Interest is a murky business in Muslim finance, in which religious doctrine prohibits earning money from money loaned. And while bankers are largely upbeat about the deal being offered by Dubai to bail out Dubai World and its property unit Nakheel, relieved that they are getting anything at all, perhaps they will take some solace from the interest prohibition when they say a final goodbye to any interest they were due.
Dubai World is being recapitalized and Nakheel’s bonds are to be paid off – sans interest — with $9.5 billion of aid. The funds include about $4 billion from the government of Dubai and a previous loan of $5.7 billion from oil-rich neighbor Abu Dhabi. The plan is Dubai’s attempt to restructure some $26 billion in debt held by Dubai World, owner of the QE2 liner and Cirque du Soleil assets. Nakheel is the developer that conjured the emirate’s iconic global map made of islands.
Some investors were expecting Abu Dhabi to step in with more cash, but it is apparently done funding its neighbor’s excesses. Maybe next boom, they’ll be back.