* Debt was to mature next month
* Roll-over was widely expected in markets
* Rate below original 4 pct, for "a minimum of 10 years"
* Will let Dubai keep spending on Expo, infrastructure
* No word on another maturity of up to $10 bln in November
By Mirna Sleiman and David French
DUBAI, Feb 19 Dubai has reached agreement on
rolling over $10 billion in debt extended by the central bank of
the United Arab Emirates during the global financial crisis,
sources familiar with the matter told Reuters on Wednesday.
The emirate borrowed the money five years ago to help the
sovereign and its government-related entities (GREs) avoid
default during the crisis, when Dubai's real estate market
crashed and loan markets froze.
The debt, in the form of bonds sold to the central bank, was
due to mature next month.
"The deal is done," one source said, declining to be named
because the matter has not been formally announced.
The previous bonds carried a 4 percent coupon; the sources
said the debt would be rolled over at a lower rate. One said the
roll-over would be for "a minimum of 10 years", but declined to
give further details.
In a brief statement, the central bank said it was too early
to talk about the bonds because they had not expired yet. It did
not elaborate, and government officials declined to make any
The roll-over, which had been widely expected in financial
markets, will enable Dubai to continue spending heavily to
develop its infrastructure and market itself as a regional
centre for finance, trade and tourism.
Last November, the emirate won the right to host the 2020
World Expo. The government has said it expects infrastructure
spending for the event to total some $6.8 billion; overall
Expo-related spending, including private sector projects, may
reach $18.3 billion, HSBC estimated.
Dubai is now recovering strongly from its crisis, thanks to
a resurgent property market and its success in attracting
foreign money, but it still faces major liabilities in coming
years. The International Monetary Fund estimates about $78
billion of debt held by Dubai and its GREs will come due between
2014 and 2017.
Much of this is the legacy of the crisis: payments agreed
between the emirate and its lenders under multi-billion dollar
debt restructurings for state-linked conglomerates, such as a
$25 billion debt reorganisation by Dubai World.
Some of Dubai's GREs have been partially repaying some of
their liabilities in recent months as local economic conditions
improve and they seek to reduce their borrowing loads.
Property developer Nakheel, taken over by the
government in 2011 in a $16 billion rescue plan, said last month
it would repay $1.1 billion a year early.
However, a repayment as large as $10 billion could have
diverted cash away from investment. The fact that the debt was
to a federal entity, not commercial lenders, meant rolling it
over was not controversial for the markets.
"The decision to roll over, rather than to reduce the
outstanding sum through alternative refinancing or through
partial repayment, means that the liquidity situation in Dubai
remains very comfortable and should be supportive of broader
Dubai asset valuations and economic growth," said Farouk Soussa,
regional chief economist for the Citigroup.
In November, the Dubai government will face the maturity of
as much as $10 billion of five-year bonds and sukuk which two
Abu Dhabi banks - National Bank of Abu Dhabi and Al
Hilal Bank - agreed to buy from the emirate as part of the
Neither the banks nor the Dubai government have said how
this debt will be handled, but many in the markets, including
Soussa, expect it to be wholly or partly rolled over.