Dubai World in Trouble

I've had this article (or variants) sent to me from many different people who are concerned / aware of what is happening in Dubai.

We had just done our Dubai presentation on market entry (our project was done on Sugar Mountain and their positioning with international infrastructure to source confectionaries from around the world) and were looking at different possible locations.

We had discovered Dubai World in our research and commented on how monsterously large it was. It actually dwarfs other famous projects from the same real estate development company, Nakheel, such as the famous World project, which creates small artificial islands on the coast in the shape of the earth.

An interesting point, the financing involve is actually islamicly based, as the bonds are sukuks. But there are interesting implications when it involves default and unwinding financial positions which have islamic components. It will be an interesting lesson in understanding not only islamic financial instruments, but also a pragmatic lesson in how distressed islamic investment instruments.

I wonder how liquidation would work. One of the general tenants (as I understand it) of islamic finance is that there are not many recourses for default, however, bonds do have an equity component so I wonder if the bonds will just naturally "convert" if the bond (sukuk) holders do not agree to delaying / suspending payments.