19. Feb 2010. DUBAI (Reuters) - Dubai's debt crisis has stifled sukuk issuance and unfairly put a damper on the Islamic finance industry, experts said, noting that an unstable credit environment and poor due diligence was to blame for the debacle.
The state-owned conglomerate Dubai World rocked global markets in November when it unveiled plans to delay repayment of $26 billion in debt as it restructures.
The company staved off default on a $4.1 billion Islamic bond linked to its property unit Nakheel after a last-minute bailout from Abu Dhabi.
Prior to the repayment, investor jitters were heightened by worries about legal ramifications and the ability to claim assets, if there was a default on the issue.
Comment:
There were wild rumours going around that defects in the whole legal structure behind Islamic finance (Islamic finance is, essentially, no conventional interest payments) meant that the lenders would not be able to recover any assets in the event of a default. This was nonsense. These rumours do, however, give rise to the important thought that, for those of us more used to conventional western forms of finance, getting involved in deals using Islamic structures needs special care and good legal advice.
As to Dubai in general, our feeling is that the fall in property prices still has some way to go (10% – 15%??) but that the views expressed to us by some clients that ‘Dubai is finished’ are far from the truth. Dubai still has the potential for being the leading commercial hub in the region and we think it will recover. Slowly.
Should you buy ‘bargains’ now? We don’t think so. There are likely to be better bargains in 6 months’ time.
Subscribe to:
Post Comments (Atom)
Its really great concept chosen in this post. This includes lot of interesting information which is really useful to everyone. Real estate for sale ads
ReplyDelete