Dubai stocks jump on $9.5 bn bail-out for Dubai World
March 25th, 2010 - 8:13 pm ICT by IANSDubai, March 25 (DPA) Dubai’s main stock market index jumped nearly 3.5 percent Thursday morning, following the government’s announcement it would extend $9.5 billion in new aid to troubled giant Dubai World.
The upward movement came in the first hour of trading following the government’s announcement.
The new aid will bring to $20 billion the amount of money the governments of Abu Dhabi and Dubai have offered Dubai World and its real estate subsidiary Nakheel since Dubai World announced in November that it would seek to restructure its debts.
That announcement unnerved investors and sent the stock exchange tumbling, until Abu Dhabi, Dubai’s petroleum-rich neighbour and the capital of the United Arab Emirates, announced a bail-out package.
Dubai World and Nakheel would announce a restructuring plan to “put both companies on a sound financial footing and allow them to realize the full potential of their underlying businesses,” the government said in a statement.
Dubai World is looking to negotiate the terms of $23.5 billion in debt.
The package announced Thursday would include $5.7 billion previously extended by Abu Dhabi, while the rest would come from “internal Dubai Government resources”, the government said.
The restructuring process is expected to take several months to complete, the government said, adding that “Dubai World and Nakheel will also present revised business plans, which take into account the current business environment and reflect the new direction being given to both companies.”
The government committed $1.5 billion to support Dubai World’s new business plan, and would convert $8.9 billion in debt to equity. Nakheel will receive funding of $8 billion, and the government would convert $1.2 billion in debts to the government to equity.
“The government understands that this restructuring process has been a difficult time for all parties,” the government said. “Our financial support demonstrates our commitment to finding a fair and equitable solution for all stakeholders in the wider interest of the economy.”
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