Wednesday, Jul 22, 2009
(Adds details, background).
DUBAI (Zawya Dow Jones)--Dubai launched a "Financial Support Fund" Wednesday to help the emirates' debt-saddled government and its related companies manage a $20 billion bond program.
"The Dubai Financial Support Fund will be responsible for managing the proceeds of the Dubai government's $20 billion bond program and will provide loans on a commercial basis to Government and Government-Related Entities engaged in projects deemed to be of strategic and developmental importance to the Emirate of Dubai," Abdulrahman Al Saleh, the director general of Dubai's department of finance said in an emailed statement.
Al Saleh added that "each application for support will be assessed on predetermined criteria" to support Dubai's long term growth strategy. The statement didn't explain the criteria.
Dubai's Department of Finance will support the fund and it will be accountable to the emirate's supreme fiscal committee.
The fund was established by royal decree from Sheikh Mohammed Bin Rashid Al Maktoum, the ruler of Dubai and the prime minister of the United Arab Emirates.
Dubai is one of seven emirates that comprise the U.A.E., which is led by the oil-rich emirate of Abu Dhabi. Dubai however is relatively oil-poor.
"The Support Fund is authorized to invest in, hold and manage debt instruments on behalf of the government of Dubai, to collect loan repayments and it may also reinvest these revenues," the statement said.
DEBT REFINANCE
In February, Dubai launched a $20 billion bond program, half of which was subscribed to by the U.A.E.'s Central Bank. The program aims to help refinance Dubai government and government-related companies' debts. The next $10 billion is expected later this year and will be issued on open credit markets, according to official comments.
By launching the fund, Dubai will have a dedicated institution to help it manage government and government-related company debt. The fund will also help Dubai raise more cash.
According to the statement, the fund can also issue financial instruments, including bonds both conventional and Islamic, known as sukuk, on behalf of Dubai's government, both inside and outside the emirate.
These financial instruments can be used to invest in commercial projects, establish investment funds and manage institutions and corporates in order to provide liquidity for strategic projects of entities applying for funds," the statement read.
Institutions and companies seeking support are also subject to a partial or whole acquisition by the fund.
The first $10 billion tranche of the $20 billion bond program started in February is being used as the fund's financial resource, the statement said.
-By Maria Abi-Habib, Dow Jones Newswires; +97150 941 9737; maria.habib@dowjones.com
Copyright (c) 2009 Dow Jones & Co.
(END) Dow Jones Newswires
22-07-09 0635GMT
