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Tuesday, 2 June 2009

Abu Dhabi sheikh cashes in Barclays stake for £1.5bn profit

S(a)ad junkie

Saad Group company logoImage via Wikipedia

In case you missed the Moody’s downgrade of Saad on Tuesday morning, here are some selected highlights. Emphasis ours:

Moody’s Investors Service has downgraded the ratings of Saad Trading Contracting & Financial Services Company (STCFSC), Saad Investments Company Limited (SICL) and Saad Group Limited (SGL) to B1 from Baa1. Moody’s has placed the ratings on review for further downgrade.

The rating action follows public reports that the Saudi Arabia Monetary Authority (SAMA) may have ordered that the accounts belonging to Saad’s majority owner and Chairman be frozen.

No reason has yet been given for this action, and the disclosure relating to this development has been limited. Moody’s notes that the events of the past few days have resulted in heightened risk of default at entities of the Saad Group, if they face increased contagion from disputes originating from the shareholder.

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Dubai ruler to bid for AC Milan stake - report

The ruler of Dubai is preparing an offer to purchase 40 percent of AC Milan for about 400 million euros, MF business newspaper reported on Tuesday.
AC Milan's owner Fininvest SpA [FIN.UL], the holding company of Prime Minister Silvio Berlusconi's family, could get the offer this week, MF said.
The bid from Sheikh Mohammed bin Rashid al-Maktoum could include an option to buy the rest of AC Milan in two years, it said.
Milan have denied any talks were under way. Asked in a television interview late on Monday about sale of the club, Berlusconi said, "You, like all other journalists, are completely divorced from reality."

See initial post, 16th May, 2009 here:

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Middle East Daily - Inflation collapses

•Egypt’s previously ballooning inflation plummets to multi-month lows

•A similar trend is emerging across the middle east and in the GCC in particular

•The review of infrastructure projects, as a result of the financial crisis, is a positive

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CII in talks over Dh100m deals

Despite signs of recovery in the economy and an easing of liquidity, caution is still the buzzword in the UAE's private equity industry.

Amer Salah, Chief Operating Officer of Capital Industries and Investments (CII), believes opportunities abound for private equity companies, but he adds that it is essential to look for well-structured deals with fundamentally strong companies.

CII, a private equity firm owned by Rasmala and other GCC investors, is negotiating three deals worth Dh100 million. The company is planning to develop a precast systems facility in a tie-up with a firm in Riyadh.

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Oil firms worldwide plan investments worth $375 billion this year

World's largest national oil companies (NOCs) and international oil companies (IOCs) are planning investments worth more than $375 billion (Dh1,377bn) despite ongoing concerns about oil demand, consultant Ernst & Young (E&Y) said in a report.

The view comes close on the heels of an International Energy Agency (IEA) statement, which warned that upstream oil investments will fall more than 21 per cent this year due to projections of low demand. That would be a reduction of almost $100bn, the IEA said. While Opec has forecasted an year-on-year decline of 1.6 mb/d in 2009, IEA said oil demand will fall by 3.5 per cent this year.

NOCs are on course to invest more than $275bn in the development of their businesses at home and abroad in 2009, E&Y said. Of this almost 70 per cent of total investment would come from NOCs in Asia and South America, the report said.

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SWFs lose $57.2bn in listed firms

Sovereign wealth funds (SWFs) have lost nearly half of their investments on paper that they made in listed companies, new research has showed.

At an aggregate level, they invested $125.7 billion (Dh461bn) in listed companies until the end of the first quarter of 2009, losing 46.7 per cent or $57.2bn of their investments due to a decline in share values, the Monitor Group and Feem said in their latest research report.

Analysing the aggregate performance of SWF investments in listed companies, the report said that 24 large investments made in listed companies – those worth at least $1bn – had massive holes in the funds' balance sheets. The report findings showed that 24 transactions were associated with a total apparent loss of $56.3bn, meaning they suffered entirely due to these few large transactions.

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HSBC launches $100m Amanah Sukuk Fund

HSBC yesterday launched $100 million (Dh367m) HSBC Amanah Sukuk Fund in the UAE, offering mid to high single digit returns to investors, the bank said yesterday.

In a reply to Emirates Business, the bank said it's confident of raising the required fund because "interest in sukuk among investors is high."

Targeted at the UAE retail investors, the fund will deliver a competitive income in addition to capital appreciation from a select number of regional and international sukuk. The fund will be closed on July 14, 2009.

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Adia maintains reign as fund with largest assets

Abu Dhabi Investment Authority (Adia) continues to be the sovereign wealth fund with by far the largest assets according to data released by the US-based SWF Institute.

Adia's estimated assets of $627 billion (Dh2.3trn) are more than 45 per cent higher than the number two, Saudi Arabia's Sama Foreign Holdings, which clocks in at $431bn.

According to the institute, Adia's holdings span multiple sectors and include a 16 per cent share in the UK-based Eastern European Trust, 9.8 per cent in Bermuda-registered Macquarie International Infrastructure Fund (both holdings through subsidiary Abu Dhabi Investment Company), 8.3 per cent in Egypt-based Hermes Holding, and 4.9 per cent in US-based Citigroup. As much as 75 per cent of Adia's assets are administered by external managers, which includes around 60 per cent that is passively managed through tracking indexed funds, the institute said.

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Former Nakheel executives jailed

The second sentence in the series of corruption cases at Dubai criminal courts was handed on Monday against two former Nakheel executives for accepting Dh5.14 million in bribe.

The Dubai Court of First Instance jailed 32-year-old Emirati general sales manager W.J. and 28-year-old Egyptian sales executive K.M. three years each. Presiding Judge Fahmi Mounir, who pronounced the accused guilty, also ordered them to pay a joint fine of Dh3.081 million.

Advocates Samir Ja'afar and Hamdi Al Sheewi, who represent W.J. and K.M., respectively, said they will appeal the initial judgment very soon. The Egyptian will be deported after serving his jail term.

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Barclays’s Abu Dhabi Investors to Sell $6.8 Bln Stock

Barclays Plc’s Abu Dhabi investors plan to sell 4.12 billion pounds ($6.8 billion) of shares in the bank after a 54 percent rally since the investment was made.

PCP Gulf Invest 1 Ltd., owned by the Abu Dhabi-based International Petroleum Investment Company, hired Credit Suisse Group AG to sell mandatory convertible notes, it said in an e- mailed statement. The notes amount to 1.3 billion shares, London-based Barclays said in a separate statement.

The MSCI World/Financials Index has advanced 73 percent in the past three months, the biggest gain among the 10 industry groups on the MSCI. The investment fund said it plans to focus on energy assets, mirroring a shift away from financial stocks among sovereign wealth funds including Temasek Holdings Pte as commodity prices recover from last year’s rout.

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Iran to go ahead with plans to pump, export more gas

Iran is pushing ahead with plans to pump and export more gas, and could award contracts to build a cross-border pipeline to Pakistan and develop another phase of its biggest offshore gasfield in coming weeks.

Tehran could award the main construction contract for a 2,100km gas pipeline to supply Iranian gas to Pakistan “maybe within a month”, Seyed Mehdi Hosseini, the adviser to the managing director of Iranian Offshore Engineering and Construction, said on the sidelines of a energy conference in Abu Dhabi.

Most of contract terms and conditions had already been decided, he added, without disclosing the contract’s recipient.

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Emirates writes down Dh1.5bn in fuel hedge losses

Emirates Airline wrote down fuel-hedging losses of Dh1.57 billion (US$428 million) for its fiscal year ending in March after it signed large fuel contracts before the global economic crisis sent oil prices tumbling, according to its annual report.

The higher fuel costs contributed to the carrier posting an 80 per cent drop in profits to Dh982m compared with the previous year.

The Dubai airline joins the list of carriers, including Singapore Airlines and British Airways, which took big bets predicting oil prices would continue to rise at a time when prices were climbing to a record $147 a barrel last July. That bet turned sour when spot prices began to decline to below $40 a few months later.
“Oil price movements in 2008 caught out many energy consumers off guard, including Emirates,” the carrier said in the report.

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Talks to help Gazprom buy distressed assets

The Abu Dhabi Government is in talks to help Gazprom, the Russian energy giant, fund the purchase of “distressed” oil and gas assets across the country, the ambassador of the UAE to Moscow said yesterday.

The negotiations concerned investments from Abu Dhabi sovereign wealth funds into projects in Russia and other countries, said Omar Ghobash, and are the latest sign of warming ties with Russia’s energy sector following co-operation in the natural gas market.

“There are detailed and extensive negotiations over particular investments,” Mr Ghobash told Bloomberg, without disclosing more details. “They’re interested in getting funding that only sovereign wealth funds can provide.”

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Economy may alter 2015 plan, PM says

The global financial crisis has prompted a review of Dubai’s 2015 strategic plan, the Prime Minister said yesterday, but he emphasised that many of the emirate’s objectives would probably be achieved on schedule.

In an internet question and answer session with the general public, Sheikh Mohammed bin Rashid, who is also Vice President of the UAE and Ruler of Dubai, said there were already signs that the economy was reviving.

He said a “careful review” had been launched of Dubai’s 2015 plan to take into account developments in financial markets and the global economy.

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So much for Sheikh Mansour bin Zayed al-Nahyan being a long-term investor in Barclays. When the UK bank tapped Gulf investors last year, trampling on shareholders’ pre-emption rights in its haste to avoid a government bail-out, it justified the breach of corporate governance protocol by saying it would gain access to valuable “strategic and commercial relationships” in the Middle East.

News that some of these Gulf investors are now looking to cash out of a large part of their holdings will embarrass the Barclays top brass and possibly ignite a new burst of shareholder irritation with John Varley and Marcus Agius, the bank’s chief executive and chairman.

Yet in reality any such decision to exit is hardly surprising. The sharp recovery in Barclays’ shares from their January trough of 47p, when concern about the bank’s future was at its peak, to Monday’s 317p has made profit-taking hard to resist. But there may be other reasons why investors want to pull back slightly. Not only is Barclays’ balance sheet cleansing far from complete, but the Financial Services Authority’s murky stress test of the bank’s trading book has yet to prove a convincing guarantee of financial health. The sale is a sign that important investors do not believe the UK’s tests have been robust enough.

Furthermore, the adverse feedback loop from the financial world into the real economy is still taking effect, with no convincing evidence that a sustainable recovery is yet under way in developed countries. The fact the recession probably has much further to run, combined with continuing uncertainty over the locus of power in UK financial regulation, makes this a good moment to trim exposure to a bank stock that has overshot. Since Sheikh Mansour called the bottom, he has probably doubled his £2bn investment. His decision to cash out now, even only in part, will leave others tempted to follow suit.END

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Opinion: Gulf states must learn art of unity

It was a particularly unsavoury row, laced with a dash of Italian spice. Finland wanted to host the European Union’s food safety authority, but Italy, the land of pasta e fagioli, spaghetti alla carbonara and pollo alla potentina, was having none of it.

Silvio Berlusconi, Italy’s prime minister, scoffed at the thought of Finnish delicacies. “There is absolutely no comparison between culatello [ham] from Parma and smoked reindeer,” Berlusconi reportedly said. It was a spat the Italians won, with the agency safely located in Parma.

Such has been the testy and troubled path Europe has taken as it inched towards economic union. Fast-forward four years and it is now the Gulf that is juggling with its own hot potato. This time the feud pits Saudi Arabia against the United Arab Emirates over the location of the Gulf Co-operation Council’s central bank.

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Private equity attracted to health sector

Gulf-based private equity firms searching for a relatively safe shelter for investments are increasingly considering the regional health industry.

Health expenses in the Gulf are largely shouldered by the state, but the rising cost means that most governments are trying to pass some of the burden on to the private sector – opening up a potentially lucrative and stable industry to private equity players.

“According to all measures, healthcare in our part of the world is a very underpenetrated market,” says Achmed Al-Shahrabani of Abraaj Capital. “Even now, where we are seeing drops in other sectors, healthcare continues to show good growth rates across the region.”

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Saudi group admits to debts squeeze

The conglomerate owned by Maan Al-Sanea, one of Saudi Arabia's most powerful businessmen, yesterday said it was planning an orderly restructuring of some its debts as the result of a liquidity squeeze.

The statement by Saad Group - its first admission that it is facing difficulties - came after bankers said the Saudi Arabian Monetary Agency (Sama) had frozen the personal accounts of Mr Sanea and his family.

Sama, the kingdom's central bank, has not commented on its decision. A spokesman for Saad Group said it did not comment "on rumour or speculation." There has been no denial. The statement said the accounts of the group's operating companies remain unimpaired.

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Moussavi woos Iran's young voters

"Death to the dictator" chanted the thousands of students who had come to hear Mir-Hossein Moussavi, the reformist-backed presidential candidate in this month's Iranian election.

Having disappeared from the public scene for decades - he was last in office as prime minister in the 1980s - Mr Moussavi is busily courting Iran's youth, who make up the vast majority of the population, and could well determine the winner of the election.

Many students want an end to the administration of Mahmoud Ahmadi-Nejad, the hardline president. Mr Moussavi's task has been to convince them that change is possible - and that they should go out and vote in the first round of the election on June 12.

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Turkey rejects minefield investment

Hostility to foreign investment in a sensitive border area has forced the Turkish government to shelve plans to turn a minefield stretching along its frontier with Syria into organic farmland.

After a week of wrangling in parliament, ministers have conceded they would have to rethink draft legislation that would have allowed an international company to lease the 510km strip for 49 years as payment for clearing thousands of landmines that still claim casualties and have made it unusable since the 1950s.

Deniz Baykal, leader of the CHP opposition party, had threatened to challenge the legislation in the constitutional court if it was passed, saying the land should be used "for the unity of the country".

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