Dubai rebounds after merger called off

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The Dubai stock market bounced back on Thursday after Emaar, a leading real estate developer said that it was breaking off talks to merge with three weaker competitors.

Emaar, 32 per cent owned by the government of Dubai and the developer of Burj Dubai, the world’s tallest building, is a bellwether stock of the Dubai Financial Market. Its shares surged 15 per cent to hit their maximum daily limit while Arabtec, a major contractor, also gained strongly.

The Dubai market, which has been hard hit by worries over the emirate’s debts, gained 7 per cent to close at 1,641 points.

Emaar said on Wednesday that it was calling off talks with the real estate subsidiaries of Dubai Holding, a conglomerate owned by Sheikh Mohammed bin Rashid Al Maktoum, the emirate’s ruler, on the grounds that a merger was uneconomic.

Investors took this as a sign that the real estate developer would not be included in a restructuring exercise that so far includes a nominal $26bn in assets of another government-controlled conglomerate.

”The systemic risks have gotten worse over last couple of weeks. Dubai Holding most likely will need to restructure some of the loans on their balance sheet. It does not appear to be in as much trouble as Dubai World – but it has problems,” Saud Masud, head of research at UBS in Dubai, said on Thursday.

Other markets in the Middle East, which have been suffering as a result of Dubai’s problems, rose slightly on Thursday. Qatar gained 1.2 per cent, Abu Dhabi rose 1.4 per cent and Egypt 0.7 per cent. Saudi Arabia, the region’s largest stock market, was closed.

Elsewhere, a payment acceleration clause in a $2bn Dubai Electricity and Water Authority loan, triggered by rating downgrades, has been temporarily waived by creditors ”for the purpose of renegotiating the terms of the transaction”, Moody’s said on Thursday.

The acceleration had initially meant that government-guaranteed DEWA had to repay the facility by next Monday, causing some concern among bankers.

”Moody’s does not view this voluntary waiver of the specified event occasioned by the downgrade of the ratings of the notes by the other rating agencies to be a ’distressed exchange’ as the waiver does not impose any economic losses on noteholders relative to the original promise to pay,” the ratings agency said in a statement on Thursday.

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