Dubai

The debt problems of troubled Dubai World look set to ease slightly, as HSBC Holdings, Standard Chartered, Lloyds Banking Group and Royal Bank of Scotland seemingly appear keen to reschedule the organisation’s debt.

According to a report in Dubai’s Al Bayan newspaper, the four banks will be meeting later on this month, to discuss the debt management of the struggling company.

They have asked Dubai World to provide further information about interest on the planned delayed payments.

The report added that Dubai World is seeking to restructure around $26 billion of debt.

Shares in Dubai tumbled again though yesterday across the world as Dubai’s finance minister, Abdulrahman al-Saleh, admitted that six months may not be enough to restructure Dubai World, the state-owned conglomerate which owns ailing property developer Nakheel.

It later emerged that Nakheel’s first half losses were around $3.65 billion, according to Bloomberg. This was due to huge reductions on the value of its land and developments.

Two weeks ago, the Dubai Government asked Dubai World’s creditors to grant a six-month freeze on its repayments of nearly $60 billion of debt. Dubai World then announced plans to restructure around $26 billion of its current liabilities.

The results of the anticipated meeting with creditors to restructure these liabilities are eagerly awaited, and could potentially ease the current debt crisis.

Dubai is a country associated with extreme wealth due to oil and hyper-tourism, but in recent times, many of the luxurious properties built by state-owned companies such as Dubai World have struggled to sell. Houses worth up to $2 million less than three years ago are still lay dormant and can be snapped up for $250,000. Granted that is still a lot of money, but the economy in Dubai isn’t geared to make a loss on these projects.

Dubai World have announced that they will have to delay the repayment of some of it’s debt, causing the markets in Asia to drop steeply. Some financial forecasters are worried that the weakened state of the European economies will allow the credit crunch to return. If this were to happen, global demand would dip again and commodities including oil would fall in value.

The anticipatory effect has caused a fall in the price of a barrel of crude across the world, down $1.26 in London and almost 5% in the US. Share indexes in Germany, France and the UK opened down 1%.

It is difficult to see exactly how we will be affected in the UK, however, chances are this will slow any recovery being made across the country and may make the debt problems of average Britons worse.

Ivan Cooper, Chairman at Chiltern Debt Management said: “This is a very worrying situation, just as the country starts to look like it is turning a corner, something seeming unrelated starts to cause such concern.

“For those whose finances are already stretched, this could be a serious worry and seeking advice from a reputable company – like Hamilton Locke, The Debt People or Chiltern.”