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Dubai Future Still Uncertain
February 18, 2010Article by Ray Withers
For not the first time and — let’s face it — probably not the last either, the news on property in Dubai, and the market’s future has been mixed this month.
On the positive side (well, kinda) another debt debacle has been staved off as Dubai World lenders roll-over a scheduled 1.2bn dollar payment on the firm’s Limitless property unit. Also on the positive side: according to insider sources Dubai world’s debt restructuring is proceeding on schedule for its March or April revelation to lenders.
According to sources the company “will not” be considering the distressed sale of assets, though one government official did conceded that asset shedding is a necessary part of any debt-restructuring but it will not be a “fire sale”.
An outsider might ask how Dubai World can expect to make such statements, when it is they who are in debt and not the other way round, but the answer is simple: when it comes to such large sums of money, weighed against the toxic assets already swallowed by lenders around the world, getting paid becomes more important than sticking out your chest to beat it as you do the peacock-strut.
One further piece of positive news, that can also be argued as a negative is the fact that work has resumed on the Dubai Metro development, after a deal was reached over who would pay the added costs. The development was estimated at 5.3bn dollars but is already thought to have cost around twice that. This is positive on the face, but with the over-supply of property in Dubai already severe, it can easily be seen as negative — but perhaps not as negative as the cancellation of another project at such a catastrophic cost.
Speaking of over-supply the negative news to emerge this month is the over-supply of hotel rooms in Dubai as the emirate continues to lead the region in terms of how many rooms are coming online. This has led to the Hospitality Management Holdings (HMH) cancelling 3 of its upcoming projects and putting several more on hold. The firm confirmed a Hotelier Middle East report that Corp Business Bay, Coral International Deira and Coral Boutique Bur Dubai are no longer going ahead.
Further gloom came when international financial ratings body Fitch downgraded Dubai Holding Commercial Operations Group LLC’s (DHCOG) Long-term Issuer Default Rating (IDR) and senior unsecured rating to ‘B+’ from ‘BB’. The firm remains on ratings watch negative.
All in all this will be viewed as a mainly negative outlook. But on the other hand at least if Dubai World can get its affairs in order once and for all it could represent a new start for the market.
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