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Tuesday, 8 December 2009

FT Alphaville » Blog Archive » Tuesday Dubai doom and gloom

FT Alphaville » Blog Archive » Tuesday Dubai doom and gloom

Nakheel Had First-Half Loss of $3.65 Billion, Document Shows

Nakheel PJSC, the Dubai World-owned property developer seeking to renegotiate debt, had a first-half loss of 13.4 billion dirhams ($3.65 billion) as revenue fell and it wrote down the value of land and property, according to a document obtained by Bloomberg News.

The loss for the company, which is building palm tree- shaped islands off the emirate’s coast, compared with a year- earlier profit of 2.65 billion dirhams, according to its financial statement for the six months to June. Revenue fell 78 percent to 1.97 billion dirhams. A spokesman for Dubai World, Nakheel’s parent, declined to comment.

Dubai World began talks last week with banks to restructure $26 billion of debt, including a $3.52 billion Islamic bond of Nakheel maturing on Dec. 14. Dubai World held talks yesterday with its six main creditors, according to a banker familiar with the negotiations.

Dubai World restructuring to take months

Dubai’s finance chief insisted on Tuesday that a troubled state-backed conglomerate has sufficient assets to meet its obligations but said that it would take more than six months to work out a restructuring plan.

Abdul Rahman al-Saleh, the head of the department of finance, also said that Nakheel, a large-scale real estate developer at the centre of Dubai’s debt problems, had received Dh9bn ($2.5bn) in state funding. But Mr Saleh did not specify when the developer, which is in talks to reschedule $4bn in debt, had received the funds.

Stock market investors shrugged off Mr Saleh’s comments and sold off shares listed on the local Dubai financial market for the second day in succession on Tuesday. In morning trading the market index fell 6 per cent to hit a 21-week low.

Also see to aid clarity!
Headlines fresh from Dubai:

09:17 08Dec09 RTRS-DP WORLD RECOUPS MOST OF EARLY LOSSES AFTER DUBAI FINANCE CHIEF SAYS FIRM ABLE TO MEET OBLIGATIONS

09:28 08Dec09 RTRS-STOCKS NEWS MIDEAST-DP World shares recover on fin min statement

REUTERS: DUBAI FINANCE CHIEF SAYS DUBAI SUPPORT FUND HAS GIVEN NAKHEEL 9 BLN DIRHAMS TO MEET ITS OBLIGATION

Update: Scratch that. Newest headlines:

RTRS: DUBAI WORLD 9 BLN DIRHAM ($2.45BLN) INJECTION “NOT NEW MONEY” - DUBAI WORLD SOURCE

DUBAI WORLD 9 BLN DIRHAM INJECTION WAS MADE AS PART OF $!) BLN GOVT AID TO STATE ENTITIES LAUNCHED IN FEB - SOURCE

Dubai Stocks Slump Most in World on Debt Restructuring Concern

Dubai shares tumbled the most in the world, erasing almost all of this year’s gains, on investor concern that Dubai World is struggling to restructure debt.

Emaar Properties PJSC, the United Arab Emirates’ biggest real-estate developer, slumped 9.8 percent and Emirates NBD PJSC retreated to the lowest since Sept. 3. The DFM General Index plunged 6.1 percent, the biggest fluctuation among global benchmarks tracked by Bloomberg, to 1,638.05. The measure, which closed at the lowest since July 13, has tumbled 22 percent since Dubai said on Nov. 25 that it was seeking a “standstill” agreement on Dubai World’s debt.

Dubai World last week began talks with banks to restructure $26 billion of debt, including a $3.52 billion Islamic bond of property unit Nakheel PJSC maturing on Dec. 14. Dubai World held talks with its six main creditors yesterday, a banker familiar with the negotiations said. Debt restructuring by Dubai state- run companies may almost double to $46.7 billion as more of the emirate’s businesses could need help making payments, Morgan Stanley said.

The Gulf Curve: GCC Credit Thoughts – December 8, 2009

The Gulf Curve: GCC Credit Thoughts – December 8, 2009

Holiday is over as region tries to limit damage

As the Gulf returns to work after the annual Eid al-Adha holiday, ratings agencies, banks and regulators are struggling to assess the implications of the region’s biggest financial crisis in almost 30 years.

The priority has been to calm fears. Bankers and regulators have been quick to try to minimise the damage by insisting their institutions’ exposure to Dubai and to Dubai World and its subsidiaries is limited.

Rasheed al-Maraj, the governor of the central bank of Bahrain, said yesterday that all of the banks on the island had some exposure to Dubai World but the total was less than 1 per cent of assets. The restructuring of Dubai World, the conglomerate that sparked the crisis last month by asking for a delay in payments on its debt, was a “normal” event.

IMF to visit Dubai in coming weeks - Fund official

An International Monetary Fund team will visit Dubai in coming weeks to look closer at the economic impact of the Dubai World debt crisis and actions needed to resolve it, a senior IMF official said on Monday.

In an interview with Reuters, IMF Director for the Middle East and Central Asia Masood Ahmed said the visit was an opportunity for the IMF to update and conclude its 2009 assessment of the United Arab Emirates.

Dubai has been shaken by the debt troubles at government-owned Dubai World, which is currently meeting creditors to delay payment on $26 billion in debt, damaging the reputation of the Gulf Arab business hub.

Supreme Court Rejects Bank’s Recovery Bid

Supreme Court Rejects Bank’s Recovery Bid

Creditors of Nakheel should look to refinance

Creditors of Nakheel, which has asked for a restructuring of its debt, should refinance rather than take Dubai World to court in a “fruitless exercise”, the regional head of Deutsche Bank says.

Creditors including HSBC, Royal Bank of Scotland, Standard Chartered, Lloyds, ADCB and Emirates NBD gathered in Dubai yesterday for their first formal meeting since Dubai World asked to restructure its US$26 billion (Dh95.49bn) of debt, including a $4bn repayment by Nakheel of an Islamic bond due next Monday.

“It is not in their (creditors’) benefit to take the government entity to court … it is a fruitless exercise,” said Henry Azzam, the chief executive of Deutsche Bank Middle East.

Legal deal boosts DIFC courts

Dubai companies will be able to settle their disputes at the specialised English-language courts of the Dubai International Financial Centre after a deal was signed yesterday.

The new protocol between the Arabic-language Dubai Courts and the DIFC Courts is intended to clarify the issue of DIFC jurisdiction and, according to lawyers, could instil greater confidence among foreign companies.

The agreement comes at a critical stage for Dubai’s financial sector and could have a large implication on resolving disputes over financial matters.

Old Mutual, CNA Biggest Insurer Investors in Dubai

CNA Financial Inc., Lincoln National Corp. and Old Mutual Plc’s U.S. life unit are the American insurers with the most bonds sold by Dubai World, the holding company that’s in talks to renegotiate $26 billion of debt.

Old Mutual’s U.S. life unit has $83.6 million in Dubai World-related bonds, Lincoln National has $57.3 million and CNA has $58.4 million, Moody’s said today in a report. The risk to insurers totals $590 million in book value and is “very limited,” the ratings firm said.

Dubai World, the state-owned company with $59 billion in liabilities, said last week that it would seek to restructure some of its obligations. Dubai World and its entities accumulated debt during a five-year real-estate boom in which the sheikhdom borrowed $10 billion and its state-controlled companies $70 billion to help diversify the economy.

Dubai Debt Restructurings May Swell, Morgan Stanley Says

Debt restructuring by Dubai state-run companies may almost double to $46.7 billion as more of the emirate’s businesses could need help making payments, Morgan Stanley said.

Dubai Holding LLC, Dubai Holding Commercial Operations Group LLC, Borse Dubai Ltd. and Dubai Sukuk Center Ltd. may join Dubai World in restructuring debt, Morgan Stanley analysts Mohamed W. Jaber and Paolo Batori wrote in a report. Government- controlled Dubai World said last week that it’s in talks to renegotiate $26 billion.

It’s likely that other state companies will “announce debt restructuring plans over the near term,” Jaber and Batori wrote. “We believe that a haircut on the external debt at risk in the area of 40-50% is necessary to have a notable long-term favorable impact on public debt dynamics.”

NYMEX awaits first trade on new sour crude futures

The CME Group Inc (CME.O) launched its Gulf Coast Sour Crude Oil <0#BMM:> futures contract on Monday, aiming to capitalize on Saudi Arabia's sudden shift to a new sour crude benchmark for its U.S. sales.

While the new contract had yet to attract any trades by midday, it may ultimately fare better than past failed efforts to launch a U.S. sour contract after years of mounting frustration with volatility in the long-standing global benchmark NYMEX West Texas Intermediate.

"Our colleagues have been working with customers and clearing firms this morning to set up for trading, so we are seeing customer interest," Mary Haffenberg, CME Group's associate director of corporate communications said in an email.

Qatar committed to meet world’s LNG demands: Attiyah

Qatar’s production of gas from the North Field has exceeded 13 billion cubic feet per day, the Deputy Premier and Minister of Energy and Industry, H E Abdullah bin Hamad Al Attiyah said yesterday.

“This represents a high rate by regional and international scales. It is twice our production four years ago, when we hosted this event in Doha in 2005,” Al Attiyah told delegates of the International Petroleum Technology Conference (IPTC) which opened here yesterday.

In 2010, all Qatar’s liquefied natural gas (LNG) production trains, under installation, will be completed and set for operation, bringing the total number of trains to 14, including six trains which are the world’s largest.

Has the sun set on Dubai World?

The price of electronic goods and used cars is expected rise in the coming months as effects of the economic meltdown in the United Arab Emirates (UAE) spills over to the local economy.

"Kenya could be affected in terms of low sales of meat products, especially live animals which are popular in this market," said Karithi Kirimi, a risk consultant.

An increase in the price of second-hand cars, sourced mainly from the UAE as well as built-Kitchen ware is likely as low sales means more unused capacity, he explains.

Creditors meet Dubai World in payment push

A group of international and regional banks met Dubai’s struggling conglomerate, Dubai World, for the first time on Monday as talks began on the company’s request to restructure debts of $26bn.

People familiar with the process said it was a “kick off” meeting for what is expected to be a long and drawn-out process and it included key creditors expected to form a steering committee.

No restructuring plan was presented by Dubai World, which shocked markets late last month when it said it was seeking a six month standstill with creditors.

Cliffhanger in Dubai’s tale of two cities

Dubai’s unpleasant Eid surprise has been put in perspective – as a debacle in the emirate, rather than a global disaster.

Even local markets have started to digest the message of the authorities: that there is now a good Dubai and a bad Dubai, with the good Dubai likely to be supported by the emirate’s government and the bad Dubai forcing its creditors to share the pain of its ill-fated decisions.

How to distinguish the two, however, has yet to be explained. Creditors are scrambling to figure out which companies’ debts are guaranteed by the government.