Asset sales on Dubai’s agenda

City A.M. Reporter
DUBAI Holding’s main unit yesterday said it may resort to asset sales to deal with its debt after posting a $6.2bn (£4.2bn) loss for 2009, sending shares in Dubai tumbling as the market reacted to the latest setback for the emirate.

Dubai Holding Commercial Operations Group (DHCOG), a unit of the conglomerate owned by the Gulf Arab emirate’s ruler, took a big hit on its exposure to Dubai’s property crash.

The unit said it was in talks with banks to roll over debt and had access to emergency funding if needed as it renegotiated obligations to trade creditors. Among its high-profile assets is the Jumeirah Group of hotels.

DHCOG said debt restructuring was not needed but it was considering

the sale of certain assets to manage its cash flow.

The loss increases the challenges for Dubai Holding – one of the emirate’s three state-owned firms along with Dubai World and Investment Corporation of Dubai – to meet its debt obligations, estimated at $14.8bn out of a total $109bn owed by the government of Dubai and its related entities.

“Dubai Holding has always been lurking in the background as a serious problem to address once the situation with Dubai World had been clarified,” said David Butter, head of Middle East and North Africa at Economist Intelligence Unit in London.

“We now have a clearer view of the dimensions of the problem.”

Dubai’s main index closed down 3.1 per cent with property stocks weakening on anticipation that DHCOG will sell more property units into an already saturated market. Bank shares fell on renewed balance sheet worries.

“It is sure to have knock-on impacts on the entire economy. The banks will be seriously challenged to lend, so it’s all again part of a vicious cycle,” UBS analyst Saud Masud said.

Dubai Holding is part of a matrix of firms commonly known as Dubai Inc, which was badly battered by the financial crisis. Its Dubai International Capital unit last week sought a three-month delay on debt repayment.