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Dubai state creditors set to do battle

There are rumours in the financial markets that bankers, lawyers and accountants are making their way to Dubai over the next few days as creditors look to begin a hard fought battle to claim back money loaned to the Dubai World company. As we have mentioned on numerous occasions over the last few days, Dubai World has asked for a period of suspension with regards to debt repayments on its $26 billion debt pile.

While many believed that the company was officially part of the state, with the Dubai authorities the main investor, the authorities have tried to wash their hands of the situation. However, in what is becoming an ever more fraught and potentially explosive situation, banks around the world are now crowding around Dubai and looking to the ruling authorities to reconsider their position. Even though the authorities today confirmed they would not "stand behind" Dubai World there are many who believe this position will change in the short to medium term.

It is difficult to know how and why the Dubai authorities have effectively walked away from Dubai World when they have been a prominent investor and backer of the operation. Would worldwide banks have lent money to Dubai World if they thought the authorities were not backing the company?

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