Dubai Inc may face shakeup after debt standstill

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Restructuring
The government's five-paragraph announcement on Wednesday gave no details of the planned restructuring, beyond saying it would occur with the help of a managing partner for corporate finance at consultants Deloitte.

But it noted that Dubai World had a portfolio of important businesses and said the restructuring "will be designed to address financial obligations and improve business efficiency for the future".

This could presumably open the door to a major reorganisation of Dubai World's assets, possibly including disposals, if business efficiency pointed in that direction.

In recent months, Dubai has been abuzz with speculation that assets in various corporate groups could be merged or sold in order to raise funds and cut debt.

In May, Sheikh Ahmed bin Saeed al-Maktoum, chairman of Dubai's Emirates, denied rumours that the airline might merge with Etihad, a carrier owned by neighbouring Abu Dhabi.

The restructuring of Dubai World may signal that in exchange for its financial support, Abu Dhabi is putting pressure on Dubai to reform its freewheeling corporate sector, because it wants to protect its investments. The central bank of the United Arab Emirates bought USD10 billion of Dubai bonds in February.

Abu Dhabi pumps most of the oil of the UAE, the world's third-largest crude exporter, has sovereign wealth funds estimated to hold hundreds of billions of dollars in assets, and is the wealthiest of the seven emirates of the federation.

Dubai's stock market closed for the day before the government made its announcement, but may fall when trading resumes after the long Eid al-Adha holiday.

"Definitely this will affect the stock market; it is really negative," said Rami Sidani, Schroders Middle East head of investment.

"A lot of domestic and regional banks own Nakheel bonds, and the bonds will definitely plummet."