It has been two years since Dubai unexpectedly declared its need to restructure $25 billion in debt but questions remain on whether its economy can navigate successfully the treacherous shoals of insolvency. There was a troubling sign in August when the maritime services company of Dubai World, the main investment company for the Dubai government, announced that it would default on loans. Last month, this led a U.S. based hedge fund to sue for some $45.5 million. The maritime company, Drydocks World, has been in discussions to restructure its debt of $2.2 billion, and that could be just a sign of things to come.
Dubai’s total debt is now $110 billion, with $14 billion due in 2012. JPMorgan has described some $3 billion of that debt as “challenging.” Analysts assert that not much has changed in Dubai since the 2009 financial crisis. The real estate market remains under water, but on the positive there is increased investor confidence brought about by some successful debt restructuring and the help of emergency funds provided at the time by Abu Dhabi.