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Dubai’s escape from default escalates sukuk uncertainty

Date: 13 Jan 2010

The state’s property developer received a bailout from Abu Dhabi to spare it from defaulting on its debt. But some would like to have seen the default proceed to throw light on investor rights in sukuk issues. Chris Wright reports.

Keywords (click to search): [Islamic finance] [sukuk] [Dubai] [Nakheel Development] [Investment Dar] [East Cameron Partners] [Ayman Adel Khaleq] [Dino Kronfol] [Badlisyah Abdul Ghani]

Late last year Dubai went to the brink of defaulting on US$10 billion of debt.

The decision of United Arab Emirates (UAE) capital Abu Dhabi on December 14 to supply Dubai with US$10 billion allowed it to forestall, at the very last moment, a default on the world’s largest ever sukuk (the Islamic equivalent of a bond) – the US$3.52 billion issue by Nakheel Development that matured on the same day.

Nakheel – “where vision inspires humanity”, as its tagline continues to trumpet – is the backer of the vast palm-shaped property developments that are sprouting into the Gulf, among the most iconic projects in this most ambitious of cities. In ownership and symbolism, Nakheel is Dubai.

This importance was evidently not lost on neighbouring Abu Dhabi, which was willing to put up the needed capital at the last possible instance.

But that final reprieve does not repair...

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