Dubai World’s $60B liabilities to affect Emirate’s total debt

It has been brought forth by the recent figures that nearly $60 billion is held by government-owned Dubai World in liabilities on its balance sheet. This has raised concerns that debts of sheikhdom might be much more than thought earlier.

A statement posted on NASDAQ Dubai's Web site on 31st July specified that the conglomerate had sum of 217.8 billion U. A. E. dirhams ($59.1 billion) in liabilities against AED365.8 billion in assets at the end of last year. A company's legal debts or obligations arising from its business operations are called liability.

When the emirate started to come to terms with the global financial crisis last year, it was announced that debt held by Dubai and its government-related entities will be $80 billion; however, the latest figures reflect that it will be much more than the official estimate.

According to Fahd Iqbal, an analyst at investment bank EFG-Hermes, "The $60 billion is very large and raises concerns and questions." He added that it is tough to determine the effect that the consolidated figures will have on the emirate's total debt position.

As a part of its obligations on a $3.5 billion sukuk due in December, Nakheel was compelled to expose the details of its mother company. It won't be wrong to say that no matter whether the bonds are refinanced or paid off, it is weighing enormously on the minds of analysts rating Dubai's government-owned companies.

Farouk Soussa, an analyst with ratings agency Standard & Poors, which recently downgraded the credit worthiness of a number of Dubai government-controlled companies, said: "The fact that the government is not sending a message of unambiguous support for Nakheel raises doubt in the market regarding the extent to which the government will relieve investors of the substantial refinancing risks of Dubai Inc. generally."