Bloomberg is reporting that Mohammed Jaber and Paolo Batori of Morgan Stanley have issued a report that as much as US$46.7 billion of Dubai World debt may need to be restructured and that haircuts of 40 to 50% are likely to be required.
The press has as usual seized on the most sensational element. Without the full report - which I am trying to get - and all its details and nuances, tt's hard to evaluate the analysis.
My own guess is that there is more pain out there in Dubai.
Heedless lenders and investors were throwing a lot of money the Emirate's way. A lot of it short term money. There's nothing that feeds a speculative boom like easy money. And nothing that causes a faster crash than suddenly sober bankers refusing to roll over short term loans.
Dubai Inc wasn't just on a spree back home but in Las Vegas, New York, etc. And most of that with borrowed money and leverage. A potentially dangerous combination when asset values go down. As indicated in my Aidan Birkett post here.
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