With Dubai World cut adrift from implicit government support, there are concerns about potential defaults by other state-related entities. The name mentioned most by bankers and investors in the region is that of Dubai Holding, the personal investment vehicle of the ruler, Sheikh Mohammed bin Rashid al-Maktoum.

    “Dubai's actions have introduced the risk that restructuring of other corporates could follow,” Barclays Capital said in a report this week. “We would focus on those with weak fundamentals and upcoming maturities and we view Dubai Holding as being most at risk.”

    Dubai Holding's Commercial Operations Group was downgraded by Moody's, the rating agency, to two notches above junk last week. The cost of insuring $10m for five years against default ballooned to $1.1435m a year on Tuesday, making it the riskiest Dubai corporate bond according to the market.

     A spokesman for Dubai Holding on the 2 Dec said: “I am very doubtful that we will face any problems paying the debt. Dubai Holding is confident that it is on track with all payments.”

     　Formed in 2004, its investment arms led the emirate's international buying spree to recycle the funds generated by developing swaths of Dubai desert. The group also leveraged those profits, building up debts of $10bn amid upcoming maturities of $2bn in 2010, according to Barclays Capital.

        But bankers say because of its connection to the ruler the conglomerate enjoys stronger political standing than Dubai World. It also appears to have a stronger financial position.

　　　　Analysts say it has a greater ability to service its debts thanks to a number of cash-generating businesses in its portfolio. It is also believed to have received cash injections from the government in recent months, although the company has never confirmed that.

　　　Still, bankers say its investment arms, Dubai International Capital and Dubai Group, could face more financial problems than its commercial wing, which spans hospitality, business parks and real estate. “Dubai Holding is not going to acknowledge problems right now. But there is a contagion effect in every Dubai entity . . . This is just the beginning,” a senior banker said.

　　　　Dubai International Capital is believed to be looking to sell assets but has enough money ring-fenced by the holding company to keep afloat its buy-out businesses in Europe and the Middle East, according to people familiar with the company.

　　　　Those people also say its public equities portfolio, which includes stakes in EADS, Sony and ICICI Bank in India, may be sold. DIC is also winding down its emerging markets private equity unit, Middle East venture capital portfolio and interests in other private equity funds.

　　　Dubai Holding's commercial arm includes profitable businesses, such as flagship hotels company Jumeirah Group.

　　　　The group has also slimmed down faster than the troubled Dubai World conglomerate. DIC and Dubai Group, for example, have merged their back-office operations and Dubai Holdings' developers have merged and been folded into Dubai's leading developer, Emaar Properties, much to the alarm of minority shareholders who fear dilution and say they are being forced to bail out other companies.

　　　The restructuring already under way at Dubai Holding is so deep that analysts are raising the possibility that, like Dubai World, it could be broken up and its best businesses – notably Jumeirah – moved into other parts of Dubai Inc., such as Investment Corporation of Dubai, which is emerging as the emirate's “good bank” of assets.