DW takes debt challenge seriously

Comment If Dubai World (DW) had a share price, it would probably have reacted positively to news that the debt-laden conglomerate was shedding thousands of jobs.

If Dubai World (DW) had a share price, it would probably have reacted positively to news that the debt-laden conglomerate was shedding thousands of jobs around the world as part of its near complete global restructuring. Cutting the workforce on such a massive scale, especially in still suffering Dubai, is a clear sign that DW is taking its challenges seriously. The human cost of the jobs cuts, and the multiplier effect of the removal of thousands of jobs from the local economy, were doubtless outside the brief.

As an exercise in corporate restructuring, it all makes sense. Nakheel becomes almost exclusively a property developer, and Istithmar an investment and asset management business - both rather more in tune with the times than the "global vision" merchants of before. However, the greater corporate clarity should not blind us to the problems that DW still faces. Dubai remains one of the riskiest sovereign borrowers in the world, judging from the cost of insuring its debt - slightly less risky than Lithuania but more likely to default than Lebanon.

Cost savings of US$800 million (Dh2.94 billion) over three years, while welcome, will make only a tiny dent in the group's aggregate liabilities of nearly $60bn. Speculation that DW will seek to raise more cash via equity sales at Nakheel looks well wide of the mark. The only potential equity value in the group is the global ports business DP World, where $2bn or more could quite easily be raised if the government sold a further chunk of its shares.

But DW's best chance of getting some quick cash remains the Dubai Financial Support Fund. Yesterday's announcement was primarily aimed at that organisation and will probably have been well received there. @Email:[e-mail]