(RTTNews) - Major banks around the world are fretting their exposure to Dubai World, the state-run conglomerate that has sought a six-month "standstill" on its $60 billion debts with all lenders.

Dubai World spearheaded the emirate's breakneck growth and may be best known for its property development business, Nakheel, whose iconic building projects include man-made islands in the shape of palms and the world.

The city-state became deeply overextended in attempting to become a global banking and holiday center. Dubai, the "Paris of the Middle East," has plans for the world's tallest building in addition to its luxury hotels, indoor ski resort and massive shopping center.

Signs of strain on Dubai became apparent as the global credit crisis and economic downturn played out. Commercial real estate and housing prices have plummeted and scores of foreign laborers have returned home due to lack of work in construction.

Dubai is trying to raise billions in bonds to repay its debt to more than 70 banks around the world. Most exposed is Royal Bank of Scotland (RBS: News ), which underwrote 17 percent of Dubai World loans since 2007, according to media citing a JP Morgan report.

Other major lenders arranging big loans to Dubai reportedly include HSBC Holdings and Japan's largest banks, Mitsubishi UFJ Financial and Sumitomo Mitsui. A number of Middle Eastern banks are also owed money by Dubai World.
Dubai is one of seven Unite Arab Emirates, and many have expressed concern that Abu Dhabi has refused to prop up its sister city.

"My own view is the world financial system is stronger now and able to deal with the problems that arise," said UK Prime Minister Gordon Brown, seeking to downplay the impact of the Dubai financial crisis on the fragile global economy.

A statement from Sheik Ahmed bin Saeed Al-Maktoum, the chairman of Dubai's Supreme Fiscal Committee, insisted that the request to delay the emirate's debt was a "sensible decision."

"The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react," said Ahmed.

The debt crisis for Dubai World could be the catalyst that leads to repricing of assets, with global shares tumbling over the past two days and the US dollar coming back to life amid increased risk aversion.

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by RTT Staff Writer

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