DUBAI: The Dubai government and the holding company that asked for a halt in its debt payments are set for a tough battle as creditors are prepared to fight to recover their money.

Hordes of bankers, lawyers and accountants are arriving in Dubai mostly from London and the US, as the parties involved start complex negotiations that are likely to “take time,” according to one person involved in the talks.

The Dubai government has said it will not stand behind Dubai World, the holding company that asked for a delay in the payment of a $3.5 billion bond due on December 14. But it may

be forced to change its

position since it is the ultimate investor in the company, the source said. “It looks pretty complicated, it won’t be sorted soon,” the source said.

Despite the tension between the parties, world markets partially recovered their losses from last week, when Dubai World called for the standstill just before the Muslim holiday, Eid Al-azha, leaving an information vacuum that exacerbated investors’ concerns.

Today the London FTSE-100 index of leading shares gained 2.34 per cent on hopes of a restructuring deal. Middle East markets fell for a second day, with the Dubai market down 5.6 pwer cent on investors’ fears that the crisis will mostly hit local banks.

Sheikh Mohammed bin Rashid al-Maktoum, Dubai’s ruler, insisted that Dubai was still in good shape and would not be derailed by the issue. “We are strong and persistent,” he said. “It is the fruit-bearing tree that becomes the target of stone throwers.” Bondholders are still furious about Dubai World announcing a standstill to debt payments just before its officials went on holiday, leaving investors in limbo for a few days. They were also shocked about the country borrowing $5 billion from its rich neighbour Abu Dhabi just hours before the announcement, which could be taken as an indication that the emirate has the cash to make the December 14 payment.

Bondholders may therefore either ask for improved terms in exchange of a delay in the payments, or call in the debt — aiming to seize some of the company’s

assets. The troubled Nakheel property group owns, among others, the Jumeira Palm Island development in Dubai and two shopping malls, according to its website.