Dubai World given easier path to recovery by emirate leaders

Dubai removed a stumbling block in talks with lenders today by saying it was not seeking preferred creditor status in the restructuring of state-owned Dubai World.

The Dubai government, acting through the Dubai Financial Support Fund, has given the debt-hit conglomerate about $6.2 billion over the past 12 months and plans to provide more.

Collateral for further aid was cited as an impediment to a deal over Dubai World's burden as it would make the DFSF a preferred creditor in the event of an insolvency.

"All creditors, including the government, will be treated on an equal basis," said a government spokeswoman.

Dubai World is negotiating the terms of a $22 billion debt restructuring plan after rocking global markets in November with plans to request a delay in repaying $26 billion in debt linked to its main property units Nakheel and Limitless World. It staved off default on a $4.1 billion Islamic bond linked to Nakheel, after a last minute bailout from Abu Dhabi.

Today Dubai newspaper the National said the government would "take its share of any exposure" in the restructuring of Dubai World, citing a person familiar with the talks between the conglomerate and its creditors.

"If it [helping international banks to recover from the Dubai World restructuring] will be at the expense of the government of Dubai, then so be it," the source told the National. "That stops short of saying they [the banks] will get full recovery, but it means the government will take its share of any exposure."

In Abu Dhabi, the director-general of the Arab Monetary Fund, Jassim al Mannai, said he expected Dubai to reach a speedy resolution on the debt talks to limit any further damage to their image: "Their reputation is not just for today so they are keen to reach a satisfactory solution fast."

Mannai said the fund stood ready to provide financial aid to any member but did not expect Dubai to come knocking. "I don't expect Dubai will be in need of the AMF assistance. They'll find many ways of settling the debt problem."