Global Markets In Turmoil After Debt Bombshell

[midas]

How Dubai's burst bubble has left behind the last days of Rome

Ross, who asked not to be identified, is one of countless expatriates who have been caught out by the collapse in Dubai’s once-booming property market.

Like many he bought a flat off-plan in what was a red-hot property market. Today he is trapped, his passport confiscated until he repays bank loans he used to invest in a property that may never exist. If his work dries up before he can clear his debts he will go to jail.

We met at a coffee shop in Dubai’s vast Mall of the Emirates. Around us were some of Britain’s most familiar high street names — Next, Debenhams, Virgin, Costa Coffee and Harvey Nichols. For now trade is still brisk. “I’m struggling to know what to do really,” he said.

Borrowing from family to supplement his savings, Ross, in his early thirties, moved with his family to Dubai from South London in late 2006, put down a £60,000 deposit and arranged a £30,000 loan to help to cover the initial instalments on a £350,000 two-bedroom apartment in the Dubai Sports City development.

“The plan was to let the place out to cover the loan and mortgage but it was scheduled for completion by the end of 2008 and they haven’t finished the ground floor yet,” he said. Without the apartment to boost the family’s income, the high cost of living forced them back to Britain. The debts became overwhelming in a city where non-payment is a criminal offence. Ross returned for some contract work but he was held on arrival at the airport by the police.

http://www.timesonline.co.uk/tol/news/worl...icle6945283.ece

[LaoPo]

How Dubai's burst bubble has left behind the last days of Rome

Ross, who asked not to be identified, is one of countless expatriates who have been caught out by the collapse in Dubai’s once-booming property market.

Like many he bought a flat off-plan in what was a red-hot property market. Today he is trapped, his passport confiscated until he repays bank loans he used to invest in a property that may never exist. If his work dries up before he can clear his debts he will go to jail.

We met at a coffee shop in Dubai’s vast Mall of the Emirates. Around us were some of Britain’s most familiar high street names — Next, Debenhams, Virgin, Costa Coffee and Harvey Nichols. For now trade is still brisk. “I’m struggling to know what to do really,” he said.

Borrowing from family to supplement his savings, Ross, in his early thirties, moved with his family to Dubai from South London in late 2006, put down a £60,000 deposit and arranged a £30,000 loan to help to cover the initial instalments on a £350,000 two-bedroom apartment in the Dubai Sports City development.

“The plan was to let the place out to cover the loan and mortgage but it was scheduled for completion by the end of 2008 and they haven’t finished the ground floor yet,” he said. Without the apartment to boost the family’s income, the high cost of living forced them back to Britain. The debts became overwhelming in a city where non-payment is a criminal offence. Ross returned for some contract work but he was held on arrival at the airport by the police.

http://www.timesonline.co.uk/tol/news/worl...icle6945283.ece

1. I'm sorry for this chap Ross but his mistake was to bet on real estate which was in the building/developing stage; he bought the apartment to let out. I also wonder where he was planning to get the remainder amount of the initial GBP 350,000 ? A mortgage ? By whom ?

He should have done so around the corner in his own area rather than Dubai.

Conclusion: GREED and he surfed on the wave of bubbles until the bubbles exploded.

2. non-payment a criminal offence.......? it's not if your name is Sheikh Mohammed. I want to make a bet with everybody that he's not going to jail for not paying his (companies') debts.....in time.

3. There are many of these stories in Dubai and the number of western people, ending up in jail is growing.

LaoPo

[Abrak]

2. non-payment a criminal offence.......? it's not if your name is Sheikh Mohammed. I want to make a bet with everybody that he's not going to jail for not paying his (companies') debts.....in time.

Please note....

Under applicable Dubai law, no debt or obligation owing from the Ruler or the Government of Dubai

may be recovered by laying hold, attachment, sale in auction, or taking possession in any other legal

action of the Ruler’s or the Government’s properties and assets whether or not a final judgment is

issued in respect of such debt or obligation.

Nakheel's bond prospectus....2006....

[lannarebirth]

2. non-payment a criminal offence.......? it's not if your name is Sheikh Mohammed. I want to make a bet with everybody that he's not going to jail for not paying his (companies') debts.....in time.

Please note....

Under applicable Dubai law, no debt or obligation owing from the Ruler or the Government of Dubai

may be recovered by laying hold, attachment, sale in auction, or taking possession in any other legal

action of the Ruler's or the Government's properties and assets whether or not a final judgment is

issued in respect of such debt or obligation.

Nakheel's bond prospectus....2006....

"It's good to be the king"

Mel Brooks.......1981

[pkrv]

How Dubai's burst bubble has left behind the last days of Rome

Ross, who asked not to be identified, is one of countless expatriates who have been caught out by the collapse in Dubai's once-booming property market.

Like many he bought a flat off-plan in what was a red-hot property market. Today he is trapped, his passport confiscated until he repays bank loans he used to invest in a property that may never exist. If his work dries up before he can clear his debts he will go to jail.

We met at a coffee shop in Dubai's vast Mall of the Emirates. Around us were some of Britain's most familiar high street names — Next, Debenhams, Virgin, Costa Coffee and Harvey Nichols. For now trade is still brisk. "I'm struggling to know what to do really," he said.

Borrowing from family to supplement his savings, Ross, in his early thirties, moved with his family to Dubai from South London in late 2006, put down a £60,000 deposit and arranged a £30,000 loan to help to cover the initial instalments on a £350,000 two-bedroom apartment in the Dubai Sports City development.

"The plan was to let the place out to cover the loan and mortgage but it was scheduled for completion by the end of 2008 and they haven't finished the ground floor yet," he said. Without the apartment to boost the family's income, the high cost of living forced them back to Britain. The debts became overwhelming in a city where non-payment is a criminal offence. Ross returned for some contract work but he was held on arrival at the airport by the police.

http://www.timesonline.co.uk/tol/news/worl...icle6945283.ece

It is important to understand here that Ross did not buy into a home, nor ever intended to, and chose to shaft his entire famly regarless of sex, age, or family obligations when he failed - I doubt he would have repaid on success either - presumably a a person of superb religious morals. What can one say a world classic - I think we have been there and done that.

Edited December 6, 2009 by pkrv

[Naam]

"In the past, the ruler was trusted on finances because everyone thought they were backed by oil," said Simon Henderson, a Gulf and energy specialist at the Washington Institute for Near East

Policy. "It will be different from now on."

Dubai is one of seven highly autonomous statelets that make up the United Arab Emirates. Though UAE capital Abu Dhabi has huge oil riches, neighboring Dubai has very little.

= suckers who didn't do their homework and wondering now why they got bad grades.

[LaoPo]

Dubai stock market slumps again

Dubai's stock market fell by 6% on Monday on new worries about the size of the emirate's debt burden.

It came as Dubai's finance minister said the government would not sell any assets to help the emirate's investment vehicle, Dubai World, meet its debts.

Minister Abdulrahman al-Saleh said any assets sold would have to be the property-to-ports company's own.

Dubai shares have had a torrid time since Dubai World said 10 days ago it wanted to stall payments to creditors.

***************************************************************

WHAT IS DUBAI WORLD?

# The emirate's flag bearer in global investments

# Has a central role in the direction of Dubai's economy

# Assets include DP World, which caused a storm when trying to take over six US ports

# Property arm Nakheel built The Palm Islands and The World developments

***************************************************************

They finished Monday trading at their lowest level since 22 July.

Real estate and banking shares were particularly hard hit, with investors still concerned about the financial sector's exposure to Dubai World's debt.

Dubai World has some valuable assets, notably its ports business, which stretches to every continent in the world, including London's Tilbury Docks and France's Le Havre.

Other items in its wide-ranging investment portfolio include the luxury retailer Barney's of New York, a list of high-end US hotels, and the Canadian acrobatic circus franchise, Cirque du Soleil.

Speaking to Al-Jazeera, Mr Al-Saleh said: "Like any company that has commitments, part of getting liquidity is selling some assets. Of course local or foreign assets."

Investors' demands

One of Dubai World's first major repayments to bondholders in its property firm Nakheel is due next week.

The BBC's Middle East Business reporter Malcolm Borthwick said although the company had asked for a six-month delay, sources had told him that bondholders wanted to be paid off in full and on time.

A group representing 25% of bondholders were writing to Dubai World to that effect, he added.

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/8398707.stm

LaoPo

[LaoPo]

Nakheel Has $3.65 Billion First-Half Loss on Writedown

Dec. 8 (Bloomberg) -- Nakheel PJSC, the Dubai World-owned property developer seeking to renegotiate debt, had a first-half loss of 13.4 billion dirhams ($3.65 billion) as real-estate prices crashed in the Gulf business hub, according to a document obtained by Bloomberg News.

Continues here:

http://www.bloomberg.com/apps/news?pid=206...d=aUR.YQt22qW4#

LaoPo

[LaoPo]

Dubai "needs more time"; investor confidence hit

By Tamara Walid and Matt Smith

DUBAI (Reuters) - Investor confidence in Dubai took a fresh knock on Tuesday as its leaders dithered over a rescue for debt-laden company Dubai World and ratings agency Moody's slapped a downgrade on government-related debt.

"You can usually take the view that no news is good news, but in Dubai's case it's quite the opposite -- investors need to hear some developments on Dubai World's restructuring," said Julian Bruce, EFG-Hermes director of institutional equity sales.

Leading lenders were waiting to hear from the flagship firm as they negotiate payment on a $3.5 billion sukuk, the world's largest, issued by Dubai World subsidiary Nakheel and viewed as a litmus test for the creditworthiness of many Dubai-linked corporations.

On November 25 Dubai World said it needed a six month standstill on payments, but on Tuesday, a government official said it would need more time than that.

"The period of six months would be too short for a full restructuring. The six month period would focus on the creditors, the contractors and so on," Abdulrahman al-Saleh, head of the Dubai finance department, told Al Arabiya TV.

Dubai World is a flagship company of the emirate, building everything from ports to luxury apartments. It is owned by the Dubai government, but state officials have said they will not sell other government assets to bail it out, so the company's debt is trading at about half its face value.

Dubai World met its main creditors on Monday to discuss its request to delay repayment of $26 billion in debt.

Dubai's government would support the group "as an owner," Saleh said, without being more specific.

"The government is present to provide backing as an owner ... we would like to emphasize the distinction between guaranteeing and backing. The company receives large backing from the government since its inception," he said.

CONFUSION REIGNS

Further confusion hit home when Saleh said a Dubai fund had given Dubai World $2.45 billion. A source later clarified that the money was not new, and was made as part of $10 billion aid to business in February.

Dubai stocks slid and debt markets were battered by the continued uncertainty.

The cost of insuring Dubai's debt against restructuring or default rose to 515.6 basis points in the five-year credit defaults swaps market, compared to a U.S. close of 500 bps. Nakheel's sukuk, maturing this month, one fell 2 points to 50 cents on the dollar.

"The situation isn't clear -- people need further information to decide what to do," says Adel Nasr, United Securities brokerage manager in Muscat.

DEBT TALKS

Dubai World's creditor steering committee is still waiting to hear from the company via its advisers as next Monday's bond repayment deadline draws closer.

"We want to hear something from the company that lays out the foundations and cornerstone of their thinking and what they're working on," a banker close to the deal said.

London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland, along with local lenders Emirates NBD and Abu Dhabi Commercial Bank are on the creditor panel discussing the restructuring.

The UAE central bank told local banks to report any exposure to Dubai World in a circular dated December 6, bankers said on Monday.

Dubai's finance chief said on Monday that Dubai's government and Dubai World were not the same, suggesting the emirate's most valuable firms, such as Emirates airline, Dubai Aluminum (DUBAL) or its 21 percent London Stock Exchange stake would not be involved in a firesale.

Dubai's debt rescheduling plans could go beyond the recently announced Dubai World standstill, extending to about $47 billion on the back of further restructuring needs of government-related entities, Morgan Stanley said in note on Tuesday.

http://www.reuters.com/article/idUSTRE5B71...usbeforethebell

LaoPo

[midas]

Was Dubai a glimpse of what is to come in Europe ?

Greek Debt Poses a Danger to Common Currency

http://www.spiegel.de/international/busine...,665679,00.html

[Abrak]

You have to admit it is impressive (as is the photog's wide angle lens).

2.5x the height of Baiyoke Tower 2 it will stand as a lasting symbol of Dubai's 15 minutes of fame. You cant rule out a come back though. But at the moment it looks as likely as George Best making it in the England squad for the world Cup finals.

[Naam]

serves the European Union right to invite all kind of clownish or corrupt countries to join. next perhaps Ukraine, Kazakhstan, the Christmas Islands and Mongolia might be invited. fortunately global investors like me can move or hedge their holdings from any currency to another within minutes

[Naam]

You have to admit it is impressive (as is the photog's wide angle lens).

2.5x the height of Baiyoke Tower 2 it will stand as a lasting symbol of Dubai's 15 minutes of fame. You cant rule out a come back though. But at the moment it looks as likely as George Best making it in the England squad for the world Cup finals.

in my book Dubai's 15 minutes of fame lasted already more than three decades and will have a long future. what we are experiencing are mostly envious and raging muslim/arab haters salivating around their mouths and disgruntled investors who most likely will lose some money who act as if no creditor has ever lost money by a bankrupt debtor who's business targets were not met.

YAAAAWWWWNNNN...

the dogs bark in the desert, but the caravan moves on.

[sokal]

You have to admit it is impressive (as is the photog's wide angle lens).

2.5x the height of Baiyoke Tower 2 it will stand as a lasting symbol of Dubai's 15 minutes of fame. You cant rule out a come back though. But at the moment it looks as likely as George Best making it in the England squad for the world Cup finals.

Funny you mention this. Tall towers tend to always be built during market tops. Check out the link The Erection Index

[sokal]

You have to admit it is impressive (as is the photog's wide angle lens).

2.5x the height of Baiyoke Tower 2 it will stand as a lasting symbol of Dubai's 15 minutes of fame. You cant rule out a come back though. But at the moment it looks as likely as George Best making it in the England squad for the world Cup finals.

in my book Dubai's 15 minutes of fame lasted already more than three decades and will have a long future. what we are experiencing are mostly envious and raging muslim/arab haters salivating around their mouths and disgruntled investors who most likely will lose some money who act as if no creditor has ever lost money by a bankrupt debtor who's business targets were not met.

YAAAAWWWWNNNN...

the dogs bark in the desert, but the caravan moves on.

I couldn't care less if these guys where white, black, green or purple, they levered up on low interest rates like idiots and now they will pay the price. I think Dubia does have a future in the next 20 years simply because of the amount of people in the area but its nice to see them get burned for their stupidity.

[midas]

serves the European Union right to invite all kind of clownish or corrupt countries to join. next perhaps Ukraine, Kazakhstan, the Christmas Islands and Mongolia might be invited. fortunately global investors like me can move or hedge their holdings from any currency to another within minutes

Is that all there is to this type of crisis ?

All I can see is a steadily growing number of countries ( not only in Europe ) facing such debts

and no solution in sight as to how they will be repaid.

[Abrak]

UAE gave Dubai US$10bn which will allow Nakheel to meet redemption of its US$3.5bn+ Sukuk bond. Seems a bit of a surprise given the bond was trading at 45 on the 9th (closed at 53 Friday - nice bit of insider trading) redeemable at 115 (today but will be paid in the next 2 weeks.)

[Naam]

UAE gave Dubai US$10bn which will allow Nakheel to meet redemption of its US$3.5bn+ Sukuk bond. Seems a bit of a surprise given the bond was trading at 45 on the 9th (closed at 53 Friday - nice bit of insider trading) redeemable at 115 (today but will be paid in the next 2 weeks.)

and the gloom&doomers pull their index finger from where the moon doesn't shine, lick it and take a deep breath

[Naam]

for the record: paying the suquq bond was a matter of prestige. restructuring of other debt (at least stretching maturities) cannot be avoided.

[Naam]

serves the European Union right to invite all kind of clownish or corrupt countries to join. next perhaps Ukraine, Kazakhstan, the Christmas Islands and Mongolia might be invited. fortunately global investors like me can move or hedge their holdings from any currency to another within minutes

Is that all there is to this type of crisis ? All I can see is a steadily growing number of countries ( not only in Europe ) facing such debts and no solution in sight as to how they will be repaid.

no it is not all Midas. debt has nothing to do with the crisis we are facing! there is hardly any country which has the capability of ever repaying its debt. the latter was never meant to be. the debt can only be rolled over and refinanced with new debt. that works as long as productivity and (real not fake) GDP is sufficient high to cover the rollovers and service the new debt. and this can go on INFINITELY.

in other words: NO SOLUTION REQUIRED TO PAY BACK ANY DEBT!

i know that is something hard to believe. but i am stating nothing but facts.

[midas]

serves the European Union right to invite all kind of clownish or corrupt countries to join. next perhaps Ukraine, Kazakhstan, the Christmas Islands and Mongolia might be invited. fortunately global investors like me can move or hedge their holdings from any currency to another within minutes

Is that all there is to this type of crisis ? All I can see is a steadily growing number of countries ( not only in Europe ) facing such debts and no solution in sight as to how they will be repaid.

no it is not all Midas. debt has nothing to do with the crisis we are facing! there is hardly any country which has the capability of ever repaying its debt. the latter was never meant to be. the debt can only be rolled over and refinanced with new debt. that works as long as productivity and (real not fake) GDP is sufficient high to cover the rollovers and service the new debt. and this can go on INFINITELY.

in other words: NO SOLUTION REQUIRED TO PAY BACK ANY DEBT!

i know that is something hard to believe. but i am stating nothing but facts.

You are right............I am sorry but its almost impossible to believe that such a situation can go on " INFINITELY "

as is your statement " debt has nothing to do with the crisis we are facing " ?

" as long as productivity and (real not fake) GDP "

And that is the point - the countries which the OECD recently warned have no real potential to grow their productivity -what do they make - nothing?

Anyway I would no longer trust what any government is telling me so how will I ever know if its real or fake GDP?

Edited December 14, 2009 by midas

[pkrv]

Funny you mention this. Tall towers tend to always be built during market tops. Check out the link The Erection Index

I quite like the Erection Index but I do not think there was enough historical precedence in the article IMO it should have included - Stone Hedge, The Mayan Pyramids, The Aztec Pyramids, The Egyptian pyramids, The seven wonders of the world, as well as the latest editions - I wonder if it is possible to ascertain the penis size of those who instigated such projects - I suspect it to be inversely proportional to the size of the Erection.

Edited December 14, 2009 by pkrv

[Abrak]

that works as long as productivity and (real not fake) GDP is sufficient high to cover the rollovers and service the new debt.

Absolutely true but that caveat is an extremely big one. Typically productivity of capital is falling in emerging markets. And falling productivity means you need ever increasing amounts of debt to fuel the same growth. Say in China investment has grown faster than GDP in everyone of the last 10 years - almost by definition that means return on capital has fallen. In the current year loan growth is about 30% of GDP and GDP is increasing say 8%.

[midas]

that works as long as productivity and (real not fake) GDP is sufficient high to cover the rollovers and service the new debt.

Absolutely true but that caveat is an extremely big one. Typically productivity of capital is falling in emerging markets. And falling productivity means you need ever increasing amounts of debt to fuel the same growth. Say in China investment has grown faster than GDP in everyone of the last 10 years - almost by definition that means return on capital has fallen. In the current year loan growth is about 30% of GDP and GDP is increasing say 8%.

Is this why so many people ( like Joe Biden )talk about spending your way out of debt ?

[Naam]

back to the topic of the thread. Abu Dhabi bailed out today Dubai's corporate suquq bond of debtor Nakheel which has matured. the muslim and aYrab haters can go back to their dark corners and keep on masturbating.

[Naam]

Funny you mention this. Tall towers tend to always be built during market tops. Check out the link The Erection Index

I quite like the Erection Index but I do not think there was enough historical precedence in the article IMO it should have included - Stone Hedge, The Mayan Pyramids, The Aztec Pyramids, The Egyptian pyramids, The seven wonders of the world, as well as the latest editions - I wonder if it is possible to ascertain the penis size of those who instigated such projects - I suspect it to be inversely proportional to the size of the Erection.

erection index = bullshit² for those who believe in the tooth fairy

[pkrv]

that works as long as productivity and (real not fake) GDP is sufficient high to cover the rollovers and service the new debt.

Absolutely true but that caveat is an extremely big one. Typically productivity of capital is falling in emerging markets. And falling productivity means you need ever increasing amounts of debt to fuel the same growth. Say in China investment has grown faster than GDP in everyone of the last 10 years - almost by definition that means return on capital has fallen. In the current year loan growth is about 30% of GDP and GDP is increasing say 8%.

Is this why so many people ( like Joe Biden )talk about spending your way out of debt ?

Yes you borrow more to get out of debt - (Fractional Reserve System, Fractional Reserve Requirements, and a system that is probably going to go bang) but not the end of the world. People adapt to change, and those in power resist change because it is not to their advantage.

Case in point religious people are not allowed to study new found texts on their religion by themselves, they are now accompanied by academics otherwise how else would we have found out that Jesus had older brothers and sisters (so much for the virgin Mary) In the past it was burn them (text, people whatever) and rewrite it themselves.

I suppose creating more debt in an unsupervised manner, i.e. by not being supervised by rational people, is a testament to the same process - the wisdom of assigning a pack of hyenas to protect a flock of chickens.

Edited December 14, 2009 by pkrv

[LaoPo]

sorry: something went wrong.

Edited December 14, 2009 by LaoPo

[LaoPo]

back to the topic of the thread. Abu Dhabi bailed out today Dubai's corporate suquq bond of debtor Nakheel which has matured. the muslim and aYrab haters can go back to their dark corners and keep on masturbating.

I'm a bit surprised by your reaction as if all problems are over for Dubai, now that Abu Dhabi (read: the Sheikh) bailed Dubai out with a first $10 Billion. More to come, since the 10 Billion won't be enough to settle all debts.

I see it simple:

big rich Abu Dhabi brother Sheikh Khalifa bin Zayed Al Nahyan talked to his bravour megalomaniac "brother" the Emir Mohammed bin Rashid Al Maktoum from Dubai and told him to shut the f_kc up with his idiotic developments and that from now on Abu Dhabi (behind the velvet curtains of the palaces) will take over.

The UAE member coalition is at stake and they know it.

But, I'm sure Sheikh Khalifa is not amused with the developments in Dubai....au contraire

In the news they speak of a so called "government to government" bail out and aid/help...whatever they want to call it, from one UAE state to the other.

In factual life there's just one or two people who're deciding what will happen next and the Sheikh of Abu Dhabi is, no doubt, the most powerful man.

Dubai is the creation of just one man, Emir Mohammed, and because of the feudalistic regime and hierarchy there was nobody (able) to keep him in line.

We know the results and that Dubai is to be considered as a mega-bubble which exploded into thin air, blown away into the sandy desert.

We haven't seen the real problems yet since there are laws in place which forbid to publish negative news about the UAE member states (within the UAE of course) and/or companies.

LaoPo

[LaoPo]

........ there are laws in place which forbid to publish negative news about the UAE ....

LaoPo

You aren't allowed to question the bubble.

The United Arab Emirates has a recently enacted media law which makes negative economic reporting a crime.

Drafted in early 2009 as a response to market turmoil, this must be a pretty difficult law to follow right now.

From: http://www.businessinsider.com/why-dubai-w...n-the-bubble-10

LaoPo