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Dubai World announces new debt agreement

Dubai World, the state-owned conglomerate at the centre of the Dubai economy, has today announced a deal in principle regarding the company's US$23.5 billion of debt. While details have yet to be confirmed it is believed that the debt will be restructured after an agreement was reached in principle with the main lending banks. However, the agreement will have to be rubberstamped by other lending institutions on the outside of the core group which could take some time.

In the eyes of many people Dubai is a perfect reflection of the ups and downs of the worldwide economy over the last decade. This is a state which literally came from nowhere to become one of the leading property centres of the world with an economy which has grown exponentially over the last 10 years. However, much of this growth was financed by debt taken on by the state resulting in a number of financial difficulties and last year's refusal to cover debt payments for one of the state controlled property companies.

Today's announcement of an outline agreement regarding debt restructuring is something of a foregone conclusion because ultimately the banks have no option but to agree otherwise they stand to lose potentially everything.

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