Default became a dirty word in the United Arab Emirates after 2009, when Dubai World requested a six-month delay on payments on US$26 billion in debt. So much so that when UAE energy company Dana Gas this month missed repayment on a US$920 million Islamic bond, local press hesitated to label it as a default.
In the midst of the global economic and financial crisis, the country and Dubai in particular took a drubbing from credit rating agencies, investors and the international press, which harshly questioned its economic model. A multibillion-dollar bailout from oil-rich sibling Abu Dhabi averted the worst, but the experience left a sting.
Based in Dubai’s neighboring Emirate of Sharjah, privately owned Dana Gas became the first example of a UAE corporation to miss a debt repayment — others had sought and received restructuring before deadline. It also presented a test for the Islamic financial market, as no sukuk had been restructured or unpaid upon maturity. Yet the Middle East’s largest natural gas firm quickly announced a restructuring deal soon after its troubles became public.
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