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Dubai: Investors in bonds sold by UAE borrowers may have to wait longer to recoup their money after a default because laws are untested and less favourable to creditors than in "more developed jurisdictions", Standard & Poor's said.
S&P classified the emirate's insolvency regime as "Group B", the middle of its three rankings based on recovery rates. In such a regime, court proceedings can exceed two years and be "somewhat unpredictable", delaying recoveries to bondholders, the New York-based ratings firm said in a report yesterday.
"Laws and regulations addressing creditors' rights are not as evolved as those in many more developed jurisdictions," S&P managing director James Penrose said in the report. "The local laws and regulations relating to creditors' rights in the event of a debtor insolvency remain substantially untested" with no major corporate insolvency in the region to draw from, he said.
Investors in countries whose insolvency codes S&P classes as Group B can expect to recover 70 per cent to 90 per cent of principal and accrued but unpaid interest at the time of default, the report said.
The Gulf's Islamic bond market will almost triple in size through 2010 as borrowers seek financing for infrastructure projects, according to Unicorn Investment Bank BSC.
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