Will Dubai World cash in on CityCenter investment?

Dec 8, 2009 2:14 AM

Dubai World appears to be under extreme pressure to sell off some of its extensive holdings to meet debt obligations, thus raising the question: will its 50 percent ownership of CityCenter in Las Vegas be part of any asset sale?

When the leaders of both UAE’s Dubai and its neighbor Abu Dhabi announced that they have no intention of intervening in the debt crisis of Dubai World, investors looked Monday toward the company generating "liquidity" through the sale of some foreign assets.

And there are many.

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In addition to its Las Vegas holdings, Dubai World, through its subsidiaries DP World, Jebel All Free Zone and Istithmar, owns the high-end retailer Barneys of New York, the luxury hotels W and Mandarin Oriental in New York City, as well as properties in other countries.

It also has in its holdings such diverse units as Cirque du Soleil, the iconic British cruise liner Queen Elizabeth 2 and shipping ports.

Global financial institutions felt the impact last week when Dubai World asked its creditors for a six-month standstill on $3.5 billion of its debt. Although press reports have placed Dubai World’s debt at $60 billion, others have escalated that amount to as much as $100 billion.

Pressured by creditors, the company leaned Monday toward generating more cash by eliminating some of its holdings.

"This is the inevitable next step, really," remarked Christopher Davidson, a professor at the University of Durham who has written extensively about the history and politics of the United Arab Emirates.

On Monday even Dubai Finance Department Director-General Abdul Rahman al-Saleh told an interviewer on al-Jazeera that "Like any company that has commitments, part of getting liquidity is selling assets."

But, will the price be right?

That’s the question asked by a Saudi banking official on Monday.

"Is it enough…Will they find the right price and willingness of investors outside of Dubai to buy into them?" he asked.

MGM MIRAGE Inc. (MGM), partner of Dubai World in CityCenter, listed the project at $8.5 billion but has taken major writedowns on the development in recent financial reports.

And, as for Dubai World’s 10 percent ownership of MGM, the price paid for that holding was $84 per share. At the close of trading on Monday, MGM shares sold for $10.37 each.