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Dubai World to get $9.5bn boost

Dubai - Dubai's government said Thursday it will pump up to $9.5bn into its chief conglomerate Dubai World and a key subsidiary as part of a long-awaited restructuring plan to rescue it from crippling debt.

The proposal, which still needs approval from creditors, comes after months of talks following Dubai World's bombshell announcement in November that is would seek delays in repaying $26bn in debt - which has symbolised Dubai's plummet from boom years to lean times as the global downturn ravaged the city-state's ambitious growth plans.

Dubai has received $20bn in emergency funds from its oil-rich neighbor Abu Dhabi, which is also the capital of the United Arab Emirates, a seven-state federation of which Dubai is part.

On Thursday, the chairperson of Dubai's supreme fiscal committee said in a statement that the support aims to ensure Dubai World and property development arm Nakheel are "key contributors to the strong economic future" of the city-state.

Sheik Ahmed bin Saeed Al Maktoum, who is also the uncle of Dubai's ruler, says the new funding will include $5.7bn of the remaining funds from a bailout by neighboring Abu Dhabi and "internal Dubai Government resources."

Dubai's government said it plans to ask all its creditors to agree to restrucure their Dubai World loans. As part of that deal, the government plans to recapitalise the conglomerate by offering as equity an $8.9bn claim in the company, while also pumping in $1.5bn in new funds, according to the statement.

Nakheel plans to present its own offer Thursday. That deal will call on banks to restructure their debt "at commercial rates," while other creditors still owed repayment "will be offered a significant cash payment shortly and a tradable security," according to the statement.

Sheik Ahmed made clear that Nakheel, whose future has been in doubt, remained a core part of Dubai's economy.

"The Nakheel business plan allows work to continue as soon as possible and puts Nakheel on a sound footing. The government, as shareholder, will work closely with Nakheel so that any future projects are carefully planned and evaluated," he said in a statement.

Dubai's government rattled global markets in late November when it unexpectedly announced plans to restructure its chief conglomerate Dubai World and asked creditors to delay repayments on some $26bn worth of debt until at least May of this year.

The focus of the restructuring centers on the company's Nakheel and Limitless real estate divisions. Nakheel is the developer behind Dubai's Palm Jumeirah and other manmade islands, the majority of which sit empty.

Dubai World has tried to protect some of its more prominent internationally focused assets, including profitable global port operator DP World, by exempting them from the restructuring.

Dubai's government last year received $20bn in bailout funds from neighboring Abu Dhabi, the capital of the seven-state United Arab Emirates and holder of nearly all the federation's oil wealth.

The conglomerate's talks with creditors, which include major British banks such as HSBC and Standard Chartered, as well as numerous local lenders, have been carried out behind closed doors. Dubai officials have said little about the restructuring process or the state's backing for its many government-linked companies.

The crisis, like that in Greece, has raised fears that the world's financial system remains exposed to large amounts of debt that will not be repaid in full. It also highlighted a lack of transparency within the booming oil-rich Gulf, and has forced creditors to rethink their assumptions about the region's overall financial health.

Before November, lenders had assumed that the more than $80 billion owed by Dubai's state-run companies was implicitly backed by the government. Dubai's refusal to stand unequivocally behind those loans made clear there was no such guarantee.

Dubai, which has little oil wealth of its own, rapidly grew into a bustling Middle East commercial and logistics hub packed with soaring skyscrapers, including the world's tallest, on the back of a building boom fueled by cheap credit. Many of the city-state's biggest companies are run by or have ties to the government and its hereditary ruler.

- AP

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