Dubai: We Won't Bail Out Dubai World

Dubai’s government threw investors a curve ball today, saying that even though struggling Dubai World is state owned, the government won’t guarantee its debts or bail it out. Lenders “have deemed Dubai World as part of the government, and this is not true,” Dubai’s finance director said on TV. “The government is the owner of the company, but since its foundation, it was established that the company is not guaranteed by the government.”

He said creditors need to “take part of the responsibility for their decision” and help the company, which asked for a standstill on its debts last week, to restructure. The statement has investors reeling. “The fine print might not oblige the government to guarantee Dubai World debt,” the chief economist at Banque Saudi Fransi tells the Wall Street Journal, “but implicitly the creditors saw the two entities as one.” (More Dubai stories.)