Dubai debt fears linger as questions on repayment go unanswered

“The situation is still very fluid and a number of questions remain unanswered,’’ Morgan Stanley analyst Mohamed Jaber said in a report Monday, noting the recent spike in premiums paid for protection against a Dubai default. “The lack of transparency . . . has contributed to the increase in market volatility.’’

It has also given the rumor mill plenty of grist. There are oft-repeated tales of the emirate’s multibillion-dollar manmade islands sinking into the sea - a claim authorities emphatically deny - and of trophy assets such as the storied Queen Elizabeth 2 cruise liner being shopped around at firesale prices.

The emirate’s elite bristle at such reports. Dubai’s ruler has repeatedly blamed his sheikdom’s tarnished image on a foreign media out to embarrass the emirate.

But the unanswered questions about Dubai’s debt are growing tougher to ignore.

Jitters returned to the forefront this week when Dow Jones reported that Dubai’s government was pushing a plan that could pay Dubai World’s lenders just 60 cents on every dollar owed. A Dubai government spokeswoman denied that any deal was on the table. She agreed to speak only on condition her name not be used, citing government policy.

“Neither the government nor the company have put forward any restructuring proposals to the lenders at this time,’’ she said, adding that the state and conglomerate were “operating within internationally accepted principles in order to ensure a fair and equitable process.’’

Those assurances may have tided investors over for now.

Dubai’s main stock market posted a modest gain yesterday, following a sharp slide earlier in the week.

Insurance against a default, measured using rates for financial instruments known as credit default swaps, grew about 1 percent cheaper by evening in Dubai yesterday, according to figures from CMA DataVision. Even so, Dubai ranks among the five sovereign issuers most at risk of default listed by the market data provider.