The Abu Dhabi government has agreed to fund 10 billion U.S. dollars to Dubai to meet upcoming obligations on the state-owned conglomerate Dubai World, the official news agency WAM reported
Monday.
"The government of Abu Dhabi has agreed to fund 10 billion dollars to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World," Sheikh Ahmad bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee (SFC), was quoted by the report as saying.
"As a first action for the new fund, the government of Dubai has authorized 4.1 billion dollars to be used to pay the Sukuk ( Islamic bond) obligations that are due today. The remaining funds would also provide for interest expenses and company working capital through April 30, 2010 -- conditioned on the company being successful in negotiating a standstill as
previously announced," Sheikh Ahmad added.
He said "like other global financial centers, Dubai has faced recent market challenges driven by global economic slowdown and severe real estate market correction."
Since Dubai World announced its restructuring plan last month, the Dubai government has worked closely with Abu Dhabi and the Central Bank of the United Arab Emirates (UAE) in a bid to address and assess the impact of Dubai World on the country's economy, banking system and investor confidence, he added.
He said the Dubai government was particularly focused on addressing the concerns of Dubai World trade creditors within the emirate.
"To help address these concerns, today the government of Dubai is announcing that the remainder of the funds provided will be used for the satisfaction of obligations to existing trade creditors and contractors," he said, adding that discussions with affected contractors would begin in short order.
The UAE central bank was also ready to provide support to local banks, the official noted.
According to the SFC chief, Dubai will later announce "a comprehensive reorganization law" based upon internationally accepted standards for
transparency and creditor protection.
"This law will be available should Dubai World and its subsidiaries be unable to achieve an acceptable restructuring of its remaining obligations," he said.
The official said the announced actions demonstrated Dubai's commitment "as a global financial leader to transparency, good governance and market principles."
"We believe today's actions will best serve the interests of all stakeholders," he said.
He pledged that the Dubai government would act at all times in accordance with market principles and internationally accepted business
practices.
He also voiced confidence over Dubai's economic model and the long-term health and outlook for its economy.
"Dubai is, and will continue to be, a strong and vibrant global financial center," Sheikh Ahmad said.
The government of Dubai, a member of the oil-rich federation UAE, announced on Nov. 25 that it would ask Dubai World's creditors to agree to a
debt moratorium of at least six months as a first step towards
restructuring.
The announcement, described by ratings agency Standard and Poor 's as a default, provided the focus for global financial markets and media, affecting stock markets around the world.
On Dec. 1, Dubai World confirmed that its debt restructuring process related to a total debt of 26 billion dollars, of which a 3.5-billion-dollar Sukuk is due on Dec. 14.