledged support for lenders in the UAE and made emergency funds available to avert any liquidity shortage that might occur as a result of the proposed restructuring of Dubai World. Banks in Abu Dhabi and Dubai are expected to disclose their exposure to Dubai World's estimated US$24.27 billion (Dh89.14bn) bonds and bank debt amid a global search for creditors. The "Central Bank of the UAE - stands behind UAE banks and branches of foreign banks operating in the UAE", it said yesterday in a statement. While no indication of the value of the facility was given, the regulator said it would be linked to banks' current accounts at the Central Bank at the rate of 50 basis points above the three-month Emirates interbank offered rate (Eibor). The announcement had been expected as a preventive move before stock markets resumed trading today for the first time since the Dubai World announcement on Wednesday night. "The UAE Central Bank has acted decisively and pragmatically in announcing new liquidity measures," Peter Sands, the group chief executive of Standard Chartered, said in an e-mailed statement. "Their support for the banking system will underpin consumer and market confidence in the economy. "We are confident that Dubai and the UAE as whole will work through these issues and continue to prosper as a dynamic and vibrant part of the world." Standard Chartered is partially owned by Dubai World, which bought a 2.7 per cent stake in 2006. Dubai World said late on Wednesday it would seek a delay on billions of dollars in debt repayments to bondholders and creditors while it undergoes a restructuring. Markets across Europe, the US and Asia were affected by the surprise move, which world leaders said illustrated that the global economic recovery remained fragile. The Central Bank wants to protect banks from taking provisions for non-performing loans to Dubai World at a time when they are struggling to return to profit after the fallout from the global financial crisis. It is also keen to restore investor confidence in Dubai since the move to restructure Dubai World. Jan Willem Plantagie, the managing director of Standard and Poor's Middle East, said there were still many questions about Dubai World's plans. "There are so many questions to be answered that really, right now Monday is all that matters - it is hard to judge anything further out than that," he said. A subsidiary of Dubai World, the Jebel Ali Free Zone Authority (JAFZA), faces a coupon payment due today on its Dh7.5bn Islamic bond. Issued in November 2007 through a Cayman Islands-registered company called JAFZ Sukuk, the sukuk pays 130 basis points over the six-month Eibor, the news agency Zawya.com said. The coupon payment is estimated to be between Dh125 million and Dh135m. The Dubai Government has previously said its ports operator division, DP World, and JAFZA were exempt from the restructuring of Dubai World. No one from JAFZA was available to comment. Dr Eckart Woertz, the programme manager of economics at Gulf Research Centre, said as JAFZA was a viable business with ongoing cashflows, he expected timely payment of the coupon. John Sfakianakis, the chief economist at Banque Saudi Fransi-Credit Agricole Group, said the fallout from Dubai World's financial problems would affect confidence in regional issuances. A number of sovereign and corporate bonds were issued over recent months as market conditions improved. "There were corporate names beginning to look at the bond markets quite seriously and all of these interested parties will postpone issuances," he said. "The pricing is not attractive and spreads have widened." Dubai World has a deadline of December 14 on the $4bn payment of a sukuk from Nakheel, its property subsidiary. Repayment on schedule is one of four alternatives being considered by Aidan Birkett of Deloitte, the new chief restructuring officer of Dubai World who was appointed to oversee its reorganisation, along with the investment bank Rothschild and the US corporate specialists AlixPartners. additional reporting by Tom Gara and Bradley Hope
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