Abu Dhabi bailed out neighbouring Dubai on Monday with $10 billion (6.1 billion pounds) in surprise aid for debt-laden Dubai World, driving stock markets higher, but Dubai said creditors still needed to approve a standstill on outstanding debt.Dubai said $4.1 billion of the money received from Abu Dhabi was allocated to property developer Nakheel to repay its Islamic bond maturing on Monday. Nakheel said it would repay the bond over the next two weeks.
The excess funds would be used to help government-controlled holding company Dubai World, which has asked creditors to agree to restructure $26 billion of its debt, up until the end of April 2010, a Dubai government statement said.
"The (agreement is) on condition of the company being successful in negotiating a standstill previously announced with remaining creditors," a government source said in a conference call with journalists.
"The fund will also be used for the satisfaction of obligations to trade creditors and contractors and discussions with contractors will begin shortly," the source said.
Dubai's benchmark stock index led a surge on regional markets, jumping more than 10 percent, while Abu Dhabi rose 7 percent in early trading.
The move was the least expected of all options Dubai had on the table after requesting a standstill on $26 billion in Dubai World debt on November 25, alarming global financial markets and shaking the image of the emirate as a regional business hub.
Dubai's creditors, which include London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland, along with United Arab Emirates lenders Abu Dhabi Commercial Bank and Emirates NBD, effectively have until Dec 28 to agree to the standstill, when the Nakheel bond's grace period ends.
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