Hmmm…. Dubai (Again) – More?
Courtesy of Karl Denninger at The Market Ticker
There is never only one
It appears, in fact, there are a lot of cockroaches…. not only is there an official bond issue (with potential default) there appear to be a whole scad of contractors who haven’t been getting paid for their work over there….
"Some Japanese construction companies are facing very serious debt problems as Dubai can’t pay,” said Seiichi Otsuka, the Japanese consul general in Dubai. “Some companies engaged with the construction of the Metro are facing some payment issues.” He said companies were also owed money by Nakheel.
Oh oh…. And how big is this problem? Nobody seems to be saying, exactly….
“It is inappropriate to reveal details about our arrangements with contractors as we respect the confidentiality of our business exchanges,” said a Nakheel spokesman. “We remain committed to working in partnership with our contractors over the long term.”
Is that especially true when you’re not paying them on time… or at all?
“Certain of the Nakheel Group’s financing arrangements may contain cross-default clauses whereby a default under one of the Nakheel Group’s financing arrangements may constitute an event of default under other” obligations, according to an offering circular for the Nakheel 2011 bonds on Bloomberg.
That could be fun. How do you spell "cascading boom-booms"?
Finally, confirming what I had suspected, the WSJ points out:
But the prospectus notes that "trusts" and "beneficial interests" are alien to Dubai’s laws and that Dubai’s legal system has no track record of adjudicating complex international transactions. Some other disclaimers: Dubai World, the chief guarantor of the Nakheel bonds, doesn’t issue audited financials; the issuer has no attachable foreign assets; the real estate assets under the trust that secure the debt are located in Dubai, which likely wouldn’t enforce a judgment from an English court, the document matter-of-factly explains.
So you mean that banks bought – and own – this crap even though there are no audited financial statements and there are no foreign assets that can be seized (those assets INSIDE Dubai can’t be seized as they’re formally the property of the Emir, and you can’t seize the King’s land you see.)
This looks like a prospectus for MBS that were stuffed full of liar loans!
