Dubai Debt Delay sends markets spinning, US Dollar hits 14 year low against yen…

Dubai World's real-estate subsidiary, Nakheel, built the emirate's iconic palm-tree-shaped island, packed with luxury villas and hotels. Bloomberg

Dubai is delaying its billions in debt repayments, markets are tanking, ours are closed for the Holiday. Tomorrow should be interesting…

Bloomberg:

Dubai World, with $59 billion of liabilities, is seeking to delay debt payments, sending contracts to protect the emirate against default surging by the most since they began trading in January.The state-controlled company will ask creditors for a “standstill” agreement as it negotiates to extend maturities, including $3.52 billion of Islamic bonds due Dec. 14 from its property unit Nakheel PJSC, Dubai’s Department of Finance said in an e-mailed statement. Moody’s Investors Service and Standard & Poor’s cut the ratings on several state companies, saying they may consider the plan a default.

“Extending the maturity of Nakheel debt is feeding the market’s uncertainty on which debt Dubai will honor in full,” said Rachel Ziemba, a senior analyst covering sovereign wealth funds at New York-based Roubini Global Economics. “They look desperate and the market is concerned that in the long term Dubai’s indebtedness is rising not falling.”

Dubai accumulated $80 billion of debt by expanding in banking, real estate and transportation before credit markets seized up last year. Contracts protecting against default rose 116 basis points to 434 basis points yesterday, the most since they began trading in January, ranking it the sixth highest-risk government borrower, according to credit-default swap prices from CMA Datavision in London. The contracts, which increase as perceptions of credit quality deteriorate, are higher than Iceland’s after climbing 131 basis points in November, the biggest monthly increase since January….

CanadianPress:

World stock markets fell Thursday as investors fretted over the debt problems at Dubai World, a government-owned investment company that wants permission to postpone payments on billions of dollars of debt.Dubai World is is thought to have debts totalling around US$60 billion, so its request to postpone payments has stoked fears of a potential default and contagion around the global financial system, particularly in emerging markets.

In Asia, the Shanghai index tanked Thursday in its biggest one-day fall since Aug. 31, falling 119.19 points, or 3.6 per cent.

Meanwhile, Hong Kong’s Hang Seng shed 1.8 per cent to close at 22,210.41.

“Certainly the Dubai debt debacle and the uncertainty that it has created has had a severe knock-on effect,” said David Buik, markets analyst at BGC Partners.

Investors were also keeping a close eye on developments in the currency markets as the U.S. dollar slid to a new 14-year low of 86.27 yen, while the euro pushed up to a fresh 15-month high of $1.5141.

By late-morning London time, the American dollar had recouped some ground and was trading at 86.75 yen, down seven per cent on the day, while the euro was 0.3 per cent lower at $1.5094.

The relative weakness of the American dollar against other major currencies has a potential disruptive effect, affecting the competitiveness of other countries – including Canada, where the loonie has been edging towards parity with the greenback….