What exactly is going on in Dubai?
Comments by an analyst at Standard & Poor’s – which has warned before about Dubai’s finances – suggest the emirate is running out of cash, and fast. As Dow Jones reported on Sunday:
Dubai needs to raise another $10 billion for its economic support fund as it has insufficient capital to prop up its struggling government-related companies, according to a leading analyst at Standard & Poor’s.
“Dubai has about $4 billion to support government-related entities,” Farouk Soussa, head of Middle East government ratings at S&P, told delegates Sunday at a Dubai International Financial Centre economic conference. “From our point of view, that’s insufficient.”
In February, Dubai received a$10bn cash injection from the United Arab Emirates, but that seems not to have been enough. According to Soussa, Abu Dhabi may need to step up with another bailout.
By S&P’s estimates, within the next three years Dubai will need to refinance about $50bn of debt; its total debts exceed $80bn, Dow Jones said.
But that’s not the only Dubai-related headline that caught our attention on Monday. According to a report in the Wall Street Journal:
Jewelry retailer Damas International Ltd. said Monday it accepted the resignation of Tawhid Mohammed Taher Abdulla as its chief executive after he disclosed alleged “unauthorized transactions” that could total about $165 million.
Damas said in a statement that Mr. Abdulla, a member of the family that controls the company, had told the board about “what is understood to be unauthorized transactions conducted by him. The full extent of these transactions has not been ascertained at this time but the company’s initial estimate is that these transactions could amount to approximately $165 million.”
For the record, Damas is a publicly listed company – it raised $270m in its IPO in July 2008. But as the Journal noted, scandals of this sort aren’t exactly uncommon:
The resignation is the latest corporate scandal to engulf Dubai after a series of damaging investigations that began 18 months ago led to the arrest of dozens of senior executives at some of the sheikdom’s biggest companies.
Not exactly a reassuring picture, then.
Related links:
Do buy Dubai, Merrill says – FT Alphaville
Two tales of a city – and Dubai’s luxury car giveaway – FT Alphaville
Investors reassured by Dubai bail-out – FT
Bailing out Dubai – FT