Narrative
Full Description
Project narrative
Prior to November 2009, the Hong Kong Branch of China Construction Bank Corporation (CCB) provided a $1.03 billion (RMB 7 billion) loan to Dubai investment company Dubai World for unspecified purposes. Then, in November 2009, due to debt repayment problems, Dubai World announced a debt restructuring, and as a result the CCB loan was classified as ‘non-performing’. The Ports, Customs and Free Zone Corporation (PCFC), a state-owned company of the Government of Dubai, had provided a guarantee for this loan. In March 2010, as part of the restructuring of Dubai World, the Government of Dubai's Department of Finance assumed responsibility from PCFC for outstanding debt to CCB worth AED 3,712,460,000 ($1,010,715,750 USD). This action occurred after Dubai’s Department of Finance established the Dubai Financial Support Fund (DFSF) to restructure and assume responsibility for the outstanding debts of Dubai World in February 2009. In March 2017, Nanyang Commercial Bank (NCB) — a wholly owned subsidiary of China Cinda Asset Management Corporation — and the Hong Kong Branch of China Construction Bank Corporation (CCB) entered into a $535 million USD syndicated facility (loan) agreement with the Government of Dubai’s Department of Finance (DoF). The proceeds of the loan were to be used by the borrower (at least in part) to refinance the Department of Finance’s outstanding repayment obligations to China Construction Bank from the Dubai World debt it had assumed responsibility for in September 2010. Some reports suggest that the borrower was also authorized to use the loan proceeds to support local infrastructure projects. NCB and CCB each contributed $267.5 million USD to the syndicated facility. NCB's contribution is captured via Record ID#89713 and CCB's contribution is captured via Record ID#89714.
Staff comments
1. Dubai World (迪拜世界) is an investment company that manages and supervises a portfolio of businesses and projects for the Government of Dubai. 2. Dubai World, one of three flagship holding companies of the Dubai Government, invested heavily in the real estate boom which burst in late 2008. Banks lent easily to Dubai World and its subsidiaries, assuming implicit government backing. After the global financial crisis, Dubai World’s refinancing needs soared as banks stopped lending. In November 2009, Dubai World said it would seek a delay on repaying $26 billion USD in debt, linked to its property units Nakheel and Limitless. The news caused global markets to tumble on fears that the Government of Dubai could no longer service its debts. 3. The exact commitment year of this loan is unknown. However, this loan was clearly committed prior to November 2009, as it was declared non-performing in that month, per "CCB to diversify overseas assets after Dubai exposure". 4. According to "建设银行人士首度披露迪拜危机坏账70亿人民币", between November 2009 and March 2010, CCB withdrew a third of the loan's value and restructured the rest after the loan was categorized as non-performing in November 2009 due to Dubai World's debt issues. This issue warrants further investigation.