dubai world crisis

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D U B A I W O R L D C R I S I S

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This Project is based on Real Estate Bubble Burst. How Dubai World Crisis bubble bursted.

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Page 1: Dubai World Crisis

DUBAI WORLD CRISIS

Page 2: Dubai World Crisis
Page 3: Dubai World Crisis

DUBAI• One of the seven emirates of the

United Arab Emirates (UAE).

• Sheikh Mohammed Bin Rashid Al Maktoum – (UAE Vice President & Prime Minister and Ruler of Dubai)

• Dubai has emerged as a global city and a business hub.

• Dubai is a prosperous and wealthy city and has a huge contribution to the gross economy of United Arab Emirates

Page 4: Dubai World Crisis

DUBAI GDP BREAKDOWN

Oil & natural gas 2%

Manufacturing 14%

Real Estate and Bus. Services

15%

Financial services

8%Others

4%

Trade 39%

Transport & Comm.,

8%

Construction 10%

Page 5: Dubai World Crisis

DIVERSIFYING TO REAL ESTATE

Dubai Financial Market (DFM)2000

Towards service and tourism oriented

Shift from trade-based, oil- reliant economy

Real estate Boom- offered 40% returns and attracted investments

DIVERSIFYING TO REAL ESTATE

Page 6: Dubai World Crisis
Page 7: Dubai World Crisis

• Dubai World is an investment company . Manages and supervises a portfolio of

businesses and projects for the Dubai government.

• On 2 July 2006, it was launched as a holding company .

• The chairman of this company is Sultan Ahmed bin Sulayem.

• 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

• Famous projects – the Burj Khalifa, the Palm Islands and the Burj Al Arab

• Total assets of $99.6 billion and total revenue of $14.2 billion at the end of 2008 .

Page 8: Dubai World Crisis

Real Estate Ports & Free Zone

Investment & Finance Hospitality

Page 9: Dubai World Crisis

What is Dubai Crisis?

• The Dubai Debt Crisis 2009 has been called by economists a consequence of real estate bubble burst when on

November 26, 2009 Dubai proposed to delay repayment of its debt which includes delay in the payment of $ 59 Billion

debt on Dubai World, the investment vehicle for the emirates for 6 months.

Page 10: Dubai World Crisis

THE BURST OF THE BUBBLE:

• Dubai, ruled by Sheikh Mohammed Bin Rashid Al Maktoum, had borrowed $80 billion in a four-year construction boom to transform the economy into a regional tourism and financial hub.

• sought a “standstill” agreement from creditors. For of bonds due Dec. 14 from property unit Nakheel PJSC.

• The core reason : Sheikh Mohammed's decision to invest all his wealth as well as Dubai govt fortunes in Real estate markets through a foreign investment arm of Emaar,(second largest property developer in US ),which ultimately went bankrupt due to recession

• Global financial crisis - Collapse of real estate prices

• Real estate prices fell to 50% from its peak

• Heavy Investments through Nakeel for huge real estate constructions

Page 11: Dubai World Crisis
Page 12: Dubai World Crisis

MATURITY DEBT DELAY---------------------------------------------------------------- LOANS Limitless $1.2 bln March 31 2010 Ongoing Dubai World $2.1 bln June 2010 Ongoing Dubai Intl Capital $1.25 bln June 2010 3 months Dubai Holding COG $555 mln July – Nov 2010Emirates $635 mln Jan-Nov 2011 Borse Dubai $827 mln Feb 2011 Tamweel $235 mln April 2011 Dubai World $2.4 bln June 2011 Palm District Cooling $500 mln July 2011 Du 3 bln AED July 2011 Dubai Aerospace $800 mln July 2011 Dubai Holding $1.16 bln Aug 2011 Dubai Financial Group $1.5 bln Aug 2011 Port, Free Zone World $1 bln Sept 2011 DP World Callao $300 mln Oct 2011 Dubai Drydocks $1.7 bln Nov 2011 Inv Corp Dubai $4 bln Nov 2011 Emaar Properties $1 bln Feb 2012 DEWA $2.2 bln April 2012 Dept Civil Aviation $635 mln April 2012 Nakheel $1.85 bln Aug 2012 Dubai Intl Capital $542.5 mln Aug 2012 ENBD $1.5 bln Oct 2012 Dubai Ports World $3 bln Oct 2012 BONDS ENBD $750 mln Dec 2010 Nakheel $750 mln Jan 2011 Emirates $500 mln Mar 2011 ENBD $640 mln June 2011 Emirates $185 mln June 2011 ENBD $220 mln July 2011 ENBD $500 mln Jan 2012 Emirates $550 mln Jun 2012 Sources: Thomson Reuters Loan Pricing Corp, Reuters fixedincome data. AED = dirhams, $1=3.673 UAE dirhams

Page 13: Dubai World Crisis

Announcement of Official Moratorium

• On November 25, 2009, the Dubai government announced that the company "intends to ask all providers of financing

to Dubai World and its subsidiary Nakheel to 'standstill' and extend maturities until at least 30 May 2010".

• The company will also undergo a restructuring process with the help of Deloitte consultants.

• Several months earlier, Dubai World accounted for a $59-billion debt, nearly three-quarters of the emirate's

US$80-billion debt.• This includes a US$3.5-billion loan which the company is

unable to repay by its December deadline.

Page 14: Dubai World Crisis

Impact of Moratorium:

• Moody's and Standard & Poor's Investors Services heavily downgraded the debt of various Dubai government-related entities

• In Moody's case, the downgrade meant that the affected agencies lost their investment grade status.

• This led the main Europen markets plunged on 26, November followed by drops in Asian stocks on the 27 November. This led to a drop in the share indices of the major markets of the world.

• Indians constitute nearly 40 per cent of its population — many find it tough to retain their jobs- Most population from Kerala

• The combined exposure of SBI, BOB, and ICICI Bank as per their estimates on Friday stood at less than Rs 7,000 crore- which is negligible

Page 15: Dubai World Crisis

RESTRUCTURING……

Page 16: Dubai World Crisis

• Dubai World has signed up the last remaining creditor to a $23bn (£15bn) debt restructuring.

• The terms of the restructuring involve converting $8.9bn of government debt into equity, and would leave Dubai World with $14.4bn of remaining debts.

Contd…..

Debt in to Equtiy; 8.9Restructuring; 14.4

Page 17: Dubai World Crisis
Page 18: Dubai World Crisis

ASSET REALISATION PLAN

• Dubai World present asset values between $6.4 billion and $10.4 billion.

• Projected future asset values over 5-8 year horizon between $15.1 billion and $19.4 billion.

• Dubai World investment arm Istithmar portfolio assets expected to generate $3.2 billion to $4.5 billion in net disposal proceeds over next 5 years.

• Possible sale of strategic assets such as DP World and Jebel Ali Free Zone to underpin payment of maturities due after 8 years

Page 19: Dubai World Crisis

POSSIBLE ROLE OF ABU DHABI AS A SAVER:

• Dubai asked Abudhabi to bail out from this crises.

• However , it up to Abu Dhabi, the wealthy capital of the United Arab Emirates how it would like to assist Dubai.

• Analysts are expecting Abu Dhabi (the senior and controlling Emirate in the UAE) to help soften the blow of this crisis.

• A recent report by HSBC confirms that Abu Dhabi has the cash liquidity to support its own banks and property companies.

• Therefore, Abu Dhabi is likely to use some of this liquidity and stability to help prevent a complete collapse of markets in Dubai.

Page 20: Dubai World Crisis

THANK YOU

PRESENTED BY MANMEET THAPAR

AARTI GADA VISHRUTHA MARAR

DEEPAVALI VANKALUSIDDHESH PARAB

RAMANI GUPTA

(ITM INSTITUTE –SION BRANCH) 63BATCH