Dubai: Dubai World is looking to hold on to key revenue-generating assets including port operator DP World and its stake in Standard Chartered, but creditors may yet force it to part ways with prized entities.
The troubled state-controlled conglomerate on Monday shed some light on how it planned to restructure $26 billion in debt,including through asset sales, in its first statement since requesting a delay in repaying billions in debt til May 2010.
The restructuring excludes firms on a ''stable financial footing'' such as Istithmar World, DP World and Jebel Ali Freezone, implying its global crown jewels would not be up for grabs, but leaving its battered property firms on the line.
''I don't think they're in a position to choose,'' Managing Director of Emirates Capital and a former director at Istithmar, Khuram Maqsood, said.
''Dubai World desperately needs cash. Everything is for sale. I don't think anything is sacred in the current environment.''
Bondholders are still reeling from the shock announcement and are unlikely to unanimously agree to the standstill without strong guarantees, especially after the government also distanced itself from the company's troubles on Monday.
The assets of the two property developers in question, Nakheel, which at the end of 2008 had a project portfolio of about $110 billion, and Limitless, are arguably the least interesting to investors.
Property prices in the emirate have already fallen some 50 per cent since their peaks last year, transactions are negligible and some analysts see a further 30 per cent decline.
Nakheel's assets include the Palm Jumeirah, the most advanced in terms of completion of three man-made islands in the shape of palms off the coast of Dubai, and the Atlantis hotel, a joint venture with South African tycoon Sol Kerzner.
Limitless, which has completed few projects to date, says it has a $100 billion portfolio.
''Who wants to buy these assets and at what price? If the Dubai real estate market conditions continue to depreciate and it will ... then they can wait until it depreciates further,'' said Chief Economist at Banque Saudi
Fransi-Credit Agricole Group in Riyadh, John Sfakianakis.
In contrast, Istithmar's portfolio ranges from U.S. luxury retailer Barneys to the luxury W Hotel in Washington, DC as well as sought-after property in London including 10 Whitehall Place.
Infinity World, another unit exempt from the plans, is a stakeholder in MGM Mirage.
Distancing Key Assets
''We're a bit surprised that Istithmar World is excluded from restructuring,'' said Fahd Iqbal, Gulf region strategist at EFG-Hermes.
''We had assumed that the private equity house (Istithmar) would have some problematic debts given that it had engaged in leveraged acquisitions in the past.''
Dubai's ruler on Tuesday again reiterated the government and Dubai World were not the same, making clear the emirate's most valuable firms like Emirates airline and Dubai Aluminium would not be part of any firesale.
''Like any other corporation, Dubai knows that it has built some great success stories and it would be a shame to get rid of them at distressed levels,'' said Rami Sidani, head of asset management at Shroeders Middle East
The emirate's overall assets could be worth as much as two to four times their debts, according to analysts. Moody's estimates Dubai debt at about $100 billion.
Investors have always been attracted to Dubai's main revenue generators and even if Dubai were to stave off this crisis, it could still prove a catalyst for a wider privatisation plan.
DP World's IPO, for example, raised $5 billion and to this day remains the only one of its top companies to have been offered internationally.
''If you look at other emerging markets, privatisation is a normal course of action ... you have some governance over vital sectors, but at the same time semi-privatisation of assets is not a bad thing. This might be the catalyst,'' said Managing Director at Gulfmena Investments, Haissam Arabi.
Dubai's neighbours will remain cautious despite being flush with liqudity and are likely to pick and choose their moment.
''It's surrounded by rich friends and Abu Dhabi ... you can't rule out some intervention,'' Arabi said. ''The problem is it's an issue of when, what price and which assets to pick and choose from.''
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