Dubai reaches deal with Abu Dhabi on $20b debt

|The Arabian Post Special|

Reports suggest Dubai has reached an agreement with Abu Dhabi on $20 billion of debt, which it arranged to avert a payment default in the wake of Dubai’s crippling financial crisis.

“The rumor is that Abu Dhabi has reached an arrangement with Dubai over the $20 billion payment,” Reuters quoted Mohammed Ali Yasin, managing director of NBAD Securities LLC, as saying on phone. The speculation is that Abu Dhabi “may not need to be paid back. Instead it may be turned into a supporting vehicle for Dubai,” he said.

Abu Dhabi and the central bank of the United Arab Emirates lent the funds to Dubai to help save the Persian Gulf business hub from a default in 2009. Dubai, whose economy relies on trade, tourism and real estate, was forced to seek help after property prices lost more than half their value amid the global financial crisis.

The Dubai Media Office and Abu Dhabi’s Department of Finance didn’t immediately respond to e-mailed questions.

Buoyed by the positive sentiment created by the news, Dubai’s benchmark stock index rose the most since September. The DFM General Index jumped 3.6 percent, the most since Sept. 15, to 3,819.02 at the close in Dubai. The measure, which more than doubled last year, was the best performer among 90 benchmarks tracked by Bloomberg. Arabtec Holding Co., which helped build the world’s tallest tower, surged 9.8 percent, while Emirates NBD, the sheikhdom’s biggest bank, rose to the highest since 2008. Abu Dhabi’s index gained 1.7 percent.

Shares with a value of 2.97 billion dirhams ($809 million), or about three times the three-month daily average, traded in Dubai. Arabtec surged to 4.15 dirhams. The stock was the biggest gainer by index points on the benchmark. Emirates NBD advanced 5 percent to 7.35 dirhams.

Emaar Properties, which has the highest weighting on the index, rose 2.2 percent to 8.02 dirhams.

“The way the DFM index moved indicates that it’s pricing in an event, which will reflect positively on Dubai as a whole, rather than just the stock market,” Yasin said.