THE news this week that Dubai World had requested a six-month repayment moratorium on its $59 billion debt – representing most of the country’s offi cial $80 billion or so debt – produced panic in the world’s stock markets, sparked by fears that banks had large debt exposures to state companies in Dubai.
As the markets digest their shock over Dubai World – the Gulf state’s government-owned conglomerate behind some of the region’s highest-profi le property and sports projects – the question now is the potential indirect impact on European economies of Dubai’s economic diffi culties in general and the $12 billion in syndicated and bilateral loans extended by international banks to Dubai World in particular.
On Friday, Central Bank Governor Athanasios Orphanides indirectly confi rmed that Cypriot banks do not feature among Dubai’s creditors. He said that “there is always an immediate impact” to such news, “but I do not have any information that would cause me particular concern regarding an immediate knock-on effect”.
But fi nancial links do exist.
Dubai Holding, one of the emirate’s largest business conglomerates, owns Dubai Group, whose fi nancial holding company, Dubai Financial Group, is said to own 17 per cent of Marfi n Popular Bank (MPB) and 20 per cent of Marfi n Investment Group (MIG).
Dubai Group Executive Chairman Soud Ba’alawy is also a director of MPB.
Both MPB and MIG were quick to shore up their share prices by publicly distancing themselves from Dubai World’s fi nancial diffi culties. They issued nearidentical press releases on Friday, saying that the operating performance of each company is not affected by “the recent developments in Dubai”.
MPB said that it “has not provided any credit facility, fi nancing or loan of any form to the State of Dubai nor to any company related or associated to the State of Dubai.
Therefore, there can be no impact whatsoever to the fi nancial results of the Bank arising from any developments in Dubai.” Similarly, MIG said that it “does not have any common investment, common interest or co-operation at a corporate level with the State of Dubai nor with any company related or associated to the State of Dubai”, so its fi nancial results will not be impacted either.
Both announcements stated publicly something that has been talked about informally for some weeks: that, although there is “no offi cial information regarding the full intentions of Dubai Financial Group regarding a full or partial disinvestment of their shares” in either MPB or MIG, “other strategic shareholders” of both companies have indicated their willingness to buy up any shares the Dubai company might decide to sell.
In terms of other economic activity, Cyprus Chambers of Commerce & Industry (KEVE) President Manthos Mavromatis said yesterday that so far there is no indication that any of the ten or so Cypriot companies currently active in Dubai – especially in construction and metalworking – might be affected by the latest developments.
However, he did not rule out the possibility in the future.
