Deal lends credibility to growing resurgence

The agreement between creditors and Dubai Group represents another milestone on the emirate's recovery from the ravages of the global financial crisis.

The agreement between creditors and Dubai Group - the biggest restructuring since Dubai World's US$25 billion deal in 2010 - represents another milestone on the emirate's recovery from the ravages of the global financial crisis.

Against the background of the benign outlook for Dubai's economy, the banks have finally bowed to the inevitable and accepted (undisclosed) terms which will enable them to put the debts in the column marked "restructured" rather than "written off" in their balance sheets.

The intriguing question is: why did it take them so long? Dubai World took six months to restructure in negotiations involving bigger sums and more banks. The Dubai Group epic ran for three years until yesterday's settlement-in-principle, and was much more contentious, with walkouts and legal action along the way.

The reason lies partly in timing, and partly in the nature of the Dubai World settlement itself. The 2010 deal took place before the sovereign debt crisis in the euro zone, when creditors were as yet unaware of the unexploded bombs on their books, and were prepared to be more charitable.

Nonetheless, there has been a feeling among many creditors that Dubai got off lightly in the Dubai World settlement back then, and should be made to sweat over Dubai Group.

The presence of $4bn of related-party debt in the equation also complicated the talks, but that obstacle was effectively removed when the Dubai Government (also a creditor, it should be noted) went to the back of the queue behind the banks, as indeed it also did with Dubai World.

All that aside, the deal gives a boost to Dubai's credit rating just when it is looking again at raising debt in the international markets to fund the next round of expansion.

As an economy and a borrower, Dubai is back.