Analysts said that Dubai Holding was most at risk of defaulting on its debts after Dubai World because it has extensive property assets, is highly leveraged and has already faced problems in the past year.

The emirate’s ruler’s personal investment vehicle Dubai Holding might be the next state-owned Dubai company after Dubai World to default, media report says.

“Fears are growing among western banks that Dubai Holding, the personal investment vehicle of the emirate’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, will be the next state-owned Dubai company to default,” the Sunday Times said.

The past decade saw the company go for a debt-fuelled spending spree, wherein it borrowed $12 billion to fund ambitious projects in Dubai and to create a private equity arm that bought stakes in Tussauds and the budget hotel chain Travelodge, the report said.

Quoting bankers in Dubai, the Sunday Times said Dubai Holding borrowed from international banks, including Royal Bank of Scotland and HSBC, as well as local lenders.

Analysts at Barclays Capital said in a note last week that Dubai Holding was most at risk of defaulting on its debts after Dubai World because it has extensive property assets, is highly leveraged and has already faced problems in the past year.

The daily added citing one official close to the company that the firm was “a bloody mess” and its boss, Mohammed Gergawi, a close confidant of Maktoum, had been “in denial” about the problems it faced.

However, the official said the company had recently begun “restructuring and deleveraging in a sensible fashion,” reported the Sunday Times.

Dubai Holding has been split into four divisions — property, leisure and hotels, investments and free zones like tax — free business parks in Dubai. Besides, thousands of staff have been laid off, especially at its indebted real estate arm Dubai Properties, the report added.

“Last week Dubai Holding denied the firm faced any problems repaying its debts but bonds in the company are trading at just over 55 cents in the dollar, reflecting a lack of confidence that it will meet its obligations,” the Sunday Times said.

There is growing mistrust of senior Dubai officials because the announcement just over a week ago of a standstill on debt repayments by Dubai World, which has $60 billion of liabilities, was made three weeks after Maktoum categorically assured investors that Dubai would pay its debts on time.

Together, Dubai World and Dubai Holding are thought to account for 60-70 per cent of Dubai’s total debt. Research from Bank of America Merrill Lynch indicates that Dubai Holding has $1.8 billion due for repayment next year.

More In: Companies | Business