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Friday, 6 November 2009

BSNL to go direct to Zain if consortium talks fail

Indian state telecoms Bharat Sanchar Nigam Ltd [BSNL.UL] said on Friday it would directly engage Kuwait's Zain (ZAIN.KW) for purchasing a stake if talks by a consortium the Indian firm is part of fail.

BSNL, along with Mahanagar Telephone Nigam Ltd (MTNL.BO), a smaller state firm, are part of a group led by little known Indian company Vavasi, which aims to take a 46 percent holding in the Kuwaiti firm.

Chairman Kuldeep Goyal said if BSNL had to go directly, it would take MTNL along with it.END

DIC forced to plough in £53m to prop up Doncasters

Dubai Investment Capital (DIC) has been forced to put £53 million of extra cash into Doncasters, its £700 million engineering business, to prevent a breach of banking covenants.

The Gulf sovereign-wealth fund has come to an agreement with its banks to put the cash into Sheffield-based Doncasters, which employs nearly 5,000, in return for an agreement with lenders to relax its covenants, The Times has learnt.

DIC, which nearly bought Liverpool Football Club, declined to comment but it is understood Doncasters would otherwise have gone into default.

Lenders had asked for up to £200 million to be put into Doncasters, which makes components for Rolls-Royce.

DIC, which is run by Sameer alAnsari, a former finance director to Sheikh Maktoum, Dubai’s ruler, has been hit hard by the credit crunch because it bought at the top of the market.

But unlike its Gulf rival the Qatar Investment Authority (QIA), which walked away from Four Seasons, the nursing home group, DIC has chosen to bolster its over-leveraged investments with more cash.

Of its six portfolio companies, only one, Merlin, the owner of Tussauds and Legoland, has managed without a cash injection this year.

DIC has paid nearly £100 million into Doncasters, Mauser, a German industrial packaging business, and Travelodge, the UK hotels. The cash injections to the three businesses were made in return for lenders agreeing to relax their covenants.

It also stumped up £150 million for Alliance Medical, the pan-European healthcare business.

The cash injection was not part of a restructuring deal.

During the good times private equity investors could have borrowed to fund expansion but DIC was forced to fund the company’s capital expenditure programme itself.

DIC’s biggest problem is Almatis, its German manufacturer of alumina ceramic products, where the company’s main lenders, Goldman Sachs and Oaktree Capital Management, could put it into a Chapter 11 US bankruptcy process as it has a facility in America.

It is believed that this could happen this year, but restructuring talks between DIC and lenders continue.

DIC is one of the few sovereign wealth funds to comply with Sir David Walker’s guidelines on transparency.

In its annual review Mr al-Ansari said: “We became increasingly proactive as the crisis deepened in the second half of 2008, in order to preserve and protect value in our portfolio companies, allocating additional resources wherever necessary.”END

Lenders of Saad Investments meet, Saudi Arabia Banks, Banking & Investment - Maktoob Business

Creditors of Saad Investments Company Ltd (SICL) held their first official meeting on Thursday, accountancy firm Grant Thornton said, taking a next step in the troubled firm's restructuring process.

Banks are seeking repayment of a loan of up to $2.8 billion taken out in 2007 by Cayman Islands-registered SICL, a unit of Saudi investment firm Saad Group.

The meeting took place in the Cayman Islands, SICL's court-appointed liquidator Grant Thornton said in a statement.

A spokesman for Saad Group declined to comment.

Regulators and bankers are grappling with up to $22 billion of debt restructurings at Saad and a second Saudi firm, Algosaibi, viewed by some as the biggest financial blow to the region since the global credit crisis began.

The two groups are involved in a complex legal dispute, and Algosaibi has asked a New York court for a default judgement against the billionaire head of Saad, Maan al-Sanea, over allegations he defrauded the company out of $10 billion.

A Cayman Islands court on Sept. 18 appointed Hugh Dickson, Stephen Akers and Mark Byers of Grant Thornton as joint official liquidators of SICL, the accountancy firm said, after hearing a winding-up order from creditors.

In addition to SICL, the Cayman court has appointed Grant Thornton liquidators to a further nine Saad Group companies, the accountancy firm said.

One of these companies is Singularis Holdings, which acquired a 3 percent stake in HSBC in 2007.

In July, a Cayman court froze the assets of SICL and a number of other international Saad units.


Mr Dubai, reporting for duty

It has been quite a learning curve for Abdul Rahman al Saleh, the 45-year-old director general of Dubai’s Department of Finance (DoF).

Having spent most of his career labouring anonymously in the engine room of Dubai Inc, he suddenly found himself a fortnight ago in the position of the emirate’s chief salesman abroad.

Mr al Saleh was the linchpin of Dubai’s global roadshow that completed its recent world tour with a deal to raise nearly US$2 billion (Dh7.34bn) on the international capital markets.

The deal, which was three times over-subscribed, proved an important confidence-boosting achievement for Dubai, was clinched on the London leg of the roadshow, where he was prominent among the emirate’s delegation selling conventional bonds and sukuks.

Dealing with the hard-nosed cynics of international finance would not have been a familiar role for him. “He is a government man through and through,” says a westerner who has worked with him.

Not that Mr al Saleh lacks financial expertise. His path to the hot seat of the DoF was marked by solid achievement in the development of a more efficient financial infrastructure in the emirate. As a qualified chartered accountant, he has the knowledge to understand and solve complex financial problems.END

Damas may fuel DIFC changes

The disclosure of unauthorised transactions at Damas International, the biggest jeweller in the Middle East, could lead to regulatory changes in the Dubai International Financial Centre (DIFC), a top official says.

“We are very much a part of the investigation,” said Paul Koster, the chief executive of the Dubai Financial Services Authority (DFSA), which regulates the DIFC. “Once we have a better understanding of what’s happened there, we will know where to focus our regulatory efforts.”

Tawhid Abdullah stepped down as the chief executive of Damas last month after disclosing the company had made US$165 million (Dh605.9m) worth of transactions without shareholder approval. About 50 transactions were made, mostly involving property projects such as the Angsana Hotel and Suites towers on Sheikh Zayed Road.

Nakheel offer casts doubt on project

Nakheel has offered investors in the stalled Palm Jebel Ali development alternative homes on other projects, casting further uncertainty over the future of the vast reclaimed island.

Some Dubai developers have encouraged home buyers on struggling projects to transfer their deposits to other developments that are nearer completion.

People who bought waterfront villas on Palm Jebel Ali, where prices have tumbled by about 45 per cent from their peak in the third quarter of last year, are now being asked to transfer their investments to projects that include Al Furjan and Jumeirah Heights, which are both under construction.

RAIL TRAFFIC REMAINS IN RECESSION (Known by me as the "True Economic Situation"!)

The latest rail freight data is not quick to validate Warren Buffett’s “all in” wager on the U.S. economy. The latest data shows another steep annual year over year decline despite vastly improving comps (the economy was spiraling to its end at this time last year if you recall). We should be seeing positive year over year improvements in this data based on the optimism regarding the recovery, however, the data continues to come in down double digits. Carloads were down 13.7% while intermodal traffic was down 15.5%.

Albert Edwards is quick to note that the seasonally adjusted data is showing signs of a stall (thanks to ZH):

“We all know that Warren Buffet is not one of those. The investment guru’s foray into railroads this week has attracted much attention. The FT’s Lex column called it “one almighty bet on the US economic recovery.” Funnily enough I was looking at railroad traffic earlier in the week. It was notable, I thought, that on a seasonally adjusted basis, there is very clear evidence that the cycle is stalling out.”

The stock market is cheering another day of “better than expected” data, but at some point we have to ask ourselves just how strong is the real economy when jobless claims are consistently at half a million and the transport sector continues to show very steep declines?

The AAR reports:

WASHINGTON, D.C., Nov. 5, 2009 — The Association of American Railroads today said that freight rail traffic remains down for the week ended Oct. 31, 2009. U.S. railroads reported originating 275,439 carloads for the week, down 13.7 percent compared with the same week in 2008 and down 18.2 percent from 2007. In order to offer a complete picture of the progress in rail traffic, AAR will be reporting 2009 weekly rail traffic with year over comparisons for both 2008 and 2007 going forward.

In the West, carloads were down 14.3 percent compared with the same week last year, and 19.1 percent compared with 2007. In the East, carloads were down 12.9 percent compared with 2008, and 8.7 percent compared with the same week in 2007.

Intermodal traffic totaled 203,860 trailers and containers, down 15.5 percent from a year ago and 14.5 percent from 2007. Compared with the same week in 2008, container volume fell 5.4 percent and trailer volume dropped 32.3 percent. Compared with the same week in 2007, container volume fell 8.9 percent and trailer volume dropped 38.6 percent.

While 15 of the 19 carload freight commodity groups were down compared with the same week last year, increases were seen in grain mill products (9.9 percent), chemicals (3.6 percent), and waste and scrap metal (.7 percent and nonmetallic minerals (.3 percent). Declines in commodity groups ranged from 2.2 percent for the all other carloads category to 55.6 percent for metallic ores.

Total volume on U.S. railroads for the week ending Oct. 31, 2009 was estimated at 31 billion ton-miles, down 12.7 percent compared with the same week last year and 13.2 percent from 2007.

For the first 43 weeks of 2009, U.S. railroads reported cumulative volume of 11,482,619 carloads, down 17.9 percent from 2008 and 18.3 percent from 2007; 8,173,640 trailers or containers, down 16.2 percent from 2008 and 18.6 percent from 2007, and total volume of an estimated 1.23 trillion ton-miles, down 17 percent from 2008 and 17.1 percent from 2007.

Tax inevitable to meet Bahrain's expenditure

The continuing run down of Bahrain's oil and gas reserves means that sooner or later the government will have to levy taxes in the country.

Taxation, at some time in the future, is inevitable to meet the level of government expenditure according to the Bahrain Chamber of Commerce and Industry (BCCI) chairman Dr Essam Fakhro.

At a breakfast meeting of the Australian Business Group at the Ritz-Carlton Bahrain Hotel and Spa, Dr Fakhro gave an hour-long talk to more than 80 delegates about the growth and development of both Bahrain and the BCCI pointing out the changes that had been achieved over the years.

Major oil exporters eye Argus switch

Major oil exporters in Latin America and the Middle East have expressed "strong interest" in switching the basis of their oil prices to Argus's U.S. Sour Crude Index following Saudi Arabia's adoption of the index, an Argus executive said on Thursday.

Euan Craik, chief executive of Argus's U.S. operations, declined to name the countries that were studying the change but described the interest as "unprecedented."

"It feels like a sea change. It's something unprecedented in our experience," Craik said in a telephone interview.

Boeing May Lose Oman Order to Airbus If 787 Delayed

Boeing Co. risks losing a $1 billion order for its 787 Dreamliner aircraft to a rival model from Airbus SAS if the U.S. plane’s production schedule slips any further, Gulf carrier Oman Air said today.

Oman, which has ordered six Dreamliners for delivery starting in the first half of 2014, may turn to Airbus’s A330 widebody if a two-year delay to the 787 is extended, Chief Executive Officer Peter Hill said in an interview.

“I really hope they get their act together,” Hill said. “Further delays might mean that we’d have to look elsewhere.”

Qatar's economy shrinks nominal 4.3 pct q/q in Q2

Qatar's nominal gross domestic product fell 4.3 percent in the second quarter compared with the previous three months, hit by a slump in natural gas prices, preliminary official estimates showed on Thursday.

The world's top natural gas exporter has been enjoying strong growth rates, unlike the rest of the region, keeping its oil and gas output unchanged despite a fall in oil prices from last year's record highs. The OPEC member's economy plunged 29.7 percent from a year ago in nominal terms with GDP reaching 67.9 billion riyals ($18.7 billion) in current prices, the authority said.

"LNG (liquefied natural gas) prices declined by an overall 31 percent in line with international pressures on the LNG industry as a result of the 2008 financial crisis," the office said in a statement.

Gulf firms test IPO market, activity still tepid

Plans for three Gulf IPOs announced in the past week don't change the picture of a slow pickup in company flotations in the region.

'The broader market needs to stabilize first and valuations need to become attractive for owners to sell,' said Jithesh Gopi, head of research at SICO investment bank in Bahrain, who sees a chance of more IPO activity in the second half of next year, rather than earlier on.

Gulf IPO activity ground to a halt as a result of the financial crisis and only four Middle East companies listed in the third quarter of 2009, raising $872 million, Ernst & Young said in a report this week.

MGM Mirage Posts $750.4 Million Third-Quarter Loss on Writedown

MGM Mirage, the biggest casino owner on the Las Vegas Strip, reported a $750.4 million third-quarter loss after writing down its CityCenter investment. Excluding the charges, the company beat analysts’ estimates.

The break-even per share before the charges and other items compared with the average 8-cent loss projected by 20 analysts in a Bloomberg survey. Revenue dropped 14 percent to $1.53 billion from $1.79 billion, the Las Vegas-based company said today in a statement. That exceeded the $1.47 billion average estimate.

Chief Executive Officer Jim Murren is counting on CityCenter, an $8.5 billion development on the Las Vegas Strip, to increase business travel and tourism once it opens in December. Visits to Las Vegas slid 5.8 percent this year through August, after dropping 4.4 percent last year, according to the Las Vegas Convention & Visitors Authority.