(2009-11-26) Dubai Debt Delay

Sentiment in stocks has been dented by the news that Dubai World, which is thought to have debts totaling around $60 billion, has asked creditors if it can postpone its forthcoming payments until May. That has stoked fears of a potential default and contagion around the global financial system, particularly in emerging markets.

European banks face potential losses on an estimated $40 billion in exposure to Dubai after the City State's largest corporate entity, Dubai World, asked creditors for a six month standstill on debt repayments, raising fears that recent signs of improvements in banks' bad debt levels could reverse and Dubai's problems could weigh on the global recovery. Most banks on Thursday said their exposure to Dubai and Dubai World is small or wouldn't comment. Dubai World accounts for about $60 billion of the city state's $80 billion in liabilities, of which half is estimated by Credit Suisse analysts to be held by European banks.