Dubai World will not make any concrete proposals to delay $22 billion in debt as it meets creditors today, a move that is likely to dismay investors who have been left in the dark for weeks.
Saddled with debts and in need of restructuring, Dubai's flagship company had been expected to formalise a request for a payment standstill when it met some 90 creditors at Dubai's World Trade Center complex from 9.30am today.
But Dubai World moved to temper expectations, saying its two-hour presentation would only offer a look at its financial situation.
The emirate sent shockwaves through global markets on November 25th when it requested a standstill on $26 billion of debts linked to Dubai World and its property units Limitless and Nakheel, developer of three palm-shaped islands.
A $10 billion lifeline from neighbouring Abu Dhabi last week - the third this year - helped Dubai stave off default on a $4.1 billion Islamic bond from Nakheel and provided enough funds to service debts until April.
Banks had lent to Dubai government-linked firms on the implicit understanding that they were backed by the federal government or Abu Dhabi. While the support eventually came, the delay and the lack of communication shook global markets and may have caused lasting damage to the reputation of the Gulf hub.
Bankers predicted that today's meeting would mark only the start of what could be lengthy negotiations.
"Providing clarity is clearly the number one priority," said Raj Madha, banking analyst at EFG-Hermes. "Obviously a standstill is not ideal. But a standstill with visibility of when payments will be received or the extent of these payments would be sufficient to call it a result."
UAE economy minister Sultan bin Saeed al-Mansouri told reporters on the sidelines of a conference that Dubai, which faces more debt maturities next year, may get more aid from the federal government or Abu Dhabi and downplayed the impact on the UAE economy as whole.
This issue has to be studied in a proper manner, evaluated and based on that, an answer will be provided on the federal level or the local level because the way we see this is one economy not separated from each other," he said.
Dubai may still repay lenders in full, an Abu Dhabi-based newspaper reported yesterday, citing unnamed sources.
The National daily said two top Dubai officials, on a confidence-building mission to Britain and the United States in recent days, told financial leaders in London that repaying all bank loans in full "was discussed as a medium-term possibility".
Sheikh Ahmed bin Saeed al-Maktoum, head of Dubai's Supreme Fiscal Committee and the uncle of Dubai's ruler, and Mohammed al-Shaibani, deputy head of the committee, met officials in London last week.
"They made clear there were a number of options the government of Dubai saw as feasible and desirable for Dubai World and repayment in full was one of them," the newspaper quoted a person who attended the talks as saying.
But a full repayment seems the most unlikely of available options and bankers expect Dubai World to propose the extension of maturities for at least a year or more while paying interest.
A steering committee of Dubai World's largest lenders met the company on December 7th.
The committee consists of London-listed Standard Chartered , HSBC, Lloyds and Royal Bank of Scotland, and local lenders Emirates NBD and Abu Dhabi Commercial Bank.
Lenders had been expected to take Dubai World's requests back to their credit committees, which were expected to agree a standstill request in the new year, several bankers said.
In the boom years, Dubai lured wealthy visitors and courted the media with celebrity-endorsed projects and developments such as The World, an archipelago in the shape of a world map.
But whereas neighbours funded growth with proceeds from soaring oil prices, Dubai borrowed to invest through a network of state-linked conglomerates that offered limited transparency.
Dubai World's troubles have raised question marks about the region as a whole and fears among investors that other government-linked firms could also face problems.
Economy minister al-Mansouri said that the UAE could not change economic forecasts for 2010 as a result of the debt crisis, adding that it did not have a "huge reflection" on the seven-member federation, the world's No.3 oil exporter.
Speculation has continued to mount over which assets Dubai Inc, the network of government-owned companies, is willing to sell to help pay off its debt obligations.
One such asset, luxury hotelier Jumeirah Group, is not for sale, said its owner Dubai Holding, which belongs to Dubai's ruler.