Dubai World's debt not government-backed

DUBAI, United Arab Emirates - The massive debt owed by the investment firm Dubai World is not guaranteed by the emirate's government, a top financial official from the city state said yesterday, offering little direction to anxious investors.

On the first day of trading since news of Dubai World's debt crunch - $60 billion - became public, Dubai's main exchange fell more than 7 percent, while the Abu Dhabi exchange fell more than 8 percent - the steepest fall in at least a year, brokers said.

Driving the financial avalanche was Wednesday's announcement that Dubai World would seek an at least six-month reprieve on its debts, obligations amassed during years of a building spree that turned the desert emirate into the Middle Eastern version of Las Vegas, Wall Street, and, at times, Sodom and Gomorrah, all rolled into one.

If markets were looking for reassurances from Dubai that it would stand behind the conglomerate, they got none yesterday.

"Dubai World was established as an independent company," Abdulrahman al-Saleh, director-general of Dubai's Finance Department, said on Dubai TV.

"It is true that the government is the owner," he said, "but given that the company has various activities and is exposed to various types of risks, the decision, since its establishment, has been that the company is not guaranteed by the [Dubai] government."

Al-Saleh's comments were the first public remarks by a Dubai official since Thursday, the day after the emirate's government's announcement about Dubai World's request for a debt repayment postponement.

The lack of clarity or direction from the rulers of Dubai since the extent of the conglomerate's financial ills became known has been a major source of angst for investors. Uncertainty about what step the emirate would take next had cast a pall on world markets late last week. In the United States, the Dow fell 154 points Friday.

Yesterday, the overwhelming majority of companies whose shares traded on the Dubai Financial Market, the city-state's main bourse, were deeply in the red. But the market failed to hit the 10 percent stop-trading cap largely because a large number of company shares were not traded.