Sunday, November 29, 2009

Dubai Update

by Bill McBride on 11/29/2009 11:26:00 AM

Note: I'll have a Black Friday retail post in a few hours ...

From Bloomberg: U.A.E. Central Bank Stands Behind Lenders, Adds Funds

The United Arab Emirates’ central bank said it “stands behind” the country’s local and foreign banks, which face losses from Dubai World’s possible default, and offered them access to more money under a new facility.
And from the Financial Times: UAE central bank offers credit facility
“It’s a bit disappointing .... It’s obviously a welcome measure in itself but we want to see more from the central bank. We want to see that they will guarantee the capital position of any banks that have exposure and that they will ultimately be willing to buy out the debt,” one UAE analyst said on Sunday.
excerpted with permission
Apparently the hope is that a majority of the debt due on Dec 14th is held by banks in the UAE, and that by adding liquidity, the UAE Central Bank will make it easier for the bondholders to accept the deferral of payment. However this isn't just a liquidity crisis - this is a solvency crisis (the assets are almost certainly worth less than the liabilities) - and this does nothing to address the solvency issues.

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