CBA Breaks Silence On Dubai World Exposure Says No Material Loss Expected

Post by Sharat on November 30, 2009 · Under Business News, Capital Markets, Company News, Equities, International Business News, banking · Comment

Australian banking major Commonwealth Bank of Australia (CBA) broke its silence Monday and issued an announcement confirming that the lender does not have a large enough exposure to incur a material loss from a possible default by troubled sovereign holding company Dubai World.

CBA released a terse one sentence statement saying:

“Commonwealth Bank of Australia confirms that it does have a financial exposure to Dubai World but it does not expect to incur a material loss as a result of the recently announced debt moratorium,”

CBA made its announcement on Monday, after maintaining silence on Friday, even after its three other Big Four rivals all confirmed that their exposure to the sovereign holding company of the Dubai government would not generate any material losses for them.

Dubai world wants a six month moratorium on its debt repayments. The company has a US$3.5 billion bond due in exactly two weeks, and is seeking to delay its repayment.

On Thursday, the government of Dubai said it wanted to restructure its investment holding company, Dubai World, which included a moratorium on the debt payments of the company including those of its property unit Nakheel.

The prospect of a quasi sovereign default sent shivers down the spines of financial markets on Thursday, with European markets plunging, on fears that sovereign defaults would not be confined to Dubai, and would result in other debt laden countries defaulting on their debt.
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On Friday, Westpac, ANZ and NAB all confirmed that they had exposure to the troubled sovereign holding company, but their exposure would not result in any material losses for the lenders.

Shares in ANZ, Westpac, NAB and CBA dropped over 3.4 per cent on Friday amid a market-wide sell-off of over 2.7 per cent.

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