Sunday, Feb 14, 2010

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By Stefania Bianchi

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--U.K. business secretary Peter Mandelson Sunday urged Dubai to reach an agreement to settle its debts, or risk its reputation with investors as details of a potential deal between creditors and troubled conglomerate Dubai World emerged.

"Time is running out," Mandelson told delegates at a lunch hosted for British business in the emirate. "The current uncertainties and lack of agreement can't go on for much longer. As we approach decisions, Dubai has to be as open as possible on talks with banks and construction companies."

British companies are amongst the biggest international creditors to Dubai, with state-controlled Royal Bank Of Scotland Group PLC (RBS.LN) and Lloyds Banking Group PLC (LLOY.LN) exposed to Dubai World.

The emirate risks be bracketed with an emerging group of heavily indebted sovereign borrowers who may default including Portugal, Italy, Ireland, Greece and Spain, unless it addresses its vast debt that's estimated to exceed $80 billion.

"Dubai has to be conscious of the fact that depending on how it resolves the current problems will mean a great deal for how it secures investment in the future. Dubai has to tread carefully, openly and not for too long. It has to reach an agreement that's demonstrably fair," Mandelson said.

Earlier Sunday Zawya Dow Jones reported that Dubai World may offer creditors 60% of the money they're owed backed by the sheikdom's government as part of a deal to reschedule $22 billion of debt. The emirate also owes U.K. companies hundreds of millions of dollars for unpaid fees.

British construction and engineering firms at one point last year were chasing about GBP400 million in unpaid fees from companies in the United Arab Emirates, mostly in Dubai, U.K. trade body the Association for Consultancy and Engineering.

Mandelson's comments, the strongest so far by a U.K. political figure regarding Dubai's financial problems received a mixed reception from British business executives attending the lunch in the swank Emirates Towers hotel.

"He was trying to sit on the fence and tiptoe around the issue," said James Hume, partner at Omega Group Services. "There's nothing the U.K. can preach to Dubai."

The U.K. economy is struggling itself and grew for the first time in 18 months in the fourth quarter, albeit by an anemic 0.1%. Data last Thursday showed U.K. home repossessions fell sharply in the fourth quarter, although they hit a 14-year high in 2009.

-By Stefania Bianchi, Dow Jones Newswires; +971-4-446-1685; stefania.bianchi@dowjones.com

Copyright (c) 2010 Dow Jones & Co.

(END) Dow Jones Newswires

14-02-10 1222GMT