Dubai debt plan fails to calm Gulf markets

By Jason Benham

DUBAI (Reuters) - Gulf markets tumbled again on Tuesday, taking no comfort from Dubai World's plan to restructure about $26 billion of its estimated $59 billion in liabilities, which appeared to calm global fears of contagion.

In a sign that concern among banks was subsiding, UAE interbank offered rates eased, with the 3-month rate falling to 1.90500 percent from Monday's 1.94125 percent fix.

Dubai and Abu Dhabi stocks fell about 6 percent on their second trading day since Dubai last week asked creditors of government-controlled conglomerate Dubai World and property arm Nakheel for a delay on debt repayments as a first step to restructuring.

Dubai World, which led the emirate's transformation into a regional hub for finance, investment and tourism, unveiled details late on Monday of a plan covering $26 billion of debt owed by its main property firms, Nakheel and Limitless.

"This is definitely good news, it shows they are still committed to their payments, and it removes all fears that this is a complete default," said Hassaim Arabi, chief executive at Gulfmena Alternative Investments.

News of the plan helped global markets edge higher, but did not halt the sell-off in the Gulf, which followed comments by Dubai's leading finance official on Monday that the government would not guarantee Dubai World's debts.

The market in Qatar, reopening after a five-day Eid al-Adha holiday, plunged more than 9 percent, while Kuwait's bourse was down 2.55 percent.

"It's a beginning, and it's definitely a positive step in that it gives us a scale of the problem," said a Dubai-based strategist. "But the main concern remains unchanged. What is the outcome of those negotiations with regard to the Nakheel problem?"