A Dubai World debt deal will help lift investor concerns about the regions' financial stability but local firms trying to raise money will still pay a higher price and face more scrutiny. Dubai World, which said in November it would delay repayment on $26 billion in debt as it restructured, is in the final stages of preparing a debt restructuring proposal to present to its creditors. Analysts expect any proposal that sets less attractive terms for creditors will set a precedent that will make it harder for companies in Dubai World's wake to borrow money or raise funds. Analysts are expecting the plan to have less attractive terms for the creditors, setting a precedent that will make it harder for companies coming in Dubai World's wake to borrow money or raise funds.
Dubai-based companies have already been hard hit, with a near-50 percent fall in property prices and most construction projects in the area have come to a halt as well as a curb in lending by provisions-hit regional banks. Before the financial crisis hit global markets, foreign banks were lending extensively to the region, aiming to cash in on the oil-rich emirate's growth prospects. However, foreign investor confidence was deeply shaken by Dubai World's announcement on its debt and, subsequently, international capital markets have become less accessible to most Gulf companies. At the same time, companies that need to raise fresh capital to rebuild balance sheets or to fund expansion have found debt markets in the region are clogged and the appetite for initial public offerings is remarkably low.
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