“For Dubai, the peak of the redemption profile is in the fourth quarter with $6.8 billion due,” Caroline Grady, a London-based economist for the bank, wrote in a note to clients received by Bloomberg on Tuesday. “Assuming the second $10 billion government of Dubai bond is issued in the coming months, we don’t see any issues with Dubai’s ability to pay.”

Rating firms have downgraded Dubai state-owned companies on concern the emirate may not have sufficient funds to support its struggling entities after the credit crisis ended a four-year real-estate boom in Dubai and forced the UAE government to bail out the two biggest mortgage lenders.

Of the $6.8 billion due by the end of this year, $4.5 billion have been borrowed by Dubai-owned firms. Developer Nakheel needs to repay an Islamic bond, or sukuk, of $3.52 billion, and Dubai Global Sukuk has to pay a $1 billion bond, according to the report.

Nakheel’s sukuk, maturing in December surged to $1.03 on Monday, its highest level in a year. His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, said on September 8 he is “not worried” about the emirate’s ability to repay debt.

Nakheel’s bond had slumped to 63.5 cents on a dollar in February on concern that Dubai is contemplating restructuring the bond.

‘Encourage Banks’

“Our impression is that up to 40 per cent of the 2009 sukuk is held by local or regional banks making the implications of any non-payment felt closer to home,” Grady wrote. “This large local holding also means that it is easier for the government to encourage some banks to perhaps roll bonds into a new issue rather than take payment on their current holdings.”

Dubai’s medium-term financing requirement remains large with an average of $12.5 billion external debt maturing in the next three years, Deutsche Bank said.

“The emirate must hope that access to Eurobond and loan markets returns or Dubai Inc. needs to generate sufficient cash,” the report