More than two years on from Dubai World, and Dubai is still struggling to sort out its debt.

Investors were shocked when government-owned Dubai World declared a payment standstill on its debts in Nov 2009 — a brutal tarnishing of the  ”sovereign halo”, which investors thought shone even on those borrowers whose debt did not have a solid sovereign guarantee.

A number of debt restructurings have taken place since then, including most recently for $2.5 billion in debt from Dubai International Capital (DIC). But banks are looking vulnerable.

Gus Chehayeb, analyst at Exotix in Dubai, says two-thirds of Dubai’s bank debt restructuring has been completed following DIC, but there is still $12.2 billion in bank debt under negotiation.

Chehayeb says:

It has not paid to be a banker in Dubai. To date, bankers have shouldered ALL of Dubai Inc’s debt restructuring costs, while bondholders have remained.  completely untouched.