I know, I know, gems don't come out of goldmines. But the IMF's latest Article IV report on the UAE keeps yielding big fat rocks of precious detail about Dubai's debt situation and the UAE's exposure to it.

The latest discoveries are by Morgan Stanley economist Mohamed Jaber, who issued a report to clients on the IMF's findings last Friday. In addition to the points I turned up in yesterday's missive, Mr Jaber's own careful weekend reading and analysis has come up with yet more goodies.

As noted in today's story on the subject, the IMF's estimation that Dubai and the companies it controls (collectively "Dubai Inc") owe roughly $109bn does NOT include any bilateral loans between Dubai Inc and individual banks. Mr Jaber reckons that such loans amount to between $10bn and $20bn, meaning that Dubai Inc's total debt is actually closer to, say, $124bn, equivalent to 161 per cent of Dubai's GDP.

The IMF's tallies also exclude any accounts payable, like to contractors from the UK or Japan.

And as UBS analyst Saud Masud notes, Dubai Inc is also on the hook to complete a lot of projects to avoid having to pay back the people who bought units in them. Since it costs less to finish a building presumably than to refund all those purchases, Mr Saud wagers that Dubai Inc will choose completion. That will require that it come with as much as $60bn more. So the hole gets deeper to the tune of $184bn.

The IMF report also provides an unprecedented breakdown of Dubai World's debts:
Dubai World has $26bn in outstanding syndicated loans and bonds. Of those, about $14.4bn worth are for restructuring -- including $2.6bn in bonds and $11.7bn in syndicated loans. Do the math and that means that Dubai World is aiming to restructure $7.5bn in bilateral loans with banks. For those arithmetically challenged, the IMF did the math for you.

Mr Jaber notes in his report that "This information is important on several fronts: First, it
confirms our belief that bilateral loans are a non-trivial part of Dubai Inc.'s debt as they currently stand at around 34% of DW's debt that is subject to restructuring."

Now some would have you believe that the Dubai Financial Support Fund's $4.1bn loan (paid from the Abu Dhabi Dept. of Finance to Deutsche Bank to redeem Nakheel's 12/09 bonds), is also up for restructuring, since the DFSF has said it doesn't subordinate existing creditors. I think that represents a fundamental misunderstanding of the relationship of Abu Dhabi and the DFSF to Dubai World and its existing creditors, whether or not they consider themselves secured or unsecured. In other words, hooey. I don't see the DFSF or the people who lent them the money, Abu Dhabi, lining up with bankers for a haircut anytime soon.

The IMF doesn't buy it either. It goes on to break down the $22bn in debt at Dubai World up for restructuring, noting that UAE banks account for 45 per cent, or $10bn, of that.
Two-thirds of that $10bn, $6.67bn is owed to Dubai-based banks, accounting for 6 per cent of all their loans. The remaining third, $3.33bn, is owed to Abu Dhabi-based banks, where it represents 3 per cent of their outstanding loan book. Thus, any haircuts doled out by Dubai World will hit Dubai banks twice as hard as they will banks in Abu Dhabi.

That also means that foreign banks are on the hook for 55 per cent of Dubai World restructured debt, or $12.1bn. Mr Jaber concludes that this relatively even distribution of Dubai World debt between local and foreign banks increases the likelihood of a consensual restructuring.

Mr Jaber goes on: "The exposure of UAE banks to DW amounts to about 3.5% of gross loans in the banking system and 16% of total bank capital and reserves. Given that the UAE banks' capital adequacy ratio stood at a relatively high 19.2% in December 2009, their exposure to DW may therefore not to be an immediate cause for concern. However, the IMF's confirmation of the Dubai banks' disproportionate exposure to DW, along with their potential exposure to the UAE's troubled real estate sector, may negatively impact their market valuations. This said, we continue to believe that systemic banking risks remain very low in the UAE, given the authorities' access to official foreign assets that are estimated to cover the total capital in the banking system 5-7 times over."

UAE banks also own 80 per cent of the Nakheel bonds that are still outstanding, the IMF said, including the 3.6bn dirham bond due on May 13 and the $750mn bond due Jan. 16. This is good for Nakheel, Mr Jaber said in his report. "Such a large ownership share by domestic financial institutions, the largest of which are majority-controlled by the government, may make it easier to reach majority-based consensual agreement, which reduces the risk of involuntary debt restructuring or outright default."

But it could mean Abu Dhabi will have to kick in more cash to the nation's banks if and when Nakheel moves to restructure those bonds. Says Mr Jaber: "A default or large haircut on these bonds would primarily affect domestic banks and would weaken their financial positions. In turn, this could force the Abu Dhabi government to intervene and shore up banks through capital injections. In essence, any large haircuts on these bonds may indirectly shift the debt burden from DW onto the banks and ultimately onto Abu Dhabi."