IMF says Dubai World's debt proposal is fair

The IMF welcomed Dubai's proposal to repay billions to lenders, saying that it supported the emirate's intention to "find a fair and equitable solution" for all the stakeholders.

The IMF welcomed Dubai's proposal to repay billions to lenders, saying that it supported the emirate's intention to "find a fair and equitable solution" for all the stakeholders. The statement late Thursday came as markets worldwide reacted to a proposal released earlier that day by Dubai to fund its share of a US$9.5 billion (Dh34.89bn) plan to repay creditors of its Dubai World conglomerate.

Abdulrahman Al Saleh, the director general of Dubai's Department of Finance, said he saw initial indications that creditors were accepting Dubai World restructuring proposals, the official WAM news agency reported yesterday, citing an interview on Dubai state television. Mr Al Saleh said that the term he heard the most about the proposal is "positive," adding that this represents "a preliminary indication that the plan is being deemed acceptable".

Investors, however, showed their concern as they pushed up the costs of Dubai debt insurance yesterday as doubts surfaced about the emirate's ability to meet its offered terms. The cost of Dubai credit default swaps rose back above 400 basis points. Dubai unveiled its proposals to repay lenders to Dubai World in five to eight years and also fully repay two bonds issued by Nakheel, its property development subsidiary.

The plan includes $5.7bn lent by Abu Dhabi, with the remaining $3.8bn coming from Dubai's "internal resources". "The terms are pretty positive but now focus has shifted to the cash flow of Dubai Government," said Okan Akin, the emerging markets analyst with Royal Bank of Scotland. "The $3.8bn is supposed to be funded by the Government, but this represents 40 per cent of the Dubai Government's revenues for 2009. The action will increase government borrowing going forward."

* with Reuters

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