Google+ Followers

Thursday, 10 December 2009

Dubai Shares Jump, CDS Fall as Emaar Calls Off Merger Plans

Dubai shares soared the most since February and the cost of protecting the emirate’s debt fell for the first time in six days after Emaar Properties PJSC abandoned a plan to combine with real-estate units of Dubai Holding LLC.

Emaar, the developer of the world’s tallest tower in Dubai, rose 15 percent, the most permitted by exchange rules. Arabtec Holding PJSC surged the most in a month. Dubai Islamic Bank PJSC climbed the most in more than a year. The DFM General Index advanced 7 percent, the biggest jump since Feb. 23, to 1,640.76. The measure has still tumbled 22 percent since the government said on Nov. 25 it would seek a “standstill” on Dubai World’s debt repayments. Credit-default swaps dropped 7 basis points to 592, according to prices from CMA Datavision.

“This was a smart move by Emaar and the government because it cushioned the recent drop and gave a boost to the market,” said Haissam Arabi, chief executive officer of Gulfmena Alternative Investments in Dubai. “Technically we were expecting somewhat of a rebound, but it doesn’t take away from the fact that this could be short lived.”

Kuwait's Global signs $1.7 bln debt deal

Kuwait's Global Investment House has agreed an agreement with its creditors to reschedule $1.7 billion in debt, Al-Arabiya television reported on Thursday.

The network said it had signed an agreement, citing sources.

Global Investment House defaulted on most of its debt and the borrower said in December 2008 that it had appointed HSBC as financial adviser to renegotiate the terms of existing credit facilities with the lending bank group.

The Gulf Curve: GCC Credit Thoughts – December 10, 2009

The Gulf Curve: GCC Credit Thoughts – December 10, 2009

Emirates raises $1.13 bn for A380 purchase

Emirates, the biggest customer for the A380 superjumbo, said it has raised $1.13 billion to pay for the purchase of six of these planes to be delivered until the end of next year amid speculation that its ability to borrow has been dented by Dubai’s debt troubles.

The Dubai-based airline had ordered 58 A380s from planemaker Airbus and already has five in operation.

Two of the remaining 53 are being delivered this month and four will be received next year, Emirates said in statement.

Emirates NBD's arm closes fund

Emirates Investment Services (EIS), the asset management arm of Emirates NBD, yesterday announced the closure of Sukuk Fund and said it generated a total return of 15 per cent in seven months.

The closed-ended fund had an initial life of four years and began trading in March this year.

Given the lack of appropriate opportunities in the market going forward, the fund manager decided to crystallise the gains and return proceeds to the investors.

The last position in the fund was liquidated in November. The fund was launched at the peak of fears about the credit worthiness of regional debt issues and was one of the several innovative opportunities developed under the umbrella of Emirates NBD, the region's largest bank in terms of assets.

"The fund not only managed to time the bottom in terms of its inception but also sold at almost the peak, thereby generating optimal returns for the investors over this time period," said Deon Vernooy, Senior Executive Officer at EIS.

The proceeds from the fund liquidation have been returned to the investors with the option to reinvest in other EIS-managed funds. "We continue to believe there is a number of exciting opportunities for our clients and look forward to discussing these with them," said Vernooy.END

Dubai lenders could get priority

Dubai might opt to keep bank lenders onside and force bondholders to take a haircut as it tries to avoid wider refinancing for the emirate and the region as a whole.

Lenders are in for the long haul and have too much at stake to do anything other than roll over and restructure existing loans as they mature at rates that reflect Dubai's increased risk, bankers said.

Dubai World's $26 billion (Dh96 billion) standstill cut its access to international capital markets, leaving the company and the emirate with few financing alternatives, which puts the banks in a stronger negotiating position than bondholders.

DEWA stays confident on debt position

Dubai Electricity and Water Authority (DEWA), the state-owned utility backed by the emirate’s government, has denied it faces a deadline next week to make a US$2 billion (Dh7.34bn) payment triggered by recent ratings downgrades.

“DEWA is very strong financially,” a spokesman said. “There has been no request from banks.” The denial came after a report that DEWA’s securitisation instrument, Thor Asset Purchase, might have to be redeemed in full next week because of downgrades to the company’s investment rating.

The three main raters, Fitch Ratings, Moody’s Investors Service and Standard and Poor’s, have recently downgraded Thor, which matures in 2036. Three main Thor investors are reported to be ready to waive their entitlement to repayment.

Sharing the gain in Dubai also means sharing the pain

If the past couple of weeks have seemed full of controversy over Dubai and its debts, try this scenario for size: imagine that every debt for whatever project, no matter how extravagant, was guaranteed. If companies couldn’t come up with the cash, the Government would, even if it had to fork over barrels of crude oil.

Try to picture the pandemonium that would cause. Anyone with any hare-brained investment scheme could borrow as much as they wanted.

Secure in the knowledge that their debt was guaranteed, they could build edible skyscrapers of Swiss chocolate reinforced with candy canes, so high that on a clear day you could see Riyadh. They could cool them with icebergs towed from Greenland or just let the whole thing melt in summer into a big pile of delicious chocolate-mint rubble.

Nakheel Partial Payment Could Hurt U.A.E., Eurasia Group Says

United Arab Emirates government entities may find it “impossible” to lure international funding if Dubai World, the state-owned holding company that’s struggling with $59 billion of debt, doesn’t make a full payment to creditors of its Nakheel PJSC unit, Eurasia Group said.

“We expect Dubai World to offer only partial payment on Dec. 14, demanding an outright haircut on the principal or buying itself some more time by potentially offering an explicit Dubai or U.A.E. government guarantee,” Eurasia associate Hani Sabra wrote in a research note. “This would provide Dubai World more time to sell some of its assets and would restore a degree of confidence.”

State-owned Dubai World is seeking a “standstill” agreement with lenders as it attempts to restructure $26 billion of debt, including property unit Nakheel’s $3.52 billion Islamic bond, which matures Dec. 14. Dubai Holding LLC is most at risk of being “next in line” in restructuring its debt, Barclays Plc said.

Dubai World,Bks To Meet Dec.21 For Crunch Debt Talks-Sources

Close to 100 creditors will meet with Dubai World officials on Dec. 21 for crunch talks to restructure most of its $26 billion pile of debt, bankers with knowledge of the matter told Zawya Dow Jones.

"All bank creditors are invited, and this is to discuss bank debt only," one banker invited to the meeting said, adding that 97 others lenders will be involved in the gathering that could determine whether the emirate will default on the obligations of one of its once prized state-owned companies.

"This is when, presumably, Dubai World will formally ask for a standstill agreement," the banker said.

Government-owned Dubai World wants banks to agree to restructuring $26 billion of debt. The Dec. 21 meeting falls a week after the maturity of a $3.52 billion Islamic bond, or sukuk, issued by Nakheel, Dubai World's troubled real estate unit.

The Nakheel bond isn't part of the talks, bankers with knowledge of the matter said.

Deloitte's Aidan Birkett has been appointed to restructure Dubai World by the Dubai Department of Finance, which is essentially overseeing the company. Rothschild and Moelis & Co. are also advising on the restructuring.

A spokesman for Dubai World declined to comment as did the Dubai Department of Finance when called by Zawya Dow Jones about the meeting on Wednesday.

The Dubai government-owned newspaper Al Bayan reported Wednesday that U.K. lenders, HSBC Holdings Plc (HSBA.LN), Lloyds Banking Group (LLOY.LN), Standard Chartered (STAN.LN) and Royal Bank of Scotland (RBS.LN) have agreed to reschedule Dubai World's debt.

A spokesman for HSBC in Dubai declined to comment on the report earlier.

U.K. law firm Ashurst has managed to gather about 40% of bondholders for the Nakheel sukuk together to form a committee amid fears the company will default on the debt, persons familiar with the matter told Zawya Dow Jones Wednesday.

New York-based hedge fund QVT Financial LP is helping to rally holders of bonds in Nakheel, including hedge funds and other money managers in New York and London, The Wall Street Journal has reported.END

Standard Chartered shakes off Dubai concerns and heads for record profits

Standard Chartered is on track for record profits in 2009 even though the emerging markets bank had been dogged by concerns about its exposure to Dubai.

The London-based bank told the City today it had achieved "record levels of income and operating profit before tax" in the 11 months to November and insisted that any losses it suffered in Dubai were unlikely to have an impact on its profits.

Analysts are forecasting a profit rise of 6% to $5.1bn (£3bn) by the year-end.

Lehman, Dubai Say Much About Double-Dip Economy: William Pesek

Ask Japanese why their economy plunged in 2008 and most will blame the “Lehman shock.”

A year from now, the “Dubai shock” may crop up in discussions about why Japan is shrinking anew. Dubai’s debt crisis accelerated an export-killing yen surge and showed that the world economy remains sick without an easy cure.

The collapse of Lehman Brothers Holdings Inc. and Dubai World’s bust bookend Japan’s recent experience quite neatly. If Lehman’s fall pulled the rug out from under Japan, Dubai’s coincided with a day of reckoning many in Tokyo have yet to discern.

Gulf economy 'strong' says Saudi oil chief

Saudi Arabia's oil minister told a Dubai conference Wednesday that Gulf economies remain strong, even as the emirate's stock market spiralled downwards over debt default fears.

"I want to emphasise that the overall economy of the Gulf region as a whole remains strong," Ali al-Naimi told the fourth Gulf Petrochemicals and Chemicals Association Forum.

"One of the fundamentals of our region's economic strength is the industry convened here for this forum -- petrochemicals and chemicals," he added.

Pimco Buys Abu Dhabi, Qatar Bonds After Dubai Shock

Pacific Investment Management Co., which runs the world’s biggest bond fund, is buying the debt of Abu Dhabi, Qatar and Ras Laffan Liquefied Natural Gas Co., said Michael Gomez, co-head of emerging markets at the fund manager.

The bonds fell after Dubai World, the state-run holding company, sought to delay payment on some of its debt, Gomez said. Dubai’s announcement on Nov. 25 spurred an increase in the cost of insuring government and company debt from default around the world. RasGas, a venture between state-run Qatar Petroleum and Exxon Mobil Corp., is one of Qatar’s two producers of gas.

“We’re coming in and buying,” said Gomez, who is based at the company’s main office in Newport Beach, California, in an interview with Bloomberg Television. “In any selloff, we’ll be accumulating even more. We think they’re cheap.”

Qatar renews investment commitment

The Qatar Investment Authority, has renewed a 2006 commitment to invest up to US$1 billion in Indonesia to help finance infrastructure projects, an official said.

There is no specific timetable for the investment as yet, as the firm would first carry out feasibility studies on a number of projects in which it is interested in particular energy-related infrastructure projects such as a fuel refinery and power plants, said Aidil Chandra Salim, director for Middle East Affairs at the Foreign Affairs Ministry, Wednesday.

“Finally the Qatar Investment Authority (QIA) has renewed its agreement with the Indonesia government.

Building boom in Oman

The Oman construction industry is expected to hit 1.57 billion Omani riyals (Dh14.97 billion) by 2013 — a 2.7 per cent annual increase, and is likely to remain high, according to Business Monitor International (BMI), a leading research company in the Middle East.

It also estimates Oman's construction industry will account for 5.2 per cent of GDP in 2009, which represents real growth of 2.67 per cent year-on-year.END

Kuwait advances economic cooperation with Japan

The Kuwait delegation has actively engaged in advancing economic cooperation between Kuwait and Japan at the first Japan-Arab Economic Forum held in Tokyo, the Kuwaiti Embassy in Japan said yesterday. The Kuwaiti representatives led by Ambassador Sheikh Ali Khaled Al-Jaber Al-Sabah, who serves as Director of Foreign Ministry's Economic Department, paid an effort to facilitate the entry of Kuwaiti companies and businessmen into the Japanese market, and to provide the clear picture of Japanese investors with Kuwait's investment climate, the embassy said in a statement.

The delegation was also accompanied by Charge d'affaires at the Kuwaiti Embassy in Japan Mohamed Al-Mutairi. In his speech at the two-day forum, Sheikh Ali announced the initiative of HH the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah to establish a support fund for small and medium-sized companies in the 22-member League of Arab States.

The initiative of the Amir to establish a support fund, with a capital estimated at $2 billion, to which Kuwait will contribute $500 million, for small and medium-sized companies in the League of Arab States member states was commended during the ministerial meeting of the forum.

Citi faces snub from Kuwaitis

The Kuwait Investment Authority has held internal discussions about scaling back its banking relationship with Citigroup in a move that could include transferring funds currently deposited with the US bank, people familiar with the matter say.

A withdrawal of KIA funds from Citi would mark another setback for the bank as it seeks to recover from the financial crisis and pay back government bail-out funds.

According to KIA officials, most of Kuwait’s oil revenues are deposited at Citi – a decades-long relationship.

Islamic interbank rates shoot higher

Exposure of Islamic banks to the debts of Dubai World, the troubled state-owned conglomerate in the Gulf, has rattled the industry and caused funding costs for them across the region to soar, according to bankers.

Dubai has been one of the most active issuers of bonds that comply with Islamic principles, known as sukuk, and the announced restructuring of $26bn of debts at the state-owned Dubai World conglomerate – including billions of dollars of sukuk – has shaken the Islamic finance industry.

“Islamic banks have a very large exposure not only to Dubai but to structured finance in general,” said Nish Popat, regional head of fixed income at ING Investment Management.

Pressure grows on overseas assets of conglomerate's equity arm

Istithmar, the private equity arm of Dubai World, the debt-laden conglomerate, is coming under increasing pressure from creditors as it loses control of key assets and breaches loan covenants.

Spurred by its ambitious parent company, the private equity firm went on a multi-billion dollar acquisition spree, snapping up assets such as Barneys, the New York retailer, the Queen Elizabeth II ocean QE2 cruise liner, Cirque du Soleil and trophy real estate in London and New York.

Other investments range from the Grand Buildings in Trafalgar Square, London, to the Mandarin Oriental hotel in New York.

Dubai property merger blocked

Dubai Holding, the conglomerate owned by the emirate’s ruler, received a blow on Wednesday when Emaar Properties blocked a proposed merger with its real estate arms. Emaar’s decision appeared to be a bid to protect itself from the continuing fallout of Dubai’s debt woes.

The company’s board said there was no economic sense in merging with Dubai Holding, whose interests include real estate, leisure and investment holdings. This surprise announcement came from the government, which owns 32 per cent of Emaar.

The move appeared to indicate the government’s intention to separate Dubai’s good assets from troubled vehicles in need of restructuring as the emirate grapples with a debt burden of at least $80bn. Dubai’s stock market fell another 6.4 per cent as Dubai’s debt problems continued to weigh on investor sentiment. Emaar, the market’s bellwether stock, has fallen 38 per cent since Dubai World triggered global panic by asking for a standstill on $26bn in distressed debt.