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Tuesday, 17 March 2009

The World's Largest Luxury Yacht Sails Out Of...You Guessed It...Dubai

Even though poor Dubai has been far from immune from Depression 2.0, someone who's still doing just fine is Mohammed bin Rashid Al Maktoum, the Emir of Dubai. This is his new $350 million yacht.

In a tragic turn of events, the superyacht (called, boringly, the Dubai) was originally commissioned by Prince Jefri of Brunei—oh how the wheel of conspicuous consumption is always turning!

It features eight decks spread across 551 feet of length, accommodations for 115 people, and all of the expected restaurants, bars, private whole-deck owners' suites, helipad, pool, Jacuzzi, woefully tacky interior...need I continue?

The folks at Luxist point out though that the Dubai's title as the world's largest is in danger—Russian billionaire Roman Abramovich, the owner of the Chelsea football club, is planning a 555-ft yacht.

Emaar Properties PJSC Downgraded To 'BBB+' On Continuing Weak Prospects For Dubai Real Estate Market; Outlook Negative

Standard & Poor's Ratings Services said today that it had lowered its long-term corporate credit rating on Dubai-based property developer Emaar Properties PJSC to 'BBB+' from 'A-'. The outlook is negative.

"The rating action reflects the continued weak real estate markets in Dubai, and our increased uncertainties about the depth of the downturn and the pace of eventual recovery. The weak markets are negatively affecting our view of Emaar's business risk, and are likely to weaken Emaar's currently healthy financial position in the near to medium term," said Standard & Poor's credit analyst Alf Stenqvist.

The ratings on Emaar continue to reflect the group's important role and strong position in the Dubai property development market and its close relationship with, and 32% ownership by, the government of Dubai (not rated). The rating includes a two-notch uplift from the stand-alone assessment to reflect implicit government support. The ratings also reflect the group's current healthy financial position, low debt leverage, and strong asset base. The main constraining rating factors include the inherent risks in the cyclical property development industry and the group's large exposure to the weakening of the Dubai real estate market.

Four Dubai-Based Banks Long-Term Ratings Placed On CreditWatch Negative On Deteriorating Operating Environment

Standard & Poor's Ratings Services said today that it has placed its long-term counterparty credit ratings on four Dubai-based banks, namely Emirates Bank International PJSC (EBI), National Bank of Dubai (NBD), Mashreqbank, and Dubai Islamic Bank (DIB) on CreditWatch with negative implications (see ratings list below). The 'A-1' short-term ratings on EBI, NBD, and Mashreqbank were also put on CreditWatch with negative implications, while the 'A-2' short-term rating on DIB was affirmed. This action reflects our growing concerns regarding the impact on the banking sector of the economic downturn in Dubai.

The outlook for Dubai's economy, in our view, has worsened relative to last year; the global economic downturn has been hurting some of Dubai's key economic sectors including trade, tourism, and commerce. Demand in the all-important real estate sector also continues to show clear signs of stress, with indications that a sharp correction is underway. As a result, we expect Dubai's economy to contract between 2% and 4% in real terms in 2009, putting pressure on banks' asset quality and profitability. Dubai is a small open economy that can do little to shield its key sectors from the impact of a fall in external demand in the coming months.

The rating actions on EBI, NBD, and DIB also reflect our concerns that the government may use these banks to support the refinancing that is soon coming due of the debt of other government-related entities (GREs). We already noticed that these banks have been important participants to the refinancing of Borse Dubai's debt that matured in February 2009. We understand that these banks received deposits to neutralize the impact on their liquidity profile. Taking into account the important amount of Dubai GRE debt that is soon coming due, Standard & Poor's believes that additional directed lending to these entities would increase credit and concentration risk. On a positive note, Dubai's establishment of a $20 billion bond program at the government level and issuance of $10 billion that was fully subscribed by the Central Bank of the United Arab Emirates (UAE) somewhat alleviate liquidity pressure.

Ratings On Dubai-Based Government-Related Entities Lowered On Deteriorating Economic Fundamentals

Standard & Poor's Ratings Services today said it had lowered its ratings on six Dubai-based government-related entities (GREs) by one notch. The 'A+' ratings on DIFC Investments LLC, DP World Ltd., Jebel Ali Free Zone (FZE), and JAFZ Sukuk Ltd. were lowered to 'A', and the 'A-1' short-term ratings were affirmed. The 'A/A-1' ratings on Dubai Multi Commodities Centre Authority were lowered to 'A-/A-2', while the 'A+' long-term rating on Dubai Holding Commercial Operations Group LLC (DHCOG) was also lowered to 'A'. The outlook on all entities remains negative. (A separate research update for each of the entities will follow.)

Thee ratings on the GREs reflect both their individual stand-alone credit profiles and our expectation that the United Arab Emirates (UAE; unrated) federal government, backed by its largest constituent, the Emirate of Abu Dhabi (AA/Stable/A-1+), will continue to provide, as and when the need arises, financial support to the Dubai government, which owns the rated GREs.

"The downgrades primarily reflect the ongoing impact on the GREs of the deterioration in Dubai's economic fundamentals since the last quarter of 2008, as the global economic downturn continues to depress some of Dubai's key economic sectors, including trade, tourism, and commerce," Standard & Poor's credit analyst Farouk Soussa said. "Demand in the all-important real estate sector also continues to show clear signs of having abated, with indications that a sharp correction in the real estate market, and an associated contraction in development and construction, is currently underway. We expect that as a result of these factors, the economy may contract in 2009, although quantifying this contraction is made difficult given the lack of timely national accounts data."

Citi chief awarded $10.82m

Citigroup chief executive Vikram Pandit was awarded $10.82m in total compensation for 2008, a period in which the group’s shares plunged and it received $45bn from the US government. Pandit, amid growing anger about executive compensation, said in February he would work for $1 salary and no bonus until Citi is profitable again. The group also announced the nomination of four new board directors, who will stand for election at next month’s shareholder meeting. See’s in-depth report on Citi.

Kuwait to issue $678m in bonds

Kuwait's Central Bank said it would issue KD200 million ($678m/Dh2,489m) of one-year treasury bonds on March 18, having received bids worth six times that amount as banks search for ways to soak up excess liquidity.

Central bank data showed it received KD1.26bn in bids for the bonds, which carry a coupon of 2.25 per cent and mature March 17, 2010.

The move came days after the Gulf Arab state issued KD107m worth of treasury bonds with the same coupon on March 11, having received bids worth KD602m.

Exit plan for PE investors

The Dubai Financial Services Authority (DFSA) wants the Dubai International Financial Centre (DIFC) to consider establishing the Gulf's first private equity secondary market where holders of non-listed equity can sell or transfer their investments.

In a discussion paper, DFSA Chief Executive Paul Koster says there is an opportunity to create a "trading facility" by which private equity fund managers "can partially sell an investment" from their portfolios.

This would provide the fund manager fresh capital and the new investor a way to join an investment run by a professional fund manager. "As the market for IPOs has dried up, the traditional exit route for a private equity investor too has evaporated," said one investment banker.

Crisis may spawn giant banks in Gulf, says banker

The global financial crisis could force out small investment companies in the Gulf and give birth to giant banks with more diverse services, according to a senior banker in the region.

Henry Azzam, Chief Executive Officer of Dubai-based Deutsche Bank in the Middle East and North Africa, said large investment companies in the six-nation Gulf Co-operation Council (GCC) must also adapt to the new world financial situation and embark on what he termed competitive services.

He said such services could include financial brokerage, investment facilities and other related instruments, adding that these firms can no longer net the same high return they had achieved during the 2002-2008 oil boom.

Gulf better placed despite $350bn loss

The UAE and other Gulf oil producers suffered from a combined asset loss of nearly $350 billion (Dh1.2 trillion) as a result of the global financial distress but their financial position remains strong enough to respond to faltering revenues and other repercussions, a major Saudi bank said yesterday.

After nearly seven years of an economic and fiscal boom, the six Gulf Co-operation Council (GCC) countries now face a difficult period as oil prices tumble, their crude output dives by more than two million barrels per day and global credits become scarce, the Saudi American Bank (Samba) said in a study sent to Emirates Business.

Given their heavy reliance on oil exports, the decline will likely turn years of fiscal surpluses into deficits in some members, while their economies will either plunge into a recession or sharply slow down this year, it said.

First Arabic financial paper hits the streets

The country’s first Arabic-language financial newspaper, Alrroya Aleqtisadiya, or Economy Vision, was launched in Abu Dhabi, including a web portal.

The 32-page daily paper aims to examine breaking news, provide analysis and conduct executive interviews and investigative reporting from a UAE perspective.

Dubai Lynx: Remain Calm

I feel like Michael Palin in Full Circle. I just arrived in Dubai after a two-day rampage through Rome where I spoke at the UPA Summit. The theme there, like the unofficial theme here in Dubai, was "Everything is changing, shall we change everything?"

Rome was an ultra-calm conference, where contemplating the extreme changes happening in the media world was done over delicious Chianti. I suppose it is hard to debate the future of the media and advertising business when buildings dating back to the beginning of Roman civilization surround you. Change in Rome is not available at Trussardi.

Four and a half hours later, courtesy of Emirates Airlines, I arrived in Dubai -- the complete opposite of Rome. The million-person city was built in the last ten years. The airport is scintillatingly modern. Sparkling pillars, titanium walkways and giant palm trees growing in huge crystal flower boxes. The airport has huge glass walls with lights embedded in them. I have no clue how they've done this technically since there are no wires. Small touches always impress me, like lines of modern elevators whisking you down comfortably to customs. And polite and welcoming customs officials. Nice touch.

Emirates and Etihad airlines seek closer ties: report

The Gulf airline Emirates seeks closer ties with rival Etihad but wants to remain a separate carrier, a German press report said on Monday in an interview with the company's boss.

"We are still on our own and that is fine," Sheikh Ahmed ibn Said al-Maktum told the daily Die Welt, without elaborating on the form of cooperation under consideration with Abu Dhabi-based Etihad.

The airline boss said that Dubai-based Emirates was not interested in investing in European airlines, such as the low-cost carrier Air Berlin.

Saving GCC banks top priority for policy makers - Markaz

Saving GCC banks is probably the most important challenge policy makers are confronting in today’s crisis-ridden world, according to a recent report released by the Kuwait Financial Centre (Markaz).

The report argues that currently the global response to the current financial crisis has been predominantly rescue-package initiated – launched and managed directly by the government in order to rescue local banks, financial institutions and other sectors.

The report strongly recommends that given the current situation in the GCC region, an overt economic stimulus package is no longer a policy option but a necessity.

Ernst & Young to move energy business to Bahrain

Ernst & Young will be moving its world energy headquarters from Houston, Texas to Bahrain, and is looking to hire more people across the region, the company’s chief executive told Arabian Business on Monday.

“We’ve realized that when you look at the importance of the Gulf region to the world energy business, we wanted a headquarter right here in the region,” James Turley, chairman and chief executive, said in an interview in Abu Dhabi.

“It’s going to be in Bahrain. We thought that would be a central post, convenient also to get to Saudi.”

Investment Dar may sell assets to meet obligations

Kuwaiti Islamic firm Investment Dar said on Monday it may sell some assets to meet its obligations as its seeks to restructure its debt.

The company said in a statement it has presented foreign and local banks and investors a plan under which it "identifies non-core assets in the current portfolio for potential disposal".

The firm, which holds stakes in such companies as carmaker Aston Martin and Boubyan Bank, said it hopes its investors and creditors "would agree to a restructuring of the existing financial commitments under a new sharia-compliant capital structure".

Kuwaiti cabinet resigns for second time

Kuwait’s government resigned for the second time in four months on Monday after deputies moved to question the prime minister, further exacerbating a political crisis in the oil-rich state and threatening an economic stimulus plan.

The crisis could delay the approval of a $5bn economic rescue plan for Kuwait, where the stock market and financial services sector have been hit hard by the global economic turmoil.

In recent months two multibillion dollar projects – including a $17.4bn joint venture with Dow Chemical – have been cancelled partly because of the political crisis and parliamentary pressure.

Family fingers burnt by move to risky assets

They are secretive, opaque and often hugely wealthy. But unlike sovereign wealth funds, the Gulf’s family-owned businesses rarely make the headlines.

Their aversion to publicity is unsurprising. After half a decade of breakneck regional growth, the patriarchs of the large merchant families from Kuwait, Saudi Arabia and the United Arab Emirates are among the richest individuals in the world.

Many family groups started out as pearl traders, shopkeepers or merchants, and most remain true to their roots, preferring tangible, traditional industries such as manufacturing, construction and retailing to financial services or technology sectors, according to bankers and experts.

Good times end in Dubai

Dubai’s Hot 100 party last month was a reminder of the city’s high-rolling times before the credit crunch. The annual celebration, laid on by a magazine profiling the United Arab Emirates’ smart set, drew a crowd of boldfaced names: Thaksin Shinawatra, former Thai prime minister, mingled with developer Sulaiman al-Fahim, who brokered the sale of Manchester City football club to an Abu Dhabi sheikh.

But among the employees of ITP, the magazine’s publisher, the free drinks were going down with more than the usual gusto. That week ITP cut its staff by about 10 per cent. “People knew the sackings were coming, and sure enough it was rough,” says one of those axed.

For thousands of expatriates lured to Dubai by the promise of year-round sunshine and a tax-free lifestyle, the party is over. Corporate restructurings have arrived hard on the heels of steep falls in property prices and plummeting consumer confidence; El Dorado is fading back into desert. As the cutbacks spread from finance and real estate to sectors such as tourism, media and retail, many are packing up and heading home.