Efforts by Dubai World to restructure about $26 billion in debt out of the estimated $59 billion it owes reassured investors that the emirate's debt problems can be contained, helping global markets edge higher on Tuesday.

Dubai World, the government-controlled conglomerate that led the transformation of Dubai into a regional hub for finance, investment and tourism, unveiled details of a restructuring plan late on Monday that would cover debt owed by its main property firms, Nakheel and Limitless.

Initial discussions have commenced with the banks of Dubai World and are proceeding on a constructive basis, Dubai World said in a statement, its first comment since the crisis began.

Dubai threw global markets into a tailspin last week when it said it would ask creditors of Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step to restructuring.

News of the restructuring plan helped soothe some investor nerves after the Dubai government on Monday disclaimed responsibility for the debts of Dubai World, crushing assumptions by creditors that the emirate would guarantee its liabilities.

Hassaim Arabi, chief executive at Gulfmena Alternative Investments, said Dubai World's restructuring statement offered support to worried markets but was not likely to completely stem selling.

This is definitely good news, it shows they are still committed to their payments and it removes all fears that this is a complete default.

NO CONTAGION SEEN

Stock markets in Dubai and Abu Dhabi tumbled on Monday, the first day of trade since the announcement made on the eve of a four-day public holiday.

Abu Dhabi's 8.3 percent plunge was its worst one-day fall on record, while Dubai's 7.3 percent slide was the biggest in more than a year.

Gulfmena's Arabi said UAE markets could slide further as foreign investors bailed for the exits while other Gulf markets in Qatar and Kuwait, reopening after the Eid holiday, were seen playing catch-up to Monday's declines.

But after initial sharp falls last week, markets in Asia and the United States rallied on Monday and Asian stocks extended gains on Tuesday.

Dubai is still a risk but most of Asia has very limited exposure to Dubai other than isolated banks. So people may want to avoid the banks but most other companies are okay, said Francis Cheung, an equities strategist at CLSA in Hong Kong.

Major Wall Street indexes rose 0.3 to 0.4 percent on Monday, while MSCI's index of Asia-Pacific stocks outside of Japan rose 0.6 percent.

Dubai World said its restructuring efforts would not include other firms such as Infinity World Holding, Istithmar World and Ports & Free Zone World, which includes DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone, or JAFZA. Dubai World said those firms were financially stable.

The statement said the restructuring plan would look at options for deleveraging, including asset sales, funding requirements and the formulation of restructuring proposals to financial creditors.

It's a step in the right direction, said Raj Madha, a banking analyst at EFG Hermes in Dubai.

I'd like to see the details it promises basically: Which entities they're talking about (selling), how big a haircut they're going to take.

(Additional reporting by Rania Oteify and Tamara Walid; Writing by Lincoln Feast; Editing by Tomasz Janowski)