JP Morgan said that a government fund set up to help debt ridden state linked firms will need to be topped up by as much as USD 2.4 billion over the next 2 years with several looming repayment deadlines at Dubai Inc.

The US investment bank said that Dubai is likely to tap capital markets to shore up cash for the Dubai Financial Support Fund adding asset sales cannot be ruled out. A key challenge is that a substantial portion of the support required would be front end loaded 2011 to 2012. We estimate that DFSF's cash will get exhausted later this year or early next and will have to be topped up by USD 1.3 billion to USD 2.4 billion over the next 2 years.

The Gulf city state managed to amass a significant debt burden over USD 100 billion by some estimates as it overstretched itself to pay for ambitious projects such as islands in the shape of palm trees.

Among assets that Dubai could sell, JP Morgan cited non core investments under the emirate's sovereign wealth fund, the Investment Corporation of Dubai such as stakes in Union National Bank, Dubai Aluminium and Borse Dubai.

State linked companies, collectively referred to as Dubai Inc came under the spotlight in late 2009 when one of the emirate's largest holding companies, Dubai World began to restructure about USD 25 billion in maturities.

JP Morgan said that debt at Dubai's healthy entities which it sees at USD 45 billion will be managed without external support but said about USD 8.5 billion will be a challenge. It estimated total debt of USD 79 billion for Dubai related entities.

(Sourced from Economic Times)