UAE newspaper criticizes markets for overreacting to Dubai World's debt plan

ABU DHABI, Nov. 27 -- The herd instincts of global markets and media over dramatized the request for a freeze on debt payments by Dubai World, one of Dubai's largest and most important conglomerates, a state-run newspaper said Friday.

"With the U.S. on its Thanksgiving holiday, the Middle East on Eid al Adha, and trading on the London Stock Exchange temporarily closed for technical reasons, the environment yesterday was ripe for rumor and sensation," The National said in an editorial.

Recent stories about debt-ridden Dubai World's troubles provided the essential raw material for rumors in financial markets, the newspaper added.

Dubai, a member of the oil-rich federation the United Arab Emirates (UAE), announced Wednesday that it would ask creditors of Dubai World, one of the country's leading holding companies that includes port operator DP World and property developer Nakheel, to agree to a debt moratorium of at least six months as a first step towards restructuring.

It is reported that Dubai World has 59 billion U.S. dollars of liabilities, representing almost three fourths of Dubai's total debt of 80 billion dollars.

The announcement, described by ratings agency Standard and Poor's as a default, provided the focus for world financial markets Thursday, hitting bank stocks and the price of oil, but lifting the dollar on a day when U.S. and most Gulf markets were closed.

The National, however, said Dubai World's debt plan will soon no longer be the focus of media reports as a debt standstill is a normal part of the corporate restructuring process and a valid option for Dubai, whose main revenues are from tourism, real estate and financial services.

"After a few days, the Dubai story will find itself off the front pages; it will linger for a while in the business sections, as the procedures of the standstill are worked through; but eventually the emirate will be back in its usual slots -- the travel, architecture and lifestyle supplements," the paper said.

But there is some serious work to be done before normal service is resumed on how the world sees Dubai, since confidence has been badly dented by the way the restructuring was made public, according to The National.

"Dubai World's problems are of a different magnitude and have greater implications outside the narrow confines of the Gulf. That is all the more reason for calm, long-term consideration, rather than hysteria, by global markets," it noted.

DUBAI RESTRUCTURING "CAREFULLY PLANNED"

Earlier, Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai government's Supreme Fiscal Committee, said Dubai World's restructuring plan was "carefully planned" and done in full knowledge of how the markets would react.

"We understand the concerns of the market and the creditors in particular. However we have had to intervene because of the need to take decisive action to address its particular debt burden," Sheikh Ahmed was quoted as saying in a statement by the state news agency WAM.

"Like most global cities, Dubai has experienced its share of economic and social challenges in this global downturn. No market is immune from economic issues. This is a sensible business decision," he said, adding that further information would be made available early next week.

Sheikh Ahmed said the unprecedented growth, in Dubai and across the UAE, over the past decade had helped lay the foundation for what is now a broad-based sustainable economy beyond just natural resources.

"The economic fundamentals, such as our highly developed infrastructure, strong transport and communications hub and regional financial center, will ensure Dubai remains an attractive regional market," he said.