Dubai World to meet creditor panel on debt crisis

DUBAI (Reuters) - Government-owned Dubai World will meet its main creditors next week to discuss a request to delay payment on $26 billion in debt that has shaken global markets and confidence in the Gulf Arab business hub.

The meeting would be the first formal encounter between Dubai and key lenders since the conglomerate that spearheaded Dubai's rapid growth disclosed its debt woes on Nov 25.

An Abu Dhabi bank executive, who asked not to be named, said London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland, along with local lenders Emirates NBD and Abu Dhabi Commercial Bank were on the creditors panel.

The banks did not immediately confirm their participation on the committee that an Asian-based banking analyst said was likely to reflect those with greatest exposure to Dubai World, whose debts were run up during a property boom that turned to bust with the global financial crisis last year.

But a source at a Dubai-based bank confirmed the makeup of the panel.

Dubai World has asked creditors of its flagship property firms Nakheel, developer of three palm-shaped islands in the Gulf, and Limitless for a six-month debt repayment standstill as part of a restructuring plan. The most urgent question is the fate of Nakheel's $3.52 billion Islamic bond, which matures on December 14.

Dubai, part of the seven-member United Arab Emirates federation, said the government would not guarantee the debts of Dubai World, whose overall liabilities total almost $60 billion, including those of units not part of the restructuring.

The International Monetary Fund said on Tuesday that banks from Britain are the most exposed to the conglomerate which boasts the motto "The Sun Never Sets on Dubai World."

UAE markets, battered in the last two days, were shut for the country's national day holiday, but Qatar's bourse defied analyst expectations by climbing nearly five percent after plunging more than eight percent on Tuesday.

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The Dubai debacle, which initially spooked global stock, debt and currency markets, has exposed the frailties of "quasi-sovereign" lending.

Foreign banks had lent to Dubai government-linked firms on the implicit understanding that they were backed by the UAE -- the world's third largest oil exporter that was flush with cash from a six-year boom in oil prices.

"Something that has irritated international investors is that the government distanced itself from Dubai World, which legally speaking is true, but morally speaking, they had gone out of their way before to make that tie," one investor said.

Moody's said on Tuesday that possible multiple defaults related to Dubai World's debt restructuring could lead to downgrades in UAE bank ratings, but international banks exposed to the conglomerate are unlikely to be affected.

The ratings agency estimated the Dubai government and its related entities have debt of $100 billion -- higher than the market estimate of around $80 billion.

UAE leaders have put a brave face on the Dubai debt shock.

"The economy of the UAE is solid and is based on proper foundations and is able to face crises and challenges no matter how difficult they might be," Economy Minister Sultan bin Saeed al-Mansouri said in remarks for the federation's national day.

Anshuman Jaswal, an analyst with Celent, a Boston-based financial research and consulting firm, said Dubai World's planned restructuring had shown the need for transparency.

"The panic caused could have been at least partly averted if there was clarity about the fact that debt worth $26 billion needed to be restructured," Jaswal said.

"Secondly, companies such as Dubai World can no longer be seen as having the protection of their respective governments. This is true all over the region and not just in Dubai."

Fears of global contagion have eased and European finance ministers said on Tuesday that Dubai's debt troubles would have little impact on their region, which is emerging from recession.

But they will surely put a crimp in the emirate's breakneck expansion -- to the relief of some outnumbered Emiratis who had growing misgivings as their rulers brought ever more foreigners and their liberal ways into the conservative Gulf Arab country.

"I don't have anything to lose in this financial crisis," said Ebtisam al-Kitbi, a politics professor at the UAE University in al-Ain. "As an activist and academic, I view it as an advantage for us as Emiratis."

(Additional reporting by Stanley Carvalho in Abu Dhabi and Andrew Hammond in Dubai, writing by Alistair Lyon, editing by Lin Noueihed)

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