Dubai builder Emaar calls off merger with firms owned by Dubai’s ruler as markets plunge again

Dubai’s Emaar calls off merger with ruler’s cos.

DUBAI, United Arab Emirates — The Dubai developer building the world’s tallest skyscraper said Wednesday it is calling off a planned merger with property companies controlled by the city-state’s ruler, raising fresh questions about Dubai’s debt problems and its willingness to repay.

Emaar Properties’ surprise decision not to combine with three firms owned by Dubai Holding came after the emirate’s main stock exchange plunged for a third straight day, as investors dumped holdings in the troubled Arab boomtown amid a scramble for details about the depth of its credit woes.

The Dubai Financial Market’s benchmark index dropped 6.3 percent at the close, building on steep declines since Monday. The exchange has seen its year-long gains erased following the announcement that Dubai World, the emirate’s biggest conglomerate, was $60 billion in debt and needed to restructure.

Dubai officials have said they will not guarantee debts racked up by the company, which served for years as one of its chief engines for growth, further stoking investor unease.

“It’s all about the absence of any news, clarity and confirmation of what will happen,” Julian Bruce, director of institutional equity sales at EFG Hermes, said of the market’s slide.

The drop was echoed in Abu Dhabi, the oil-rich emirate that is home to the United Arab Emirates’ federal government. That bourse tumbled 2.8 percent.

As in previous sessions, shares of bellwether Emaar were among the hardest hit on the DFM, plummeting nearly 10 percent.

Concerns about Dubai’s debt have prompted a series of credit ratings downgrades, the most recent coming Tuesday when Moody’s Investors Service cut the ratings of six government-linked companies, leaving all in junk status. Emaar was among the companies downgraded.

“There’s a huge level of uncertainty, and investors are not interested in gaining more exposure to Dubai,” Bruce added. “That’s why everything is for sale.”

Emaar said in a statement sent by the Dubai ruler’s media office that its board of directors decided to cancel the long-anticipated merger with the Dubai Holding companies “at the present time” following an examination of the plan’s feasibility. It did not elaborate.

Representatives for Emaar and Dubai Holding were unable to provide additional details when reached by The Associated Press.

Dubai’s government owns nearly a third of Emaar, which along with state-owned Dubai World’s Nakheel was one of the most prominent developers shaping Dubai’s evolution from a sleepy seaside village into a pulsing, high-rise metropolis.

Emaar opened the region’s largest shopping mall last year and is putting the finishing touches on the Burj Dubai, the world’s tallest tower expected to open early next month.

In June, Emaar said it planned to merge with Dubai Holding subsidiaries Dubai Properties, Sama Dubai and Tatweer, in a a consolidation aimed at better coping with a steep drop in Dubai’s once white-hot property market. Some Emaar investors were unhappy with the plan because of concerns it would overload the company with too much new debt.

Dubai Holding is controlled by Dubai’s hereditary ruler, Sheik Mohammed bin Rashid Al Maktoum. Dubai World is wholly-owned by the Dubai government.

Earlier in the day, Nakheel, the Dubai World subsidiary that built the city-state’s iconic palm-shaped islands, disclosed that it lost about $3.66 billion, in the first half of this year as property values tumbled in the emirate on the back of the global economic meltdown.

The company also said it had amassed nearly $20 billion in liabilities through the end of June. It said its assets at the time stood at about twice that amount.

The debt build-up mirrored that of Dubai World — whose sprawling holdings range from ports to real estate and luxury retail — and of Dubai, itself.

The conglomerate and the emirate had relied on cheap cash to build up Dubai — one of seven semiautonomous city-states making up the UAE — over the past decade. But the bills are coming due and the money is not there.

That crunch prompted Dubai’s government, on the eve of the U.S. Thanksgiving holiday, to announce that Dubai World would seek a six-month “standstill,” effectively a delay, on repaying some of its $60 billion in debts.

While the company later said the restructuring would involve roughly $26 billion in debts, and indicated it may sell some assets to raise the cash, it said its profitable ports and related free zone operations would be exempt from the restructuring. Also off the table was its private equity division Istithmar World and Infinity World Holding, the co-owner of Las Vegas’ new $8.5 billion CityCenter hotel and casino complex.

Dubai World looked to isolate other assets from the restructuring, announcing late Tuesday that its shipbuilding and repair arm Drydocks World will not be included in a restructuring.

Even as it tries to fence off more valuable assets, Dubai is coming under mounting pressure from creditors that have loaned the emirate’s web of state-run companies more than $80 billion. Dubai World’s Istithmar lost ownership of the W Union Square New York hotel in a foreclosure auction Tuesday.

Creditors increasingly fear Dubai’s debt problems could spread beyond Dubai World to the other state-linked companies known informally as “Dubai Inc.”

Analysts at Barclays Capital said in a research report that Dubai Holding could be “next in line” with credit problems.

Associated Press Writer Barbara Surk contributed reporting.