Thursday, December 10, 2009

Dubai will not sell any of its assets to bail out Dubai World

Dubai will not sell its any of its assets to bail out Dubai World, confirmed a top Dubai Government Official, adding that the group will be able to overcome the situation by re-structuring its debts and selling its own assets.

According to Director-General of Dubai Department of Finance, Abdul Rahman Al Saleh, part of financing Dubai World will be through asset sales, as these are the company’s assets and not government assets.

The motive behind restructuring of Dubai World is to ensure continuation of its operation as a viable commercial entity. The future of the company is most important than liquidity. It is in the company's interest to inject liquidity or restructure it, to ensure that it remains sustainable in the long-term, he said.

Al Saleh said that the Dubai World and Nakheel problem has originated from short-term lending on long-term projects, which doesn't usually work in a volatile market situation. Majority of Dubai World and Nakheel projects are long-term projects with strategic importance. These cannot be developed through short-term lending.

Al Saleh said that the Dubai Financial Support Fund, established in July this year, can offer support to Dubai World, if needed. He re-iterated the government's stand on the state guarantee for Dubai World's debts.

Al-Saleh also pointed out that the legal documents signed at the time of company establishment do not carry any clause on the government's guarantee. The clauses clearly specify that the government will not guarantee the liabilities of the company.

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