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November 30, 2009

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Sale of assets 'totally rejected'

DUBAI World "totally rejected" the possibility of selling off some of its top performing assets in the months before the heavily indebted conglomerate turned to creditors with a plea to defer payments on some of the US$60 billion it owes, a newspaper reported yesterday.

The company, whose holdings range from ports to real estate, shocked world markets last week with an announcement that it would seek, until at least May, a deferment on its debts and those of its real estate arm, Nakheel PJSC. That subsidiary has a US$3.5 billion bond coming due next month.

The announcement was the clearest indication yet that the conglomerate, which has been a primary engine behind Dubai's meteoric growth over the past decade, was in way over its head in terms of debts. The company's obligations alone account for the overwhelming majority of at least US$80 billion that Dubai owes to creditors.

Dubai World "totally rejected the idea of selling some of its good investment and real estate assets at low prices," a company official was quoted as saying by Al-Itihad newspaper yesterday.

The official said any asset sale needed to be in a "commercially fair manner in order to achieve (Dubai World's) long-term strategic objectives, away from ... economic pressures."

The statement in the newspaper adds little in the way of explanation as to how company officials, and indeed Dubai's ruling family, planned to tackle a debt crisis that could destroy the reputation of Dubai Inc, as the city-state's government-affiliated businesses are known.

Dubai officials have headed down to neighboring Abu Dhabi, ostensibly to discuss the debt issues.

The company said last week that it was seeking the delay as it continued its restructuring - a plan under which it has already laid off 15 percent of its work force in an attempt to streamline costs.

The news was a blow to the reputation of Dubai, once seen as the Gulf Arab region's answer to Las Vegas, Wall Street and Los Angeles rolled in one.


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