Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum told the Al-Arabiya satellite channel that his emirate's economy was "strong" and solid." The comments were his first public statement about Dubai World since his government announced on Wednesday that conglomerate - the emirate's chief engine for growth - was restructuring and wanted a six-month minimum delay in its debt payments.
The news roiled Dubai and Abu Dhabi's markets for a second day Tuesday, as the UAE's two biggest bourses as well as others in the Gulf Arab region played catch-up with global markets that had digested the bad news late last week.
The Dubai Financial Market closed down 5.61 percent after slightly paring an earlier slide of about 6 percent. Abu Dhabi's bourse fell 3.57 percent by closing, after losing about 5 percent earlier in the day. On Monday, both markets registered record falls.
Sheik Mohammed attributed the reaction in the market to the news of Dubai World's restructuring as an indication of "a lack of understanding about what is happening in Dubai."
Earlier, the UAE's president, was quoted by WAM, the state-run news agency, as saying that the country's economy was healthy and that the international financial crisis, "despite being very harsh, will not push us toward despair."
The remarks were clear attempts by UAE officials to calm investors scrambling to get a clear understanding of how Dubai would deal the conglomerate's debts. Dubai officials on Monday indicated they had washed their hands of Dubai World's debts, arguing that it was an independent company that happened to be owned by the city-state.
The news rattled investors and raised more questions about whether neighboring Abu Dhabi, the oil-rich seat of the UAE's federal government, would step in with a bailout of sort and what such a step would mean for Dubai.
Partial answers emerged early Tuesday when Dubai World announced in a statement that it had begun "constructive" discussions with its creditors over $26 billion of the conglomerate's debts. It said the debt restructuring would include about $6 billion
It said the restructuring would include about $6 billion in Islamic bonds issued by its real estate arm, Nakheel PJSC, the company behind Dubai's iconic palm shaped man-made islands. About $3.5 billion of the bonds come due on Dec. 14, and Nakheel was viewed as the litmus test Dubai World's debt woes.
Dubai World said the restructuring would include Dubai World and certain subsidiaries, including Nakheel World and Limitless World. Excluded from the talks are debts from Infinity World Holding, Istithmar World and Ports & Free Zone World, which includes ports and terminal operator DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone).
The conglomerate said all those subsidiaries are on "stable financial footing," and in a statement posted on the Nasdaq Dubai Web site, Jebel Ali Free Zone said it paid a roughly $2 billion Islamic bond, or sukuk, on time Tuesday.
While the statement offered the first taste of clarity for a financial world eager for some transparency, it did not deal with the broader issue of how the company and Dubai itself would deal with the overall debt.
"There has been a mixed sentiment," said Saurabh Dhall, an independent broker in Dubai. "There is a lack of certainty as to how things are going to move forward, and investors are wary espeically when all the talk beforehand was that things were OK and payments would be made."
"The major concern is not so much the dollar amount ... of the payments, it's the concern about how this will affect credibility," he said.
Those concerns were reflected in trading on the UAE's main bourses, as well as elsewhere in the Gulf.
Qatar's bourse fell 8.27 percent while Kuwait's was off 2.71 percent.
Markets in the Emirates will be closed on Wednesday and Thursday for the country's national holiday and will reopen on Sunday after the end of weekend in the Arab world.
