Dubai World restructure talk eases fears

Dubai World says it has begun "constructive" talks with banks to restructure US$26 billion ($36 billion) of debt, including liabilities owed by units Nakheel World and Limitless World.

Debt from subsidiaries such as Infinity World Holding, Istithmar World and Ports & Free Zone World will be excluded from the negotiations because those companies "are on a stable financial footing", said Dubai World, one of the emirate's three main state-related holding companies.

The company is seeking to delay payments on less than half its US$59 billion of obligations, damping concern that a potential default may set back the global financial system's recovery from the credit crisis.

Stocks erased losses in the US after the Dubai World statement, sending the Standard & Poor's 500 Index up 0.4 per cent.

New Zealand's NZX-50 closed up 0.67 per cent yesterday at 3146.60. Australia's ASX 200 closed up 17.7 points, or 0.38 per cent, at 4719.

"Now that they're saying US$26 billion, it reduces some of the panic that built up in the last few days," said Nick Chamie, an analyst at RBC Capital Markets in Toronto.

"This is positive. The market was feeding on its own concern and there were talks of US$60 billion debt that would need to be restructured."

The country's credit-default swaps declined 75 basis points to 571 basis points, according to CMA Datavision.

Dubai shares tumbled and Abu Dhabi's stock index dropped the most in at least eight years on Monday on the first trading day since the Government announced Dubai World might delay debt payments.

- BLOOMBERG