19/01/2010

The US$10 billion (Dh36.73bn) in financial assistance to Dubai announced last month by Abu Dhabi includes $5bn committed in November by two Abu Dhabi-controlled banks, Dubai said yesterday.

Dubai announced in mid-December that Abu Dhabi would lend it $10bn to help prevent cash-strapped companies controlled by the Dubai Government, notably Dubai World, stay afloat after the financial crisis impacted their ability to keep up with debts accumulated during the property boom.

Until now, it had been unclear as to whether the $10bn, which Abu Dhabi will use to buy Dubai bonds, represented an entirely new commitment or whether it included $5bn in bond purchases announced on November 25 by two banks controlled by Abu Dhabi – Al Hilal Bank and the National Bank of Abu Dhabi (NBAD). They have already disbursed as much as $1bn of those funds.

New questions were raised about the funds when, only hours after the deal’s announcement, Dubai World announced that it would ask creditors for a standstill arrangement on its debt payments.

Analysts and bankers consulting with the governments of Abu Dhabi and Dubai, speaking on the condition of anonymity, said that as part of its $10bn investment in Dubai bonds, Abu Dhabi plans to assume the remainder of the banks’ $5bn purchase commitment.

A spokesperson for the Dubai Government confirmed yesterday that the latest financial package included the $5bn, but declined to comment on how Abu Dhabi planned to channel the funds. Neither Abu Dhabi’s Department of Finance nor Al Hilal Bank could be reached for comment.

Amelia Soares, the head of investor relations and corporate affairs at NBAD, said she was unaware of any changes and that the bank’s contract to purchase Dubai’s bonds remained in effect.

The new details about Abu Dhabi’s financing arrangements with Dubai lend sharper focus to the evolving effort by the two emirates to manage and eventually reduce the estimated $62bn owed by the companies that Dubai controls.

For more on this:

http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100117/BUSINESS/701179866/1049

Wayne Arnold - The National