Dubai stock market hit by scale of Nakheel losses
UK, 9 Dec 2009
DUBAI - The full extent of the crisis facing Nakheel, Dubai's once celebrated "Palm Islands" developer, has been revealed by half-yearly figures showing a loss of $3.64bn (£2.23bn) to June.
Even more striking were the cash flow figures, with revenue down by 78pc to $540m for the company, at the centre of a crisis over calls for a debt "standstill" by its owner, Dubai World.
The news sent Dubai's stock markets plunging again on Wednesday, with a fall of 6.4pc on the general index taking it back to where it started the year.
Panic has started to spread to other state-owned companies, especially in the property sector, with Emaar, developer of the Burj Dubai, the world's tallest building, falling 9.9pc after Moody's downgraded its credit rating. Arabtec Holding, the United Arab Emirates' biggest construction firm, also fell 9.9pc over fears of its exposure to Nakheel.
In a research note, Barclays said that other "Dubai Inc" companies would have difficulty in tapping the debt market, threatening a wider contagion.
Dubai World is facing a battle with creditors over its request that they "standstill" $26bn of debt, including a $4bn Islamic bond repayment by Nakheel due on Monday.
The latest figures show how difficult it will be for Nakheel to find the money if the government maintains its stance that it does not guarantee the debt of state companies.
They also indicate the continuing crisis likely to face both the company and the emirate even if the short-term funding crisis is resolved amicably. The company said it did not have the cash to continue work on all its large stock of unfinished office blocks and its artificial island developments, which represent liabilities estimated at billions of dollars more.
The company also lowered the value of its land and properties under construction by $3.5bn. Property prices have fallen by half in the Emirate in the last year, and analysts expect further write-downs.
Other figures released on Wednesday put Dubai's financial problems in a broader context. The United Arab Emirates as a whole has made 16pc of its professional workforce redundant in last year, with Dubai being the worst hit, according to a survey by GulfTalent, a recruitment website.
The property sector was the worst hit. Pay rises continued at above the rate of inflation, though, with an average of 5.5pc across the UAE.