Dubai stocks jump on 9.5-billion-dollar bail-out deal (2nd Roundup)

Mar 25, 2010, 23:09 GMT

Dubai - The Dubai government's announcement Thursday that it would extend 9.5 billion dollars in new aid to troubled giant Dubai World sent the country's stock index surging 4.3 per cent.

The surge cancelled out the losses the index has suffered so far this year, closing at just over 1,845.

The new aid package will bring to 20 billion dollars the amount of money that the governments of Abu Dhabi and Dubai have offered Dubai World and its real estate subsidiary Nakheel, since Dubai World announced in November that it would seek to restructure its debts.

That announcement unnerved investors and sent the stock exchange tumbling, until Abu Dhabi, Dubai's petroleum-rich neighbour and the capital of the United Arab Emirates, announced a bail-out package.

Dubai World and Nakheel would announce a restructuring plan to 'put both companies on a sound financial footing and allow them to realize the full potential of their underlying businesses,' the government said in a statement.

Dubai World is looking to negotiate the terms of 23.5 billion dollars in debt.

In Washington, the International Monetary Fund (IMF) said Thursday's package was a 'welcome further step in the debt restructuring process' and encouraged the Dubai government 'to find a fair and equitable solution for all stakeholders.'

The package would include 5.7 billion dollars previously extended by Abu Dhabi, while the rest would come from 'internal Dubai government resources,' the government said.

The restructuring process is expected to take several months to complete, the government said, adding that 'Dubai World and Nakheel will also present revised business plans, which take into account the current business environment and reflect the new direction being given to both companies.'

The government committed 1.5 billion dollars to support Dubai World's new business plan, and would convert 8.9 billion dollars in debt to equity. Nakheel will receive funding of 8 billion dollars, and the government would convert 1.2 billion dollars in debts to the government to equity.

'The government understands that this restructuring process has been a difficult time for all parties,' the government said. 'Our financial support demonstrates our commitment to finding a fair and equitable solution for all stakeholders in the wider interest of the economy.'