Even the lavish Dubai once the beacon of the emirates which spent billions creating the perfect home for the rich and famous is in deep financial debt with repayments of loans put on a freeze. Even Dubai is adding to the 1.7 trillion dollars of loses since the Wall Street crash of the US banks. The Royal Bank of Scotland Group stands to lose the most as it was the major underwriter of the loans to Dubai. The United Arab Emirates bank came to the rescue and shored up bank capital offering more money under a new structure. Abu Dubai an oil rich neighbor of Dubai needs to step in and save the day.
The Dubai Palm Man Made Excesses in Financial Trouble
The creditors are scrambling to get their loan payments and are now being told to wait for Dubai to restructure the loans with the potential for a massive meltdown of what was the world’s most expensive real estate projects that boomed even during last year’s recession commenced. The man made islands and expensive buildings once the world center for business and creative real estate massive projects stand still in the desert.
Now the Gulf emirates are suddenly sinking by heavy debt and the ruler sheikh Mohammed bin Rashid had a very expensive vision but he went a little overboard in his thinking as all good things come to an end. The Gulf Arabs pinned their hopes on a model city built in haste and with borrowed money. Although the Arabs hold the rest of the world ransom with oil prices they can now ill afford their own excesses and dreams.
Dubai is in hawk to the tune of 80 billion dollars of debt on which it cannot make payments, and the reaction from the rest of the world was a quick drop in the already shaky markets due to the US financial fiasco. But who owns this problem assets- is it the government or the poster boy Sheikh Mohammed, or the ruling family? The banks certainly are to share some responsibility for financing such a enormously expensive dream.
Dubai World of the Rich and Famous Crumbles Under Debt
Turns out that Dubai cannot make payment on a bond for 3.5 billion due on December 2, 2009 which signifies the tremendous instability of the region. The beautiful palm man made islands created in the desert and towers that are the highest in the world are all now in jeopardy. Dubai aimed at attracting foreign investments and financing in the advanced city and fashioned itself after the builds in Singapore or Hong Kong.
But the sad tale is that the Dubai government says it is not responsible for the debt and blames the banks. Local commentary by the newspapers of Dubai indicated that the emergency caused their central bank to float some funds to their banking sector. The newspapers also indicate the West is blowing the crisis out of proportion although markets are very sensitive to news of non-payment of loans by Dubai. If Dubai is in trouble what about the rest of the world markets all still in recovery mode. If Dubai wants a 6 month freeze on loan re-payments and will default on a 3.5 billion dollar payment -this suggests big probems and certain fear in the financial world markets.
The banks that loaned billions to Dubai are RBS, Lloyds and HSBC and the most exposure falls on the European banks that lent Dubai over 80 billion dollars. The banks like Barclays had “no statements” fearing their admitting that these were bad loans would scare off investors making the situation worse.
The London stock exchange fell over 7 percent, Barclays down 8 percent and HSBC down over 4 percent, and technical errors caused the exhange to shut down yesterday. The question is put forth by analyst is this just a blip on the radar screen or portends more problems in the future after a six month delay in payments.
Thaksin Flees Dubai to Secret Location under Dubai Debt Fallout
Investor Thaksin Shinawatra has left Dubai for an un-named country in Europe as his investments are affected greatly by the Dubai debt disaster. Thanksin’s passport has been altered and changed from Thai to a new Nicaraguan passport. Thaksin used Dubai as his central investment campaign and no one can know how much his investments in financial, real estate and debts are affected by the fiasco in Dubai. His quick exit must mean he cannot any longer manouver capital in that country and no doubt means they will be wiped out. This means there is more to the story of the start of Dubai’s financial debacle.
Even billionaires are living in an increasing shrinking world where Dubai once the pinacle of success stories begins to blacken the world with more financial downturns and the markets once again are in free fall.
TAGS: Dubai in Debt, Thaksin leaves Dubai, Dubai world markets, Barkleys Bank, financial turmoil in Dubai, Dubai defaults on loan payment Dec 2, Dubai financial debacle.
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Dubai will remain one of the top hot spots and economic centres in the middle east and the whole world.
Rather Doubtful Mourad…..Dubai is in deep doo doo, non repayment of loans usually signifies default on loans which means – bankruptcy is not far away. Too much glitter, too many pompous buildings, too much use of borrowed money – real estate will be really cheap -watch for Walmart Falling prices.
We had to remove your link by the way….trying to make a comment for a link is not allowed.
Polticol News Staff
stephanie
This information is very useful ,thank you for sharing!