DP World unaffected by Dubai debt meltdown
An announcement Wednesday that the parent company of DP World was seeking to restructure $60 billion in debt should have no impact on the container terminal operating subsidiary.
However, it emerged over the weekend that the Jebel Ali Free Zone Authority, another cargo-related subsidiary of debt-plagued, state-owned conglomerate Dubai World, could face a key test of its solvency as soon as today.
JAFZA, a massive free zone complex adjacent to Dubai's Jebel Ali Port, is due to pay a $7.5 billion Islamic bond payment, according to a report over the weekend in the Wall Street Journal.
The news of Dubai World's financial problems were broadcast far and wide over the Thanksgiving weekend, but representatives of DP World said quickly the terminal operating arm would be cordoned off from loss-making ventures that the parent company has undertaken.
'The government of Dubai has confirmed that DP World and its debt are not included in the restructuring process for Dubai World,' Dubai World said in a statement.
Despite suffering a drop in volume and revenue this year, DP World remains a profitable business for Dubai World, with prospects in coming years even brighter once demand for containerized cargo rebounds.
Though DP World is dependent on its flagship Jebel Ali complex, it has spread its reach to Africa, Asia, Europe and South America as it diversifies its sources of revenue, focusing on underserved and developing markets.
The JAFZA situation is less clear. Dubai World on Wednesday announced it would ask for a debt moratorium from its creditors through May 2010 or longer, after it was unable to make a $3.5 billion bond repayment due Wednesday.
Unsurprisingly, debt-rating agencies swiftly downgraded their ratings for Dubai World, with Standard and Poor's placing JAFZA on its Credit Watch.
Aside from the free zone in Jebel Ali, JAFZA is developing a free zone in South Carolina. ' Eric Johnson
DP World unaffected by Dubai debt meltdown
