Official: Dubai won’t aid investor

DUBAI, United Arab Emirates -- Dubai World, MGM Mirage's cash-strapped partner for CityCenter, appears to be set for an period of retrenchment after the emirate's top finance official said Monday the company may need to change course and unload assets to pay lenders.

What eventually gets sold remains uncertain. Clearer is the city-state's position that the government won't be responsible for Dubai World's debts, renewing questions about its backing of other state-run companies.

"Like any company that has commitments, part of getting liquidity is selling some assets," Dubai Finance Department Director-General Abdul Rahman al-Saleh said in an interview aired Monday by Arab satellite channel Al-Jazeera. "Of course, local or foreign assets. These are assets of a company, not assets of a government."

He also said that the restructuring was aimed at keeping Dubai World viable.

The comments appeared to cement concerns that Dubai was washing its hands of debts racked up by companies it created and backed during the city-state's frenetic boom years this decade. Easy money and unbridled ambition transformed the tiny sheikdom from desert hamlet to pulsing Arab boomtown.

Dubai's main exchange fell 5.8 percent Monday, with stocks sinking to their lowest level in more than four months.

The sale of any major Dubai World holdings would mark a stark about-face for the conglomerate, which repeatedly downplayed talk it might need to unload pieces of its rapidly acquired global empire even as Dubai's financial concerns grew more acute over the past year.

That perception began to shift last week when the company announced that its restructuring would include an assessment of options to reduce its debt load, "including asset sales."

"This is the inevitable next step, really," said Christopher Davidson, a University of Durham professor who has written extensively about the history and politics of the UAE.

Davidson and others said they expected that some of Dubai World's overseas property would be among the first on the auction block.

"It's damaging for their reputation, but it doesn't do much to alter the status quo back home," Davidson said.

A Dubai World spokeswoman declined to comment.

Dubai World has already taken off the bargaining table some key assets, including its profitable port operator.

Other state-run crown jewels not part of the conglomerate, such as the Middle East's biggest airline Emirates, are also unlikely to be sold for now, analysts say.

Emirates airline President Tim Clark said in an e-mailed response to questions he was unaware of any plans to sell part or all of the carrier.

"This would be a decision for our shareholder, the government of Dubai," he said.

Clark added, however, that like Dubai World's, "none of Emirates' debts are guaranteed by the government."

Dubai World's story was essentially that of Dubai -- a heavy reliance on borrowed money in recent years to carve out markets far beyond the tiny emirate's shores while building up the city-state, one of seven semiautonomous entities making up the United Arab Emirates.

Dubai World bought a stake in City Center, which is in the process of opening on the Strip, for about $5.4 billion. It also runs the world's fourth-biggest seaport operator, DP World, with operations on six continents. Its wide-ranging investment portfolio includes luxury retailer Barney's New York and a stable of high-end U.S. hotels.

Its holdings are so diverse and spread out that its slogan boasts: "The sun never sets on Dubai World."

The government said Dubai World would request a delay in paying some of the $60 billion in debt coming due, including those of its real estate arm, Nakheel. That subsidiary has $3.5 billion in bonds that must be paid or refinanced by next week.

Many lenders in Dubai and abroad lent Dubai World money on the assumption that, as a company controlled by the government, it had implicit state backing.

"Banks believed the Dubai government ... would not want to risk its reputation, but (the) government effectively called their bluff" when it asked for new repayment terms, said Jan Randolph, director of sovereign risk at IHS Global Insight.