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Sunday, 6 December 2009

Oman sees no need for bank provisions over Dubai

Oman's central bank governor said on Sunday there was no need to require local banks to book provisions for exposure to Dubai World debt as their exposure was not related to loans under restructuring.

The $77 million exposure announced by the country's three top banks earlier on Sunday represents "about the total" exposure of the sultanate's banking system, Hamood Sangour al-Zadjali told Al Arabiya television.

"There will be no surprises..." he said.

The debt was not part of the $26 billion debt the Dubai state-controlled group was restructuring, he added.

Iran still in talks with Total over gas field

Iran has not stopped talks with France's Total over investment in the country's phase 11 of the South Pars gas field, the semi-official Mehr news agency reported on Sunday.

Deputy head of NIOC Hojjatollah Ghanimifard had told state television on Saturday that Iran had excluded Total from phase 11 of its giant South Pars gas field.

However, head of National Iranian Oil Co Seifollah Jashnsaz said he had no knowledge about reports on Total being dismissed from the project in southern Iran.

For background see also:

FOCUS: Deloitte's Birkett Faces Struggle With Dubai Sheiks (Complete article)

Aidan Birkett, the man charged with sorting out Dubai World's $26 billion debt pile, could face an uphill struggle to restructure the company that's at the heart of the emirate's financial crisis.

"It's a very large and complex restructuring with an enormous amount of debt so it's not a small assignment," said Chris Ward, chief executive of financial advisory services at Deloitte in the Middle East. "There will be challenges."

Birkett, 56, managing director of Deloitte's corporate finance department, was parachuted in last month as chief restructuring officer of Dubai World. He has little time to work his magic, with creditors already baying for blood as the maturity of a $3.52 billion sukuk, or Islamic bond, issued by Dubai World's real-estate unit Nakheel approaches on Dec. 14.

Having led Deloitte's 1,200-strong corporate finance team in the U.K. for five years, Birkett is an experienced hand in the world of company restructuring but less knowledgeable about the complexities of doing business in the Persian Gulf emirates and the idiosyncrasies of Dubai's secretive sheiks.

In the past he has restructured over $100 billion of debt and successes include the overhauling of U.K companies MyTravel, London underground contractor Metronet and communications group Energis, which collapsed in 2002.

Bankers say his biggest challenge will be getting Dubai's government to listen. It's unclear whether he'll be given a free hand to remodel Dubai World without the interference of the emirate's political elite.

"When a foreigner comes into the country, ultimately what happens is that the door closes, people speak Arabic, they come out and they say that's the deal," said a Dubai-based investment banker, who asked not to be named.

Of course Birkett isn't alone in his task. Alix Partners has been retained to fix Dubai World's operations and on the financial side of the business blue-blooded advisers Rothschild and Moelis & Co. will lend a hand.

"He can prepare the deal but as a foreigner coming in at a high level, your degrees of freedom are limited," the Dubai-based banker added.

A spokesman for Dubai World declined to comment on the details of Birkett's remit. Deloitte declined requests from Zawya Dow Jones for an interview with Birkett.

Western executives at Dubai's biggest state-owned companies have very little power with ultimate management authority resting with Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum and his inner-circle of closely-knit advisors usually drawn from influential local families.

People who have worked with Birkett in the past say he is a tough operator and will demand that his advice is heeded by Dubai's powerful sheiks.

"He is robust and he's absolutely straight, no nonsense," said Deloitte's Ward in Dubai. "He doesn't have to upset everybody along the way but he gets his own way."

The scale of Birkett's task at Dubai World is vast, dwarfing his other projects. The company has close to $60 billion worth of liabilities, and assets spread across the globe including Turnberry golf resort in the west of Scotland and a stake in the company behind London waxworks museum Madame Tussauds.

Industry experts think much of Birkett's time will be taken up with reaching an agreement with Dubai's creditors and that his options are limited because most of Dubai World's assets were purchased with debt, complicating a straight sale of its investments.

"If they sell the asset they will have to pay back the debt that is linked to it," said one banker in Dubai who declined to be named.

Only time will tell whether Dubai's rulers will listen to Birkett's advice on how fix their broken corporate jewel.

-By Alex Delmar-Morgan, Dow Jones Newswires; +9714 374 8044;

The Gulf Curve: GCC Credit Thoughts – December 6, 2009

The Gulf Curve: GCC Credit Thoughts – December 6, 2009

What About UAE/Dubai's New York City Assets?

The Hudson Institute's New York Web site, which has some excellent commentary on Middle East geopolitics, has an anonymous article on what it calls the "dark side" of the United Arab Emirates:

Although a signatory to free trade agreements, the UAE does not, for instance, allow American companies to legally operate within its billion dollar VOIP sector and allow users to make computer-to-mobile-phone calls. This is done to protect the state-owned monopoly, Etisalat [Emirates Telecommunications Corporation], although recently Dubai started a similar company, DU...

Moreover, the UAE, which illegally shuts out American companies the right to participate in its lucrative VOIP sector, has, either directly or through its front-companies, delved into a buying spree of its own in the U.S.. Their assets include: A tower and adjacent plot of land at 1466 Broadway, owned by the UAE company, Istithmar, which also owns Dubai World. Jumeirah Essex House New York, on Central Park South, Jumeirah being a district in Dubai. Barney's Department Store, New York City. Mandarin Oriental Hotel, New York City. W Union Square Hotel, New York City.

GCC Q3 Banks Earnings

The GCC banking sector witnessed a significant decline in Q3 earnings as compared to the previous year. Bottom line numbers were down 9% YoY on the quarter and down 13% YoY for the 9 months. Although the top line earnings showed some remarkable growth that was mainly driven by the Net interest income (growth of 13% YoY for Q3 and 19% YoY for 9M), their affect was dragged down by the increase in provisions. Consequently, 2009 results are expected to show a growth of approximately 15%, not from driven by impressive Q4 earnings but the dismal Q4′08 results that weight down 2008 earnings.

Abu Dhabi Shares Lead U.A.E. Rebound From Last Week’s Losses

Abu Dhabi shares gained the most since March and Dubai’s index rose for the first time in three days on investor speculation last week’s drop was overdone and the impact of Dubai’s debt problems would be limited.

Emirates Telecom Corp., the biggest operator in the United Arab Emirates known as Etisalat, soared the most in more than eight months. Aldar Properties PJSC and Sorouh Real Estate Co., the two largest developers in Abu Dhabi, gained after they were rated “buy” in new coverage at HC Securities. Abu Dhabi’s index climbed 3.9 percent, the most since March 24, to 2,673.12. The index tumbled 12 percent last week. Dubai’s DFM General Index added 1.2 percent after retreating 13 percent last week.

Efforts by Dubai World, a state-run investment company with $59 billion of liabilities, to tackle its debts are on the right track, U.A.E. Minister of Economy Sultan bin Saeed al-Mansouri said Dec. 2, according to state-run WAM news agency. Financial and property stocks slumped last week after Dubai World requested a “standstill” agreement on all its debt payments. Nakheel PJSC, the property unit of Dubai World, has a $3.52 billion bond maturing on Dec. 14.

Qatar to boost knowledge-based industries

Qatar is gearing up to boost its non-oil and non-gas sector with particular emphasis on knowledge-based and high-tech industries, according to senior Ministry of Energy and Industry officials.

A committee has been set up to conduct studies aimed at promoting small and medium size projects worth QR2bn.

Besides, in order to finance projects and encourage investment, the government has raised Qatar Development Bank’s (QDB) capital to QR10bn.

Stock trading to reopen with Dubai World fallout likely

Stock markets reopen in the UAE today after a two-day National Day holiday with analysts expecting more selling pressure after heavy losses last week in the wake of Dubai World’s request for a standstill on its debt payments.

The Dubai World announcement of November 25 caused declines in exchanges worldwide and spread to Gulf markets after the Eid Al Adha holiday.

As UAE stock markets reopened last Monday, the Dubai Financial Market General Index lost 7.3 per cent, the most since October last year, while the Abu Dhabi Securities Exchange General Index fell 8.3 per cent, its largest drop in eight years. Those declines continued into last Tuesday.

BP buys Rio stake in Abu Dhabi energy venture

Rio Tinto, the world’s largest mining group, has pulled out of a joint venture with BP to develop a US$2 billion (Dh7.34bn) clean-energy project in Abu Dhabi.

The hydrogen power development also involved the Abu Dhabi Government’s alternative energy company Masdar and the Abu Dhabi National Oil Company (ADNOC).

It was designed to be part of a scheme to develop a carbon capture and storage (CCS) network for Abu Dhabi, using industrial carbon dioxide emissions to enhance the productivity of oilfields before storing the waste gas permanently underground.

ADIA in Citigroup bond conversion

The Abu Dhabi Investment Authority (ADIA), the country’s largest sovereign wealth fund, is to convert bonds it holds in Citigroup into shares at more than seven times their current value.

The deal, which will come in four stages beginning in March, is the result of a two-year-old agreement between ADIA and Citi that was designed to inject new capital into the US bank, which was then facing liquidity problems.

Under the original agreement, ADIA would have been left with a 4.9 per cent shareholding in Citi, but this has since been diluted by the US government, which took a 36 per cent share in the bank earlier this year, and other investors.

Banks face fresh Dubai debt fears

FEARS are growing among western banks that Dubai Holding, the personal investment vehicle of the emirate’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, will be the next state-owned Dubai company to default.

The conglomerate went on a debt-fuelled spending spree in the past decade, borrowing $12 billion (£7.3 billion) to fund ambitious projects in Dubai and to create a private equity arm that bought stakes in Tussauds and the budget hotel chain Travelodge.

Details of the main lenders to Dubai Holding are not public but bankers in Dubai say the group borrowed from international banks, including Royal Bank of Scotland and HSBC, as well as local lenders.

Saudi Arabia’s Al-Naimi Says Oil Price Is ‘Perfect’

Crude oil prices are in “the right range” and there is no need to reduce inventories, Saudi Arabian Oil Minister Ali al-Naimi said ahead of an OPEC meeting scheduled for later this month.

“Inventories are coming down, the price is perfect, and all investors, consumers, producers -- they’re all very happy,” Al-Naimi said today in Cairo, where Arab oil ministers are holding an annual meeting.

Algerian Oil Minister Chakib Khelil said it will be “some time” before oil production will have to increase. The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, cut crude production last year as the global recession curtailed demand.

Saudi investors shrug off Dubai debt crisis

Saudi stocks closed down one percent on Saturday as investors shrugged off neighbouring Dubai's debt crisis in the first trading day on the Riyadh market in nearly two weeks.

The Gulf's largest equities market sank 2.3 percent when trading opened for the first time after the Eid al-Adha holiday break, but recovered and was off only 1.06 percent at the close.

The main TASI index fell to 6,288.27 from 6355.82 at its last closing on November 25, the day state-owned conglomerate Dubai World said it was asking to suspend payments on 59 billion dollars in debt.

Opec members seeking better quota compliance

Some Organisation of Petroleum Exporting Countries members will seek better compliance with quotas rather than a change in output levels at the group’s upcoming production policy meeting in Angola later this month, Arab oil ministers said yesterday.

Kuwait’s oil minister said he isn’t happy with current Opec member compliance levels of about 60% and will call for greater adherence.

“We want to see at least 65% to 70% compliance,” Sheik Ahmad al-Sabah told reporters in Cairo, where he and other Arab oil ministers are attending an Organisation of Arab Petroleum Exporting Countries (OApec) meeting.

Opec members will meet in the Angolan capital Luanda on December 22 to decide on production policy, which has remained unchanged in 2009 since the group cut production last year as oil prices slumped and global demand dropped with the onset of the world’s longest recession since World War II.

A new era dawns in regional trade

His Majesty King Hamad will today open the Khalifa Bin Salman Port (KBSP) in Hidd.

The new facility will further promote Bahrain as a regional trading hub with plans for further expansion already in the pipeline.

Early last year, a joint task force consisting of representatives from the General Organisation of Seaport (GOP) and APM Terminals was established to start the process of moving from Mina Salman, which had served for almost 50 years as Bahrain's principal port, to the KBSP.

The power and the glitz / Abu Dhabi resurgent over the irresponsible kid

"This strategy embodies our ambitious vision to take our policy to new heights," Caliph bin Zayed Al Nahyan, ruler of the United Arab Emirates, declared grandly in 2007. But while aiming to lead the people to new horizons, the values on which the nation had been founded would be preserved, he said.

The caliph's words accompanied a PowerPoint presentation by Sheikh Mohammad bin Rashed al Maktoum, vice-president of the UAE and Emir of Dubai.

Maktoum hoped to broaden cooperation among the seven emirates comprising the UAE in education, economics, environment, infrastructure and law, empowering the federal government and blurring differences between the emirates.

This week, after Dubai World admitted to difficulty repaying about $59 billion in debt, Maktoum's strategy faces one of its stiffest tests: Will the federal government agree to guarantee the debts or pay part of them? Or will it leave Dubai to lose its assets?