(BN) Mobius Says Dubai Pledge Is ‘Giant Step,’ Worst Over

Mobius Says Dubai Pledge Is 'Giant Step,' Worst Over 
2009-12-14 17:08:33.945 GMT


    (Updates today's trading in final paragraph.)

By Michael Patterson
    Dec. 14 (Bloomberg) -- Dubai's pledge to adopt global
standards on transparency and creditor protection is a "giant
step in the right direction" and the worst of the emirate's
debt crisis is over, investor Mark Mobius said.
    "They said that going forward they wanted to become more
transparent and keep people fully informed," Mobius, who
oversees more than $30 billion as chairman of Templeton Asset
Management Ltd., said in a phone interview from Riyadh today.
"That is a very giant step in the right direction. By making
that statement, Dubai will be able to have a foremost position
here in the Middle East."
    The emirate said it's committed to "transparency, good
governance and market principles" in a statement today that
announced a new bankruptcy law and a $10 billion bailout of
state-owned company Dubai World. Dubai's benchmark equity index
surged the most in 14 months, while the $3.52 billion bond of
state-controlled Nakheel PJSC more than doubled to 109.5 cents
on the dollar after the statement.
    Prices for Nakheel's Islamic bond maturing today had
tumbled to as low as 42 cents after Dubai's Nov. 25 announcement
that Dubai World, the parent of Nakheel, would seek to delay
repayments. Investors' reaction was "blind panic" because of
uncertainty about the size of the restructuring and the
government's role, Abdulrahman Al Saleh, director general of
Dubai's Department of Finance, said on Dec. 10.

                     Dubai Transformation

    "In Dubai we are not good in publicizing what we are doing
as much as we are good in doing it," Al Saleh said during a
conference at the Dubai School of Government.
    Dubai World said on Dec. 1 it was in talks to restructure
less than half of its $59 billion of liabilities, spurring a
rally in global equities and a plunge in prices of credit-
default swaps that insure the debt of Dubai's government.
    "Some of these debts still have to be restructured," said
Mobius. "But the worst is over. To the degree that Dubai really
emphasizes transparency and good corporate governance, they can
really become a big leader, not only in the Middle East but
globally."
    Dubai, which borrowed about $80 billion in a four-year
construction boom to transform its economy into a regional
tourism and financial hub, suffered the world's steepest
property slump in the first global recession since World War II.

                     'Good Opportunities'

    Dubai World will use the bailout money from Abu Dhabi, the
wealthiest of the seven sheikdoms that comprise the United Arab
Emirates, to repay the Nakheel debt that comes due today. The
rest will cover Dubai World's interest and operating costs until
the company reaches a standstill agreement with its creditors,
Dubai's government said in the statement.
    Mobius said he's traveling to Dubai tomorrow to meet with
companies and that there are "very good opportunities" in the
emirate's stock market for long-term investors. Templeton owns
shares of Emaar Properties PJSC, the developer of the world's
tallest tower in Dubai, and DP World Ltd., the Middle East's
biggest port operator, Mobius said.
    Shares of Emaar and DP World jumped 15 percent today,
leading a 10 percent rally in the Dubai Financial Market General
Index. Abu Dhabi's ADX General Index added 7.9 percent for the
steepest rally since May 2006. The MSCI AC World Index of shares
in advanced and developing nations increased 0.7 percent at
11:58 a.m. in New York.

--With assistance from Camilla Hall and Arif Sharif in Dubai.
Editors: Gavin Serkin, Tim Farrand

To contact the reporters on this story:
Michael Patterson in London at +44-20-7073-3102 or
mpatterson10@bloomberg.net;

To contact the editor responsible for this story:
Gavin Serkin at +44-20-7673-2467 or gserkin@bloomberg.net.