Dubai World to defer payment shocking US markets

With the onset of a global recession, Dubai's real estate market declined after a six-year boom. On November 25, 2009, the Dubai government announced that the company "intends to ask all providers of financing to Dubai World and [its subsidiary] Nakheel to 'standstill' and extend maturities until at least 30 May 2010".[3] The company will also undergo a restructuring process with the help of Deloitte consultants. Several months earlier, Dubai World accounted for a $59-billion debt, nearly three-quarters of the emirate's US$80-billion debt.[4] This includes a US$3.5-billion loan which the company is unable to repay by its December deadline.[5]

In response to the government announced moratorium of Dubai World's debts, both Moody's and Standard & Poor's Investors Services heavily downgraded the debt of various Dubai government-related entities with interests in property, utilities, commercial operations and commodities trading. In Moody's case, the downgrade meant that the affected agencies lost their investment grade status.[6]

American stocks tumbled on the afternoon of November 27 as fears about the fallout from Dubai's debt problems rattled Wall Street in a thinly-traded half-day session following Thanksgiving. The Dow Jones industrial average (INDU) fell 155 points, or 1.5%, after closing November 25 at a 13-month high. The Dow had lost as much as 233 points in the morning.[7]

Source: Wikipedia