From Bloomberg:
Dubai shook investor confidence across the Persian Gulf after its proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001.
The cost of protecting government notes from Abu Dhabi to Bahrain rose, extending the steepest increase since February as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors. Its debt includes $3.52 billion of bonds due Dec. 14 from property unit Nakheel PJSC. Dubai credit-default swaps climbed 90 basis points to 530 after yesterday increasing the most since they began trading in January, CMA Datavision prices showed.
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Dubai World’s assets range from stakes in Las Vegas casino company MGM Mirage to London-traded bank Standard Chartered Plc and luxury retailer Barneys New York through asset-management firm Istithmar PJSC. The Dubai government’s attempt to reschedule debt triggered declines in stocks worldwide that had been rebounding from the worst financial crisis since the Great Depression.
Who could have guessed that the explosive growth of Dubai over the last decade was fueled, in part, by borrowing that they couldn't pay back?
Interesting to note that DP World, the global port operator that is a subsidiary of the defaulting entity is not included in the planned restructuring.
It's Thanksgiving here in the U.S., so markets are closed, but the news from Dubai is already having an impact elsewhere in the globe.
From London:
Sterling fell on Thursday, with the euro hitting a one-month high against the UK currency, on worries about British banks' exposure to debt problems in Dubai and concern over UK economic health.
The pound also fell sharply against the dollar, which recovered some of the previous day's sharp losses, and dropped to a six-week low against a broadly firmer yen.
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European bank shares fell more than 3 percent on Thursday on concern about their potential exposure to Dubai debt problems.
Dubai has long been considered a sort of "Noah's Ark" for global economic elites ... Whoops!
This is a sign that the global financial storm has not ended. More fall-out to come.