Dubai World may be forced to sell overseas assets as part of its restructuring process, a top Dubai finance official conceded on Monday, but he said the government would not divest businesses to support the holding company.
Abdulrahman al-Saleh, director-general of the department of finance, said that as part of Dubai World's $26bn debt restructuring, the holding company would sell some of its foreign investments and real estate assets, which include the QE2 cruise liner and Cirque du Soleil, the Canadian circus operator.
"There is nothing to prevent [Dubai World] selling these assets," Mr Saleh told Al Jazeera television.
The main goal of the restructuring process is to guarantee the survival of Dubai World, which borrowed heavily to fuel an overseas expansion programme, within a new financial framework agreed with creditors.
But Saleh said the government would not sell assets to support the state-owned holding company.
The department of finance, which oversees core government functions such as the Dubai Water & Electricity Authority and the Roads & Transport Authority, has previously confirmed that it would support all entities that enjoy a sovereign government guarantee.
But the government has not offered an explicit guarantee to Dubai World, which is chaired by sultan bin Sulayen, or companies within the Investment Corporation of Dubai, which include Emirates airline, Dubai Duty Free and a stake in real estate giant Emaar Properties. Dubai Holding, which groups companies owned by Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, is also not believed to have sovereign backing.
Some bankers have suggested that Dubai World's debt problems are so severe that the government may have to look to sell assets beyond those held by Dubai World or its two real estate units Nakheel and Limitless to put the holding company back on a stable financial footing.
The Financial Times reported last week that UK banks are believed to have an aggregate debt exposure to Dubai World of about $5bn. Royal Bank of Scotland was the most exposed of the UK banks, with between $1bn and $2bn of outstanding debt, ahead of HSBC, Standard Chartered and Lloyds Banking Group.
Emirates National Bank of Dubai is the biggest single creditor with outstanding lending of about $3bn.
However, the UK banks, which are due to hold a meeting with Dubai World later on Monday, are understood to have much of their lending focused on the still-performing parts of the group.
Dubai World has suggested to lenders that it would be able to meet refinancing obligations by selling off some of its assets as markets recovered, bankers familiar with the process say.
However, the group has said it does not intend to include private equity arm Istithmar and DP World, the profitable ports operator which includes P&O, or Jebel Ali Free Zone, the operator of one of Dubai's key economic development zones, within the restructuring process.
Istithmar has assets across the world, from New York retailer Barney's to the V&A Waterfront, a retail and property development in South Africa.
As bondholders consider legal action to enforce payment of the $4bn Nakheel sukuk which is due on December 14, the government remains confident that they will find it hard to claim assets held within the Istithmar unit.
Dubai World, which guaranteed the sukuk, has shares in Istithmar, making it difficult for legal action to claim the underlying assets, people aware of the matter say.