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Tuesday, 8 September 2009

SocGen In New London Legal Fight Against Saudi's Saad Group

LONDON (Dow Jones)--French bank SocGen, has joined the U.K. legal scramble against Saudi Arabia's troubled Saad Trading, Contracting and Financial Services Co., filing suit against it in London's High Court for $50 million, according to court documents seen by Dow Jones Newswires.

Saad, once a prestigious family-run business conglomerate, started struggling to repay debts earlier this year, prompting ratings agency Moody's to withdraw all its ratings on the group and forcing Bahrain's central bank to take one of SaadSaad's financial arms into administration.

The Soc Gen filing takes the total of London legal claims against Saad to $80 million, ramping up the pressure on the under-fire group.

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Foreign banks cautious after Saad saga

Foreign banks will become more cautious when lending to Saudi family businesses, following the trouble at two large conglomerates that shook confidence in the region, an executive at France's BNP Paribas said.

Privately-owned firms Saad Group and Ahmad Hamad Al-Gosaibi and Brothers Co (AHAB) are restructuring their debt in a complex, multi-billion dollar process that involves local and international banks, as well as legal and other financial stakeholders.

"There will be an impact on the appetite of the banking sector to lend in Saudi Arabia," Jean-Christophe Durand, chief executive of BNP Paribas in the Gulf region, told reporters in Dubai late on Monday.

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David Marks breaks the silence on payment problems

Many UK firms are owed money by Middle Eastern developers, but few are willing to talk about it. Roxane McMeeken spoke to one man who was prepared to break the silence

While it was growing, Dubai became a sort of surreal version of Las Vegas – the city that was one vast casino where everybody wins. It also acquired a casino’s reputation for style and taste, particularly in its nouveau riche architecture. This perception was meant to be challenged by the Dubai Arts District. Instead of all the “landmarks” of concrete, glass and steel, developer Abyaar wanted its £230m scheme to present a soulful appearance based on natural forms from the Arabian landscape, and it chose British architect Marks Barfield to design it.

This looked like a shrewd choice. Although the practice was best known for the London Eye, it had designed a much praised cafe in Birmingham that took its shape from the golden spiral found in sunflowers and shells. For Abyaar, Marks Barfield created a design dominated by landscaping and parks that drew inspiration from pebbles and waves. Unfortunately, five months after the practice started work, Dubai turned into the casino where everybody loses.

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Barneys Owner Istithmar Loses Two Key Execs - Sources

Dubai investment firm Istithmar World Capital, owner of troubled U.S. department store Barneys, will part company with its two key investment executives, according to people familiar with the matter.

John F. Amato and Felix P. Herlihy, Istithmar's two chief investment officers, are currently serving notice with the firm, one of the persons with close knowledge of the matter told Zawya Dow Jones Tuesday.

A spokesperson for Istithmar was unable to comment when called. Zawya Dow Jones was unable to reach either executive for comment. Their departure isn't linked to the troubled Barneys chain, another person with knowledge of the matter said.

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FACTBOX-Firms bidding for UAE nuclear power plant

The United Arab Emirates is days away from awarding the largest ever energy contract in the Middle East for the development of a nuclear power plant.

Here is a list of companies who have submitted bids for the project.

The contract to build at least four reactors is expected to cost the world's third-largest oil producer as much as $40 billion.

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UAE'S Taqa mandates banks for debt issue

Abu Dhabi National Energy Co TAQA.AD, also known as Taqa, mandated five banks to sell a benchmark-sized bond off of its global medium-term note program, a market source told Reuters on Tuesday.

Taqa, which is indirectly owned by the government of Abu Dhabi, named BNP Paribas, HSBC, Mitsubishi UFJ, Morgan Stanley, and Standard Chartered as joint bookrunners for the deal, the source said.

The United Arab Emirates is rated Aa2 by Moody's Investors Service.END

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Dubai Hopes Metro Will Get Economy Back On Track

The opening of Dubai Metro Wednesday could mark a turning point in the emirate's fortunes as it tries to spend its way out of the worst economic downturn in a generation.

After four years of planning and construction, Dubai's ruler Sheik Mohammed bin Rashid Al Maktoum will open the 52-kilometer-long rail system, the first urban metro network in the Gulf's Arab states. Across the Persian Gulf, Iran already operates a metro in Tehran.

Dubai's planners hope the metro will not only make the daily commute for thousands of the city's residents easier but also help lift a struggling economy, desperately in need of a boost.

But the vast project has come at a high price for debt-laden Dubai. Construction costs on the project have soared to 28 billion U.A.E. dirhams ($7.6 billion) from the AED15.5 billion originally estimated, according to the emirate's Road & Transport Authority, or RTA.

The sheikdom can hardly afford the increased cost. Dubai's government and its many related companies are estimated to have debts of almost $85 billion, more than double the city state's gross domestic product, according to investment bank EFG-Hermes. That figure doesn't include the cost of the metro.

"It's very difficult for any railway system to recoup initial capital costs," said Joss Dare, partner and head of Middle East transport at law firm Ashurst.

The RTA has said it expects the metro will generate $4.6 billion over the next 10 years. To raise cash, it has offered naming rights for 23 of the planned 47 metro stations, as well as the metro lines. So far, approximately $490 million has been raised from the sales.

With little oil, Dubai has historically invested in the best infrastructure in the Gulf to attract international companies and investment. The emirate is home to the region's largest airport and biggest container terminal, which both help make it a bustling trading hub.

Dubai like many of its neighbors wants to spend its way out of the global economic crisis despite heavy debts. The emirate has budgeted this year for its first-ever deficit of $1.14 billion, with government spending up 42%.

"The metro is a long-term investment," said Simon Williams, chief economist for the Middle East at HSBC Holdings PLC. "Its value will show itself when Dubai eventually returns to growth."............

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Abu Dhabi not interested in Zain stake -paper

Abu Dhabi Investment Authority (ADIA) is not involved in talks to buy a 46 percent stake in Kuwaiti telecom firm Zain , an Arabic language daily said on Tuesday, contradicting previous media reports.

Unidentified sources told Al-Ittihad newspaper that ADIA had showed no interest in buying a stake.

Kuwaiti newspaper reports said on Monday the Abu Dhabi sovereign wealth fund was part of a group in discussions to buy a stake in the telecoms operator.

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Babylon Fund July 2009 +5.10% (PDF)

Abu Dhabi invests in chip firm, Dubai should be next (Re-post)

Abu Dhabi is paying $1.8 billion to buy Singapore-based chip maker Chartered Semiconductor, taking advantage of relatively depressed global asset prices. Yet a far more logical home for its surplus oil wealth would be to invest heavily in neighbouring Dubai.

The commercial logic from the standpoint of both Abu Dhabi and Dubai is overwhelming. Abu Dhabi knows and trusts its neighbour and has admired its entrepreneurial flair for years. Asset prices in Dubai have sunk during the recession since last September and must represent an excellent deal in many cases.

From the perspective of Dubai the big choice is whether to gradually pay off a debt pile that could now exceed $100 billion, something that will take many years but is still possible as a highly profitable regional port, logistics, financial and trading centre, or to sell equity to Abu Dhabi and greatly accelerate this process.

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FIRST PERSIA EQUITY FUND NEWSLETTER NO 23 Sept 2009.pdf

Zain investors prepare to sell big stake

Big shareholders in Zain, Kuwait’s largest telecommunications operator, are preparing to sell a 46 per cent stake in the company for about $13.7bn in what could be one of the largest financial transactions on record in the Gulf.

A company controlled by the Kharafi Group, one of the main shareholders of Zain and one of the Middle East’s wealthiest families, said on Monday that it was considering a sale of 46 per cent of Zain for 2 dinars a share.

“One of our clients, which owns a portfolio run by Al-Khair National Co. for Stocks and Real Estate, and others, has informed National Investments that it is about to decide on selling” 46 per cent of Zain, National Investments said in a statement on the Kuwait Stock Exchange website on Monday.

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Bahrain to tighten bank regulations

The Central Bank of Bahrain (CBB) plans a sweeping overhaul of liquidity rules, designed to make banks more robust after troubles at two Saudi-linked banks cast doubt on the country's regulatory system.

The proposed changes will force banks to increase the amount of liquid assets held, to submit to rigid checks and limit the so-called mismatches that could starve a bank of funding in stressful markets, according to documents on the CBB website.

The CBB in July assumed control of Saad Group's Awal Bank and The International Banking Corporation (TIBC), a unit of Ahmad Hamad Algosaibi and Brothers, citing a substantial shortfall in their assets compared with their liabilities.

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A storm from out of clear blue skies

The first half of last year was stellar for the UAE’s banks by virtually any measure.

Profits were more than healthy, loan books had grown by almost 50 per cent, and the development boom and high oil prices that let banks rake in the gains seemed unlikely to slow down.

“The UAE banking sector should continue to enjoy robust top and bottom line growth,” Deepak Tolani, an analyst at Al Mal Capital in Dubai, wrote in a research note in May last year.

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When boom was lowered on property

Confidence still permeated the property sector at the start of last year, even as the credit crunch in most other markets stalled transactions and caused prices to fall.

Developers were gung-ho about the outlook for their market, responding to continuously high demand with even more ambitious projects.

They had every reason to be enthusiastic: property prices surged 78 per cent between the first quarter of 2007 and the same quarter last year, and everybody wanted a slice of the action.

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Gulf’s recovery a little slower, but still on track

First, Asia emerged from the global recession, propelled by recovering growth in China. Now it appears that even Europe has managed to slog its way back to economic growth.

Yet even with oil prices back at about US$70 a barrel, the Gulf still suffers from the equivalent of a low-grade dose of flu, neither falling as ill as Asia and the West, nor seemingly able to spring back as quickly.

A year after the collapse of the US investment bank Lehman Brothers touched off a global financial firestorm, the region that many thought would sail through the crisis unscathed is instead mired in a building slump that has crippled its banks and exposed shortcomings in corporate governance, regulatory transparency, legal institutions and capital flows.

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Ex-Shuaa chief urges more foreign ownership

Gulf companies should allow greater ownership by foreigners if they want to attract long-term institutional investors, according to the former chief executive of Shuaa Capital.

“I hope the GCC will be added to the MSCI emerging market index because that would bring in long-term funds and money from all those who have allocations to emerging markets, including endowments, universities and others,” said Iyad Duwaji, who stepped down as the chief executive of Shuaa last month after 17 years in the post. “Government support is essential in addressing some of the issues.” MSCI Barra, a compiler of stock indexes, classifies Gulf countries as frontier markets rather than emerging markets.

This affects demand for stocks from the region, because many institutional investors or asset managers who track MSCI indexes are restricted from investing in frontier markets. MSCI said in a statement that it “encourages the Emirati regulator to find ways to further facilitate equal foreign access to the local equity market”.

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Assets drive Mubadala profit surge

Mubadala Development, the Government’s strategic investment arm, said yesterday that profits more than quadrupled in the first half of this year, after rising prices for its growing pool of assets offset higher costs incurred as the company expanded into new operations.

Most of the surge in Mubadala’s profits was the result of recognising higher market prices for its holdings of oil and stocks. Without such revaluations on investments, the company’s net income from operations actually fell.

“Mubadala is showing strong financial metrics while delivering projects that deliver on the double bottom line – financial performance and strategic interests,” said Waleed al Muhairi, the chief operating officer. “Part of the core mission of Mubadala is diversifying our economy from oil and gas and therefore reducing the risk of our portfolio. And so while oil and gas remains our biggest contributor, there’s no question we’re developing other contributors.”

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Ministry launches public debt unit

A new unit to manage the UAE’s public debt is being set up by the Ministry of Finance.

It is the latest attempt by ministers to stimulate the economy and try to develop local bond markets as the UAE strives to follow other global economies out of the credit crisis.

The Public Debt Management Unit will be responsible for developing public debt and risk management strategies to submit to the Government for approval, the Ministry of Finance said yesterday.

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How times change September 2009 (Re-post)

They also say Sell in May and Go Away. Maybe not this May, and that saying has no real backing by data recently, if I am not mistaken.

They also say summer is bad for stocks here in the UAE. This summer, I feel, will make you come back from your holiday, or make you invest your vacation money in the markets, because they are going up and 100% above the recent 52 week lows.

Everyone will call you crazy for not entering the markets.

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UAE's NBAD to list on Abu Dhabi exchange

National Bank of Abu Dhabi, or NBAD, is set to list the Middle East's first exchange traded fund on the Abu Dhabi stock market in two months, a bank executive said on Monday.

NBAD's ETF is licensed by "a global, leading index provider" and includes 50 traded stocks, Giyas Gokkent, NBAD's co-head of asset management and chief economist, told the news agency Zawya Dow Jones.

"We're planning to launch in about two months, subject to regulatory approval," Gokkent said.

"We think that there will be a lot of demand, because exposure of international investors to this region is still behind the curve," he said, adding that the fund will provide "exposure and passive management in an efficient way, when active fund management has taken a hit."

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TNI, Kamco to form $150 mln Islamic fund

The National Investor's private equity arm and Kipco Asset Management Co plan to set up a $150 million Islamic fund, in a sign that private equity activity in the Gulf region is picking up.

The shariah-compliant fund is expected to be launched within three months and will make six to seven investments with an average equity of $25 million each in mid-sized, family-owned companies.

"The market opportunity really lies in family businesses in the region who may have entered into too many disparate business lines and now feel they need to pick and choose and are looking into divestitures," Yahya Jalil, director of private equity at The National Investor, told the news agency Reuters.

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Downturn tests Dubai’s social tolerance

At an exhibition of rare Korans in Dubai’s financial district, an expatriate who should have known better flutters around the gallery, far too much of her bosom on display alongside the holy books.

Unwise in any situation in Dubai, her deeply cut dress was even more inappropriate given the subject matter of the exhibition and its timing during Ramadan, the Muslim holy month of fasting.

It is typical of Dubai that none of the guests chided her for the fleshy faux-pas, instead concentrating on averting their gaze during the Islamic year’s most spiritual month.

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Port projects put on hold in storm

The global economy may be showing tentative signs of recovery but international trade is still suffering from the aftershocks of last year’s credit quakes.

AP Moller-Maersk, the world’s largest container shipping line, is on course for the first full-year loss of its 105-year history, and warned in August that the industry remained in a “crisis of historic dimensions”.

The International Monetary Fund said in May the world trade in goods and services would contract 11 per cent in 2009 and remain flat next year. The Baltic Dry index, an important measure of shipping costs for raw materials, recovered from last autumn’s lows, but started to slip again in May due to still-depressed demand for shipping.

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