19 Jan 2010

Dubai bailout less than thought

9:43 pm on 19 January 2010

Dubai has revealed that half of a $US10 billion bailout from Abu Dhabi in December was actually from a previous deal.

The loan by Abu Dhabi averted a potential default that severely rattled financial markets. Dubai now says that the total included $US5 billion raised from Abu Dhabi in November.

Without the bailout, there were fears that Dubai would not have been able to repay what it owed.

A government spokeswoman said the emirate had used $US1 billion of the $US5 billion from the banks. She declined to comment when asked if Dubai would ask for more funds.

Dubai used $US4.1 billion of the money in December to bail out a government-owned investment company, Dubai World. A property subsidiary of Dubai World needed the money to pay investors in an Islamic bond due to its investors.

In November, Dubai asked its creditors for a freeze on Dubai World's $US26 billion debt repayments.

Both emirates are part of the seven-member UAE and their ruling families are from the same tribe. But Dubai's economy is largely based on the service sector, while Abu Dhabi has substantial oil reserves.