Financial crises between 2007 2010 (about Dubai) Essay

Financial crises between 2007 2010 (about Dubai) - Essay Example Buildings like the Burj Khalifa remained largely unoccupied. In 2009, Dubai suggested that it may not be able to pay the impending six month interest payments on its loans. Abu Dhabi then came to its rescue with a $ 10 billion bailout. In the year 2009, Dubai stumbled into a debt crisis. During the years of economic boom before 2008, the investment arm of Dubai, Dubai World had borrowed heavily. It had racked up more than $ 59 billion in debt. Dubai World had borrowed hugely to invest in lavish projects in Dubai. These included Las Vegas casino style glittering properties and a giant island that was shaped like a palm tree; besides the tallest building in the world: the Burj Khalifa. Nakheel is the real estate developer owned by Dubai World, the investment arm of the state of Dubai. Prominent among the constructions of Nakheel are palm-shaped islands and the Atlantis Hotel. $ 3.52 billion of the Islamic bonds of Nakheel also became due and Nakheel had no liquidity to pay them off. It was part of one of the largest tranches of Islamic bonds that Nakheel had sold to Western investors (Landon Thomas Junior, 2009). The investors had no idea that Dubai was facing a risk of default. A week before Dubai announced its possible incapacity to pay the interests on bonds, the bonds were trading at a 10% premium on their face value. After the announcement they were trading at a discount of 50% on their face value. The total debt of Dubai is distributed among a number of different state owned companies. Majority of these companies are owned by the three main investment arms of the state of Dubai. These three investment arms are: When the global financial crisis started and the property market in United States and around the world crashed, Dubai found itself left with an abundance of costly real estate that no one wanted to buy or rent. Dubai had to request that the impending six