Dubai's plan to avoid drawing on fresh funds from wealthier neighbor Abu Dhabi in its debt restructuring proposal for Dubai World may be more about presentation than the reality of its balance sheet. Not taking new cash from Abu Dhabi was meant to show investors that Dubai can still stand on its own feet. But analysts say the hard reality is that the emirate could never navigate its current troubles without Abu Dhabi's support. Abu Dhabi, which holds over 90 percent of the United Arab Emirates' oil wealth, may yet have to help out Dubai again despite the message of Thursday's plan for the conglomerate. “The message is: Let Dubai handle this,” Emirati political scientist Abdul-Khaleq Abdullah said. “But you and I and everyone else knows that without Abu Dhabi's help, support, involvement - which I think will become clearer - this thing would not have been possible.” There may be other motives to Abu Dhabi's low public profile in the process of restructuring Dubai World's $26 billion debt. Staying in the shadows could also help to prevent the federal capital from being too strongly associated with Dubai's financial problems, and contain potential spillover. Dubai said on Thursday it would recapitalize Dubai World and repay property unit Nakheel's bonds in full, with $9.5 billion of aid in a debt offer that would promise creditors all their money back in up to eight years. The Dubai government said $5.7 billion in funds from a previous loan made by Abu Dhabi would provide the lion's share of the funding, and that Dubai would add around $4 billion of its own resources. Analysts had expected Abu Dhabi to step in with more cash. “One of the strengths of the announcement is that it says that based on current resources, Dubai will be able to meet its current obligations,” Abu Dhabi-based analyst Mohammed Yasin said. “That doesn't mean that the cooperation between the various government entities, federal or local, will change or stop.” Dubai may ultimately need to draw on its neighbor's help again, said Khuram Maqsood, managing director of Emirates Capital in Dubai. “Dubai has other debts coming due in addition to Dubai World,” Maqsood said. “Unless in their plan they have assumed a lot of good things breaking in their favor ... Abu Dhabi will step in because how else are they going to fill the gap?” Abu Dhabi gave Dubai $10 billion late last year in a two-part bailout made up of $5 billion from Abu Dhabi-linked banks in November and another $5 billion from the government. The latter helped to avert default on an Islamic bond issued by Nakheel but came at the last minute and was announced on the day the Sukuk matured. It can be difficult to establish the facts surrounding the relationships between the ruling families of the UAE's emirates and how these affect decision-making, but perception also plays a key role in how these matters are dealt with. “Getting help from Abu Dhabi shows that it's a federal state and that it will not let one part fall down,” said Ebtisam Al-Kitbi, a politics professor at the UAE University in Al-Ain. Any failure of state-linked firms in Dubai could have a spillover effect on Abu Dhabi's economy and investor confidence, as well as making it more expensive for companies to tap capital markets. Moody's downgraded seven leading Abu Dhabi government-linked firms earlier this month, including Mubadala and International Petroleum Investment Company (IPIC), citing a lack of explicit state support.
