Saturday, November 28, 2009

The Relationship Between Dubai and Dubai World

There have been a couple of comments left at EPJ and comments throughout the media suggesting that the government of Dubai is not responsible for debt of Dubai World, and this is technically correct. In a number of DW debt raising documents, it is clearly stated that the government of Dubai is not responsible for the debt of DW. That said, it is unlikely that DW would have been able to raise a cent if the expectation wasn't there that Dubai was back stopping the debt.

Indeed at DW's web site they at one point promote the fact that they are 100% owned by the government of Dubai
Istithmar is an alternative investment house based in the United Arab Emirates. It is 100% owned by Dubai World, which is in turn wholly owned by the Government of Dubai.
The current situation isn't a case of legal technicalities where Dubai has the money to backup DW and doesn't want to pay up. Dubai doesn't have the funds, if they did they would backstop DW.

This is a de facto default by Dubai, and has serious implications for its future money raising abilities.

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