By Dana El Baltaji www.businessweek.com
April 18 (Bloomberg) — Dubai’s benchmark index declined the most in more than a week on concern Dubai World is offering creditors interest that is about a fifth of the current market rate.
Arabtec Holding dropped the most since February after The National said a unit of the construction company won’t bid for a contract to build a 1.1 kilometer (0.68-mile) skyscraper in Saudi Arabia. Emaar Properties PJSC, the developer of the world’s tallest tower in Dubai, dropped as much as 4.7 percent. Dubai Islamic Bank PJSC, the United Arab Emirates’ biggest Islamic lender, retreated the most in more than a week. The Dubai Financial Market General Index lost 2.2 percent, the biggest intraday drop since April 8, to 1,776.63 at 11:33 a.m. in Dubai.
Dubai World, the state-owned holding company restructuring $24.8 billion of debt, is offering to pay creditors 1 percent interest on new loans as part of a restructuring plan, according to a banker familiar with the plan. Banks are reluctant to accept the new rate presented on March 25 as it is lower than the market rate of about 5 percent and would force Dubai World’s creditors to book impairment provisions, two bankers said April 15, declining to be identified because the talks are private.
“A 1 percent interest on the restructured amount is not in the best interest of anyone,” said Marwan Shurrab, assistant fund manager and chief trader at Gulfmena Alternative Investments in Dubai. “It would hurt banks and force them to make more provisions, which will affect their results.”
A spokesman for Dubai World declined to comment when contacted on April 15.
Arabtec tumbled 4.9 percent, the most since Feb. 14, to 2.53 dirhams. Arabtec Construction and its South Korean partner Samsung Corp. planned to submit a proposal for Kingdom Tower this month and withdrew for “various reasons associated with the requirements,” The National reported, citing Chief Executive Officer Tom Barry.
“Due to the various reasons associated with the requirements of the Kingdom Tower, we could not comply and therefore have decided not to bid for this project,” Arabtec said in a statement read over the phone to Bloomberg today.
Emaar fell to as low as 3.87 dirhams, before trading at 3.93 dirhams. Dubai Islamic Bank lost 2.9 percent to 2.31 dirhams.
–Editors: Claudia Maedler, Shanthy Nambiar
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