Exclusive: Dubai can fund rescue plan, sees "small issues"

SARAJEVO (Reuters) - Dubai has the money to pay its share of Dubai World’s rescue plan and can help other state-linked firms that may be facing “small issues,” the vice chairman of the emirate’s top fiscal body said in an interview.

An aerial view of the Dubai Marina is seen during the UIM XCat Powerboat Championships in Dubai, April 6, 2010. REUTERS/Mohammed Salem

Dubai unveiled a $9.5 billion rescue plan for Dubai World last month, as part of its offer to repay creditors of the state-owned conglomerate.

The plan relies on Dubai stumping up $3.8 billion from “internal government resources.” The remainder comes from a previous loan from wealthy neighboring emirate Abu Dhabi.

“We have money available, from companies like ICD (Investment Corporation of Dubai), quite big government dividends, so this is not an issue,” said Mohammed Al-Shaibani, who helps oversee the distribution of aid to state-linked firms through Dubai’s Financial Support Fund, set up in the wake of the financial crisis to lead bailout efforts.

Shaibani -- vice chairman of the emirate’s Supreme Fiscal Committee, which reviews debt and spending policies -- is also head of Dubai’s Ruler’s Court, the body that coordinates the activities of government departments, and chief executive of ICD, the government’s investment arm.

“We’ve issued a bond earlier, $20 billion -- $10 billion plus $10 billion. We have all kinds of resources, so this is not an issue,” he told Reuters on the sidelines of a conference in the Bosnian capital.

Dubai launched a $20 billion sovereign bond fund program in February 2009 with the UAE central bank taking up the first $10 billion tranche. Abu Dhabi and a pair of its linked banks picked up the rest.

Where Dubai would get new money had been one of the biggest unanswered questions about the debt proposal.

Dubai’s government owns equity stakes in several listed companies, including ports operator DP World, which proposed a near 20 percent dividend last month, as well as Dubai Islamic Bank, Emaar Properties and Dubai Financial Market.

Dubai World’s chief restructuring officer has said asset sales could be a part of any fund-raising plan but that there would be no “fire sale” of holdings under pressure.

Dubai rattled global markets last November when it said it would delay repayment of $26 billion in debt linked to Dubai World and its property units Limitless and Nakheel, which built man-made island groups shaped like palm trees and a map of the world.

Dubai World’s issues raised worries about whether other state-linked entities faced debt strains in the emirate, where the end of a six-year, oil-fueled boom in 2008 led to an abrupt property crash.

“There is always a possibility of some issues here and there, but nothing unusual,” Shaibani said. “Overall, we have tremendous growth, and we are doing really very well.

“We have small issues with some of the companies that over-extended themselves, and real estate-related issues, and we are ready to help them. We are doing this more than comfortably.”

Shaibani said the debt crisis was a “temporary” problem for the emirate, which used massive amounts of leverage to turn itself into a trade and tourism hub in the region.

“I don’t expect problems. We have some issues, but everything else in Dubai is growing at almost double-digit figures,” he said in the interview late on Tuesday. “Everything else is growing very, very well. We see this as something very temporary, and Dubai will recover very quickly.”

Shaibani said “almost 90 percent of all restructuring” on Dubai World was complete.

Separately, the government official expressed support for a proposed merger between the UAE’s two main stock exchanges -- the Dubai and Abu Dhabi bourses -- which are in talks.

“There is a discussion. We think on both sides it would help the UAE. We have thoughts on the integration and think it’s going to be favorable for everybody.”

A collapse in trading is spurring the UAE bourses to consolidate, with many analysts questioning the wisdom of having three stock exchanges -- DFM, ADX and Nasdaq Dubai -- in a country of 5 million people. Consolidation is expected to boost liquidity and valuations.

Writing by Amran Abocar; Editing by Thomas Atkins and Will Waterman