Advisers head to the Gulf as rumours swirl

Aidan Birkett is beginning a week of intense negotiations as the full implications of Dubai World&rsquo;s debt problems emerge.<br /><br />The managing director for corporate finance at Deloitte is leading the process to shore up Dubai World&rsquo;s crippled finances. The state-owned property and financial conglomerate announced last week it needed a six-month respite from its debt repayments, sending stock markets into a tailspin and prompting concern that Dubai&rsquo;s booming economy was bust.<br /><br />Meanwhile, Dubai World&rsquo;s creditors are organising themselves in to a committee to begin renegotiating their loans. KPMG is being lined up to advise them.<br /><br />A number of British banks, including RBS, HSBC, Lloyds Banking Group and Standard Chartered, are among those with significant exposure to Dubai. Many of the banks, however, are understood to have syndicated part of their loans on to other lenders, so their actual exposure is currently unclear. Michael Geoghegan, HSBC group chief executive, described the problems in Dubai as &ldquo;somewhat sensationalised&rdquo;.<br /><br />Rumours swirled at the weekend as to how Dubai World would begin to repay its debts. Its Nakheel property arm has a $3.5bn Islamic bond due for repayment on 14 December.<br /><br />As part of the restructuring process, Birkett may be forced to sell off some of Dubai World&rsquo;s trophy assets. These include the QE2 cruise ship and the Turnberry golf course in Ayrshire.<br /><br />Rothschild, long-standing advisers to the government of Dubai, is also assisting with the restructuring of Dubai World.<br /><br />Speculation has been mounting as to how neighbouring emirate, Abu Dhabi, will respond. Abu Dhabi, capital of the emirates and far wealthier than Dubai, has so far said little on how it will assist its neighbour. But it is thought unlikely Abu Dhabi will allow its fellow emirate to suffer too deeply and will step in with additional financing if needed.<br /><br />Jon Breach, head of corporate finance Middle East at BDO, believes Dubai will survive this crisis. &ldquo;The investment in Dubai has been in assets and infrastructure. Together with the legislative framework in Dubai, the leisure and tourism industry that exists here, this is the gravitational centre of the Gulf. The problems with Dubai World are the result of it being overleveraged, and are not symptomatic of fundamental flaws in Dubai as a whole,&rdquo; he said.