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Dubai's debts spook lenders

THE POOR credit status of Dubai&rsquo;s main banks has sent shockwaves through the financial world.<br /><br />Investors are running scared as the emirate &ndash; which has experienced huge economic growth over the past decade &ndash; runs into trouble.<br /><br />Emirates Bank International, National Bank of Dubai, Mashreqbank and Dubai Islamic Bank were all put on credit watch by ratings agency Standard &amp; Poor&rsquo;s.<br /><br />And Moody&rsquo;s downgraded the ratings of all six government-related issuers in Dubai, including DP World.<br /><br />The debt moratorium will have an immediate impact on the $3.5bn (&pound;2.1bn) bond that Nakheel, Dubai World&rsquo;s developer of the palm-shaped islands, was scheduled to repay in mid-December.<br /><br />A conference call for Nakheel bond holders was abandoned after phone lines were bombarded with concerned investors.<br /><br />In a further sign that Dubai&rsquo;s problems are affecting fund-raising efforts in the rest of the region, Saudi-backed Gulf International Bank pulled a bond sale due to priced this week.<br /><br />And European investors are already dumping bonds in the region.<br /><br />&ldquo;We are having an extremely nervous session on Middle eastern credit we are seeing implications for Qatari and Abu Dhabi bonds too which are trading down in sympathy,&rdquo; said Luis Costa, head of emerging debt strategy at Commerzbank in London.<br /><br />But Jan Randolph, a sovereign risk expert at IHS Global Insight, said some will hope to ride out the storm.<br /><br />&nbsp;He said: &ldquo;Investors may well accept that Dubai has hit a bad patch and the best course to take is to go along with the restructuring efforts as the best means of maintaining value in their assets and loans.&rdquo;<br /><br />Meanwhile analysts have estimated that European banks could be exposed by up to $39bn &ndash; with Barclays and RBS among the UK institutions to be hit.<br /><br />Financial support for Dubai from neighbouring Abu Dhabi is expected to help stabilise the economy.<br /><strong><br />AIDAN BIRKETT<br />DELOITTE</strong><br /><br />DELOITTE&rsquo;S Aidan Birkett has been sent to Dubai to deal with the fallout from the crisis which has rocked markets across the globe. He leads the company&rsquo;s 1,200 strong UK Corporate Finance practice. His expertise is in large-scale financial restructuring of the kind needed at Dubai World. <br /><br />He has personally dealt with the financial restructuring of over $100bn (&pound;60.6bn) of debt and has a reputation for turning businesses around by coming up with new strategies. He has dealt with companies including Cable &amp; Wireless, Energis and My Travel Spanish Real Estate Group and Gate Gourmet. The big-hitter Birkett was the Society of Turnaround Professionals &ldquo;Turnaround Professional of the Year&rdquo; in 2002. A Deloitte spokesman said: &ldquo;We can confirm that Aidan Birkett, managing director for corporate finance at Deloitte, has been appointed chief restructuring officer (CRO) to Dubai World. "His first priority will be to evaluate the extent of the restructuring required. He will work closely with both the Dubai Financial Support Fund (DFSF) and Dubai World&rsquo;s executive management team to oversee the restructuring process and ensure the continuity of Dubai World&rsquo;s operations.&rdquo; The chief of Deloitte&rsquo;s corporate finance arm in the Middle East, Chris Ward, will help deal with the financial turmoil in Dubai. Ward is head of joint venture company Deloitte Corporate Finance which is authorised by the Dubai Financial Services Authority.