Monday, December 14, 2009

Doom's Day nears for Dubai's $3.5 bn debt hurdle
  • Nakheel’s possible non-payment of its Islamic bond due on Monday will trigger defaults on two other securities, bringing the total of  affected securities to $5.25 billion, bond documents show. 
  • Investors are waiting to see if the Dubai state-controlled developer will pay the maturing $3.52 billion Islamic bond, known as sukuk. The Dubai government said on November 25 that state-run holding company Dubai World is seeking a “standstill” agreement on its debt, including for the Nakheel unit. 
  • A sudden u-turn and repayment would placate disappointed and confused investors in the immediate term. Dubai's handling of the situation has tarnished its reputation. 
  • If Nakheel does not pay on Monday, it would technically be in default, but it would still give its restructuring team a two-week grace period to reach an agreement with creditors. 
  • December 28 is the final cut off point. After that a cross default clause in its original prospectus will be triggered that covers Nakheel and its guarantor Dubai World, adding to the overall debt burden. 
The Dubai government and its affiliated firms owe non-financial Japanese companies roughly $7.5 billion in credit that had not been collected as of Oct. 31, a study by the Japanese government showed. The study covered 18 projects that involved Japanese general contractors, trading companies and electric machinery manufacturers, the Nikkei business daily.

Russian companies are sitting on a multi-billion dollar debt time bomb after allowing overseas borrowings to rise since April, heedless of default fears that dogged them in early 2009. Bankers say a failure to complete restructurings may hamper Russia's ability to borrow in the future and the absence of clearly defined negotiation guidelines between Russian and western lenders raises the risk of future defaults.

Greece and Ireland are among countries in an “intolerable” economic situation, which may lead to bailouts or even an exit from the euro area by the end of next year, according to Standard Bank Plc. The absence of a mechanism to permit so-called fiscal transfers within the 16-nation region may undermine the exchange-rate system, said Steve Barrow, head of Group of 10 foreign-exchange strategy at the bank in London.

With three more American banks biting the dust, the total number of collapses in 2009 has touched 133, more than five-fold that of  last year. Battered by the financial turmoil, an average of 11 banks especially the small and medium ones, are going belly up every month in the country. Last year, just 25 banks had collapsed. The count of bank failures in 2009 is the maximum in 18 years. In the wake of the savings and loan crisis, a whopping 181 banks were shuttered in 1992.

No comments: