HSBC sees Dubai meeting 2012 debt maturities

HSBC Holdings expects Dubai to meet its upcoming debt obligations this year and said international banks' appetite to refinance the emirates' liabilities will not be impacted by the euro zone crisis.
Government-related entities in Dubai have bonds worth $3.8 billion maturing in 2012, according to a Moody's report last month. Data from The Royal Bank of Scotland show that the total value of Dubai loans maturing this year are over $5 billion.
"We're not concerned with regards to Dubai's ability to meet its debt obligations, that's not only in the medium term but certainly in the context of this year," Paul Skelton, regional co-head of global banking, Middle East North Africa, at HSBC told Reuters in an interview.
"There is sufficient liquidity and sufficient ways at the borrowers' disposal to get things done. International banks are still here and will continue to support Dubai Inc," he added.
Moody's reckons that the total debt of the government and related entities stands at $102 billion. That would amount to around 125 percent of the emirate's gross domestic product (GDP). Just months after Dubai World asked creditors for a standstill in 2009, the IMF estimated Dubai's total debt at $109 billion.
With the real estate market still sagging, the stock market moribund and many banks reluctant to lend because of global financial instability, investors have worried that some of those bonds might be restructured, with changes to repayment terms that disadvantage creditors.
Such speculation prompted Sheikh Ahmed bin Saeed al-Maktoum, chairman of the Dubai Supreme Fiscal Committee, to declare on December 7 that restructuring was not on the cards, though he said the government might look into refinancing part of the debts, presumably through issuing new bonds or loans.
A chunk of $3.8 billion in bonds is due next year from a trio of state-linked firms seen as having the highest refinancing risk.
Those firms are Dubai Holding Commercial Operations Group (DHCOG), part of the ruler's private holding company, DIFC Investments (DIFCI) and Jebel Ali Free Zone (JAFZA). Skelton noted that there will be more refinancing of maturities compared to last year.
"I think it's possible because there is still an ability for them to refinance as and when required," he said. The euro zone debt crisis should not have a big impact on international banks operating in the United Arab Emirates and other Gulf states.