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Friday, 15 May 2009

Arab Orient Insurance Co. (PSC) 'A' Ratings Placed On Watch Negative Due To Operating Pressure On Its Parent

Standard & Poor's Ratings Services said today that it placed its 'A' long-term counterparty credit and insurer financial strength ratings on Dubai-based non-life insurer Arab Orient Insurance Co. (PSC) on CreditWatch with negative implications.

"The CreditWatch placement reflects our concerns that Arab Orient's parent, the Al-Futtaim Group, is heavily exposed to the deteriorating operating environment in Dubai," said Standard & Poor's credit analyst Nigel Bond.

Similar concerns have led to Standard & Poor's taking negative rating actions recently on various corporates (see "Ratings On Dubai Government-Related Entities Put On Creditwatch Negative On Uncertainty Over Support," published April 30, 2009, on RatingsDirect) and banks ("Four Dubai-Based Banks Long-Term Ratings Placed On CreditWatch Negative On Deteriorating Operating Environment," published March 17, 2009).

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Global's Kuwait Weekly Market Report - May 14, 2009 (PDF)

MGM scrambles to restructure (Update 1)

Metro-Goldwyn-Mayer Inc.Image via Wikipedia

Metro-Goldywn-Mayer, the Hollywood studio, is considering drastic measures including a debt for equity swap with the group’s 140 lenders as it works frantically to restructure its $3.7bn debt pile. MGM, owned by a consortium that includes TPG and Providence Equity Partners, has seen income slide from its film library, the biggest in Hollywood, and plans to produce new movies hit by a failure to raise new financing from third-party sources.

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Barclays in $10bn talks over BGI sale

Image representing Barclays Global Investors a...Image via CrunchBase

Barclays is in talks about selling asset management arm Barclays Global Investors for about $10bn, with potential bidders including US money manager BlackRock. The talks follow an initial auction for iShares, BGI’s exchange-traded funds unit, which Barclays agreed to sell to buyout group CVC for $4.2bn last month. Under a “go-shop” provision of that sale, Barclays can seek alternative bidders for iShares until June 18. For BlackRock, buying BGI would massively boost its ETF business. BC Partners and Hellman & Friedman, meanwhile, are both considering a counter-bid for iShares.

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Sovereign wealth funds focus on the home front

EVENT: A new Saudi sovereign wealth fund (SWF), Sanabil Al Saudia, started operations last week.

SIGNIFICANCE: Gulf SWFs have recently initiated major changes in their investment strategy. They have shifted away from investing in Western markets, particularly the financial sector, and started to invest in local businesses and banks. Moreover, they have decreased the dollar ratio in their investment portfolio and started to be more transparent as a response to the global anxiety over their investment goals.

Arab SWFs have retreated somewhat from global markets as the value of their investments has fallen and have focused more on domestic economies.

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MGM Mirage slumps on stock sale

MGM Mirage fell 11 per cent in early trading after selling 143 million shares in a stock offering, almost double the number planned, to raise $1 billion (Dh3.67 billion) to repay debt.

The shares were sold for $7 each, the underwriters said on Wednesday after markets closed. Las Vegas-based MGM Mirage fell $1 to $7.70 yesterday in trading before US exchanges opened after dropping 30 per cent yesterday on the New York Stock Exchange, the biggest decline since at least 1989.

The drop in the stock price reflects dilution from the sale, which will increase the stock outstanding by 52 per cent from 276.6 million shares reported at the end of the first quarter. The offering is one part of a refinancing of the casino company, controlled by Kirk Kerkorian, announced on Wednesday to restructure its $14 billion debt and head off default.

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VAT plans put on hold

The UAE appears to have abandoned plans to implement value-added tax (VAT) for the time being, a top official said, adding that the worst for Dubai is over.

The government is going to enact a new Investment Law and revise the Companies Law in the next six months. The Investment Law will change the country's foreign investment regime and allow more than 49 per cent foreign ownership in companies in certain sectors outside free zone areas.

"The government is currently working on a number of laws and regulations that will reduce procedures and lower licensing and business registration costs and make Dubai a more competitive place to work and live in," Hamad Bu Amim, Director-General of Dubai Chamber of Commerce and Industry, told Gulf News in an exclusive interview.

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TAQA sees 90% profit fall

Profits at Abu Dhabi National Energy (Taqa) fell 90 per cent in the first quarter, reflecting lower oil and gas revenues and higher operating costs.

An increase in revenues from electricity and water generation partially offset the effects of lower oil prices but Taqa saw costs rise by 30 per cent, mainly because of investments in newly acquired North Sea assets and higher fuel costs at UAE power plants.

“Operating conditions have been tough, energy prices volatile and currency markets in a state of flux,” said Peter Barker-Homek, the chief executive. “We have been able to return a net profit even after newly acquired businesses and their operations have been consolidated.”

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Caution keeps EFG-Hermes loss to a minimum

EFG-Hermes Holding, one of the biggest publicly traded investment banks in the region, said first-quarter profit declined 60 per cent to 140.1 million Egyptian pounds (Dh91m). Net consolidated revenue fell 49.3 per cent from the first quarter of 2008, while values in the equity markets in which the firm operates were down 62 per cent over the same period.

“We are clearly pleased with these results,” said Hassan Heikal, the chief executive of EFG Hermes. “We were relatively cautious as senior management was scarred by experiences in Egypt’s markets in 2001.”

He said that the firm’s integrated business model and the continued pursuit of a universal banking platform have been key advantages over regional and international peer groups.

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Central bank warns against unauthorised funds

The Central Bank has warned the public to avoid dealing with investment funds that are not authorised by the Government to do business in the UAE.

The bank’s anti-money laundering committee has been conducting investigations into fraudulent financial practices in the UAE, which it said had increased since the onset of the financial crisis.

The committee issued a cautionary notice meant to raise awareness of “some individuals and institutions” that were not licensed by the Central Bank, but were carrying out fund management operations. The notice also identified fraudulent techniques used to fleece investors.

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Dubai Holding profits drop

Sheikh Mohammed bin Rashid Al Maktoum, Prime M...Image via Wikipedia

Dubai Holding Commercial Operations Group, the investment company owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, reported a 29 per cent fall in profits for last year as it booked impairment charges on its property interests.

The charges were recorded “due to the overall downturn in global market conditions and the uncertainty associated with the future profitability of certain projects”, the company said in a statement to NASDAQ Dubai.

Dubai Holding has interests in property, industry, aerospace and investments, and includes: Tatweer, the developer of Dubailand; the Jumeirah hospitality group; and the private equity specialist Dubai International Capital. It was established to execute the economic agenda of the emirate and diversify away from oil. It owns 250 companies and has a network of offices in overseas cities including Chicago, Frankfurt, Tokyo and Shanghai.

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Saudi bank also a victim in DIB scam

A Saudi bank was among the victims of the scam in which the Dubai Islamic Bank was defrauded of US$501 million (Dh1.8bn), it was disclosed in court here yesterday.

A DIB employee testified yesterday before the Dubai Criminal Court of First Instance that $120m of the embezzled money belonged to the Saudi Hollandi Bank, of which DIB was a local agent.

The seven defendants are charged with presenting falsified documents to DIB to take possession of funds to finance non-existent projects. Five of them appeared in court yesterday.

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Mandelson called in to help recoup £400m Dubai debt

The Association for Consulting and Engineering (ACE) said some members have been offered just 65 cents on the dollar on unpaid fees by the emirate's best-known developer, Nakheel.

Nakheel, which has built palm-shaped islands in the Gulf and has plans for the world's first kilometre-high tower, is dealing with a debt crisis caused by the collapse in the property market following the credit crunch.

After a visit to Dubai, ACE's chief executive, Nelson Ogunshakin, described the situation as "chaos". He has written to Lord Mandelson, the Business Secretary, to ask for political intervention. The most important developers in the United Arab Emirates, including Nakheel, are part of holding companies owned either by the governments or rulers of the federation's seven emirates, particularly Dubai and Abu Dhabi.

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Economic crisis casts cloud over Race to Dubai

A £100million sponsorship plan for The Race to Dubai was thrown into doubt last night with the government takeover of the Middle East firm behind the ambitious five-year deal.

No expense was spared two years ago when The Race was launched in a seven-star hotel in Dubai as part of the $150million five-year sponsorship deal for the European Tour. All may not now be as it seemed, however, with the restructuring as there are concerns about the financial security of Leisurecorp, now that is has been restructured, and its chief executive has been ousted.

Leisurecorp specialises in developments and investments in the sports and leisure sector. In November 2007, it announced it was putting up $10million (now about £6.6million) annually for the European Tour Order of Merit to be renamed The Race to Dubai, and also said that it would sponsor the Dubai World Championship, the world's richest tournament, at a cost of $20million annually.

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UAE takes news measures against money laundering

The United Arab Emirates said on Thursday it had approved new measures to combat money laundering and financing of militant groups.

Since the Sept. 11 attacks, the United States has leaned hard on Gulf countries, among others, to tighten controls in their financial systems to choke off terrorist finance. One of the 19 attackers was from the UAE.

Free zones and economic departments in the UAE, a federation of seven semi-autonomous "emirates", have been asked to make sure their regulatory measures conform with international moves to combat the phenomenon, the state news agency WAM said.

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Low turn-out seen in Kuwait polls

Mudslinging, accusations and threats have dominated campaigning in Kuwait’s upcoming elections – the third parliamentary vote in as many years in one of the few democracies in the oil-rich Gulf region.

In March a long-running political spat between the elected assembly and the government, where the ruling Al-Sabah family holds all the important posts, spurred Kuwait’s emir to dissolve parliament and call for fresh elections.

Two months on, and the polls have become a battleground in an intensifying conflict between the country’s conservatives and liberals.

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Clouseau-esque market-moving commentary, IEA edition

On Thursday the International Energy Agency (IEA) issued its latest monthly oil report, and in case you weren’t aware, the market was awaiting the forecast more than usual.

This was largely on account of expectations the IEA would finally put an end to its eight-month run of global demand cuts and in so doing confirm ‘green-shoot’ hopes that the economic crisis may be easing.

What’s more, the expectation itself was based on some pretty reliable sources: comments from IEA Executive Director Nobuo Tanaka, no less. Speaking earlier this week while in Poland, Tanaka said the IEA was unlikely to reduce its oil demand forecast in May. The Reuters quote went:

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