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Nakheel Bonds Drop To All Time Lows - Dubai's Ghost Refuses To Go Away
After opening at 58, Nakheel 3.1725%'s of 09 are now trading at an all time low of 54. Does someone know something ahead of the weekend, or has QVT decided to simply take its losses and move on? Or does Dubai's ghost simply refuse to go away.
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http://www.guardian.co.uk/business/2009/dec/03/creditors-refuse-dubai-world-deal
As Denninger points out, if default is triggered at DW, who/what/where is holding the CDS ??
I'm thinking it would be appropriate to bump the AIG/Fed margin call article.
wow , fail
More dupe buy
Without fresh injection of cash from Abu Dhabi, Nakheel is hardly worth the sand its fantastic projects have been built on.
To paraprhase Fibozachi, "It's 11:30 am ... sell!"
In case anybody didn't see it, there's an article in today's WSJ on Dubai which has some stuff on Hakheel that I've posted below:
http://online.wsj.com/article/SB125988807548075805.html?mod=rss_Today's_Most_Popular
<Aarti Chana was living in the U.K. in 2004 when Nakheel pitched a project called Palm Jebel Ali to prospective buyers. As the second piece of a spectacular development jutting out in the sea in the shape of a palm tree, Palm Jebel Ali would include homes built on stilts, forming a 7.5-mile chain spelling out an Arabic poem written by Sheik Mohammed. "It takes a man of great vision to write on water," the poem reads in part.
Many units would be ready for occupancy by December 2009, Nakheel said. Ms. Chana, now 38 years old, put 10% down on a $780,000 five-bedroom beachfront villa and, making plans to settle here, sold her house near London. "I believed in the Dubai story," she says.
In 2006, Sheik Mohammed consolidated a handful of government businesses into the Dubai World holding company, with Sultan Ahmed bin Sulayem as its leader. To head Nakheel, Mr. Sulayem, in turn, plucked Mr. O'Donnell from Australia, where he headed a fast-growing property fund.
Messrs. Sulayem and O'Donnell declined to comment for this article. A spokesman for Nakheel didn't respond to emailed questions, nor did a spokesman for Dubai's ruler.
Nakheel was on a roll, preparing to open the first of the palm developments, Palm Jumeirah, and planning the next two. In September 2006, at a separate, 914-acre residential community called Jumeirah Park, villas starting at $654,000 sold out in a day. International banks and local lenders offered loans for up to 97% of the purchase price.
To help finance all this construction, Mr. O'Donnell turned to the bond markets. An investor presentation in November 2006 called Dubai a "vantage access point" that would draw in businessmen from a wide swath of the greater Middle East, from India to Egypt. It projected that Dubai's population, then just under 1.2 million, would grow by two million in 14 years.
Investors rushed to buy a piece of Nakheel's Islamic bond, known as a sukuk. Swamped by demand, the borrower increased the issue's size to $3.5 billion.>
<Amid the uncertainty surrounding the arrests, the crisis roiling the rest of the world was catching up with Dubai. When global credit markets froze up in late 2008, international investors stopped buying Dubai property. Some who had already bought stopped making installment payments. Nakheel and others shed staff and scrapped or delayed dozens of projects.
Last February, the troubles touched Ms. Chana's plan for a new home in Dubai. Nakheel halted work on the Palm Jebel Ali. Though dredging had been done, little construction had.
Ms. Chana says she has sunk about $550,000 into her still-unfinished home. Earlier this year, she flew to Dubai to try to salvage the investment. She is living in a hotel-apartment with her daughter, helping to organize other investors and petition Nakheel for rebates. "I just won't let this drop," she says. "It's become my obsession."
In October, Nakheel proposed that Jebel Ali investors transfer their contracts to property elsewhere that is already finished or close to it.
Simon Murphy bought a $240,000 ground-floor apartment in the Palm Jumeirah in 2002 and moved in five years later. He is now a "resident representative" to Nakheel, like being part of a homeowners board. He says that in recent weeks, Nakheel has cut back on maintenance, including tree trimming.
Since Dubai's debt-standstill announcement, Mr. Murphy says, many apartment residents have stopped paying management fees, typically around $700 a month. Nakheel declined to comment. "Most people fear that their money will go into the bottomless pit of Nakheel debt," Mr. Murphy says.>
It's nothing as compared to what they were planning to build: http://www.nakheel.com/en/developments :
I can go on, but that's pointless as the truth is simple - Nakheel got over-extended with its crazy projects and most likely bankrupt without support from A.D.
Thanks for the links.
These bulls have no horns!
Why do they need to borrow money from the west anyway? I thought they were damned loaded with oil money down there.
You're an idiot. Nakheel bonds bottom ticked at 40 in asia time last Friday. I was watching
Okay, Dow and Pms tanking. Did the Margin call from hell just get made and stuff is unwinding here?
Obama live now in a long planned townhall meeting in PA on jobs -- taking credit for the job numbers - went through the topline numbers with the crowd - and taking credit for the economic recovery - he's making jokes about how tough his job has been and indcated that we are now in recovery. The tide has turned the economy is growing again etc etc
http://cspan.org/Watch/Media/2009/12/04/HP/R/26785/new+labor+figures+sho...
This is not the all-time low. Why would you trust Bloomberg for accurate pricing on bonds traded OTC? The lows were last week when it went into the low 40s. I have about a thousand Bloomberg runs and axes in my message history I can show you.
Is this the waterfall event?
Dubai is unsustainable on so many levels.
You don't need any chart or financial analysis, just some common sense. This is the best article I have seen written about Dubai and once you read it you can see its future bright and clear - http://www.johannhari.com/2009/04/06/the-dark-side-of-dubai
Nature simply doesn't permit building anything of substance in that area. The desert will eat away anything if not actively maintained. There are no resources there. You build buildings where nature permits plain and simple.
Not to mention the highest order of modern day slavery going on there. Just makes me sick.
Thanx OBush....a valuable read.
Can't help but believe this 21st Century Dubai buildout is a re-creation of the days when the pharohs built their pyramid monuments off the backs of thousands of slaves.
Of course, the pharohs never intended to sell their tombs.
Yup pyramids is what came to my mind too! Ironically it was meant for the dead and not the living!
It is a long article and if someone wants a short snippet I think the following sums up the folly in constructing anything there:
The very earth is trying to repel Dubai, to dry it up and blow it away. The new Tiger Woods Gold Course needs four million gallons of water to be pumped onto its grounds every day, or its grasses and sands simply shrivel and disappear on the winds. The city is washed over with dust-storms that fog up the skies and turn the skyline into a blur, and when the dust parts, sheer heat burns through. Anything that is not kept constantly and artificially wet or cold is cooked to a crisp.
This is the most water-stressed place on earth, according to the UN – yet it is littered with sprinklers, giant artificial ski-slopes frozen to create real snow, and tanks filled with dolphins. Dr Mohammed Raouf, the Environmental Director of the Gulf Research Centre, sits in his Dubai office and warns: “This is a desert area, and we are trying to defy its environment. It is very unwise. If you take on the desert, you will lose.”
Sheikh Maktoum built his showcase city in a place with no useable water. None. There is no surface water, very little aquifer, and some of the lowest rainfall in the world. So Dubai drinks the sea. The Emirates’ water is stripped of salt in vast desalination plants around the Gulf – making it the most expensive water on earth. It costs more than petrol to produce, and belches vast amounts of carbon dioxide into the atmosphere as it goes. It’s the main reason why the residents of Dubai have the biggest average carbon footprint of any human being – more than double an American’s.
If a depression bites deep, Dr Raouf bluntly says Dubai could run out of water. “At the moment, we have financial reserves that cover bringing so much water to the middle of the desert. But if we had lower revenues – if, say, the world shifts to another source of energy than oil…” he shakes his head. “We will have a very big problem. Water is the main source of life. It would be a catastrophe. Dubai only has enough water to last us a week. There’s almost no storage. We don’t know what will happen if our supplies falter. It would be hard to survive.”
FMT,
Excellent article. I was recently in Dubai and I can second the idea that many go to Dubai in search for love and end up in a fake desert pit. I saw myself the degree of slavery and racism . Sad but true.
Thanks for the link FMT. Quite a read.
nakheel 2009 bonds traded as low as 40 FYI the day after the announcement
there will be losses, but there's also a lot of uncertainty about the restructuring, since that bond is guaranteed by dubai world, which also holds a controlling stake in DPWorld, where all the useful non-dubai-real-estate assets sit.
Stupid Muslims - should have traded their stocks and bonds on our exchanges. Their equity would be trading like gold and their bonds rated AAA.
old story but something to think about...
The dark side of Dubai
One doctor told him he had a year to live; another said it was benign and he'd be okay. But the debts were growing. "Before I came here, I didn't know anything about Dubai law. I assumed if all these big companies come here, it must be pretty like Canada's or any other liberal democracy's," she says. Nobody told her there is no concept of bankruptcy. If you get into debt and you can't pay, you go to prison.
"When we realised that, I sat Daniel down and told him: listen, we need to get out of here. He knew he was guaranteed a pay-off when he resigned, so we said – right, let's take the pay-off, clear the debt, and go." So Daniel resigned – but he was given a lower pay-off than his contract suggested. The debt remained. As soon as you quit your job in Dubai, your employer has to inform your bank. If you have any outstanding debts that aren't covered by your savings, then all your accounts are frozen, and you are forbidden to leave the country.
http://www.independent.co.uk/opinion/commentators/johann-hari/the-dark-s...
thank you so much for the article.
i don't know where to begin..i mean it goes without saying that it is one of the most hitting articles i have ever read. but what shocks me most of all is how the expats and the emiratis talk about the labor class and how insensitive and asinine they sound about anything that comes between themselves and their parties!
maybe we human beings do indeed have an innate propensity for doing the wrong thing and sliding down the evil path without even realizing it...i still cant forget that remark of the brit woman who says the best thing about dubai?, " the slave class !" and these r people who cant even escape because their passports have been taken away from them...and not by any govt but by another common average joe human being who is a mom / a wife/ but has hired you to work as your maidservant. don't get me wrong. i don't see anything wrong in if u can afford a maid or a butler then have one fine..but to forget that that person is a human being and treat her like a cattle or an ox...
man. and then laugh about it and say that's the best thing about dubai!!
maybe apocalypse is way overdue! when dubai is the modern utopia and ideal and its residents are insensitive to the most basic level of humanity! we all sit and crib about rocker fellers or bankers..but how can we dare to judge anyone else, when it seems we ourselves can act as arrogantly and inhumanly just because we are in a place where it is the done thing!
damn damn damn!! i am still shivering and blistering with some of those people in this article!!! arggggggghhhhhhhhhhhhhhhhhh
$700 appartments management fee?pew,you could have two mortgages in Fl for that amount of money. I guess what comes easy goes away easy too..........
Another default that went under the radar. Since the company is in a negative surplus position (and with many losses still to come) I can't imagine bondholders will get much.
http://online.wsj.com/article/BT-CO-20091203-714550.html
I guess nobody told them
that all the rich folk are moving to New Zealand
instead.
-MobBarles
Based on the lack of transparency and the Sheik's intolerance for criticism I would be willing to put some money on a gamble that the problems in Dubai are much greater than we can possibly imagine. Here is my thought process: the Big Dig in Boston is said to have cost 14-15 billion dollars over quite a few years. The Big Dig appears to have been a small project in comparison to what is happening in Dubai. I have not heard any estimates for the cost of improvements in Dubai but I would imagine they are well in excess of 300 billion. So what amount of that investment is leveraged? Dubai wants us to believe a mere 60 billion or so is the total debt with 26 billion related to troubled projects. If the leverage is 60 billion then does that mean someone put up 230 billion in cash? Wouldn't it seem more reasonable in our recent- world financial history- that perhaps 100% of the improvements have been leveraged? That means there is a whole lot more debt out there that no one has yet to talk about. More problems to come maybe?
Get this, land or property cannot be seized from the Emir or his family. If Nakheel had their properties on leasehold (no matter how long) then all you get is literally the sand and some glass and particleboard buildings that no-one fancies much and are depreciating rapidly. Personally, I'd be taking the deal they are ofering rather than hold out for collateral value because those bastards will ring fence Dubai Ports and everything else they have fucks, floats or flys.