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Sunday, 13 December 2009

Dubai Default Implications « Alpha Dinar- talking GCC finance

Dubai Default Implications « Alpha Dinar- talking GCC finance

Qatari firm seeks to bring welfare, profit sharing to agriculture ventures

Qatar has embarked on a food-security programme to make it more self-sufficient and help the communities around its farmland projects in developing countries.

Like most Gulf countries where water scarcity makes farming nearly impossible, Qatar imports about 90 per cent of its food.

“We will be self-sufficient in things that can be produced in Qatar,” said Mohammed al Hajri, the chairman of Hassad Food, which is the strategic agriculture investment arm of the Qatar Investment Authority.

Blaming ratings agencies clouds real issues

The conundrum facing the three major ratings agencies – Fitch, Moody’s and Standard & Poor’s (S&P) – has always been that if they don’t adjust their credit ratings for a borrower soon enough, they are blamed for anything that happens in the meantime.

If the borrower defaults and the agency’s rating indicated that the likelihood was low, investors tend to blame the agency for not foreseeing problems.

This is obviously a shortcoming in the way investors and markets interpret ratings in the first place. A rating merely indicates the likelihood of a default. But an “AAA”-rated borrower can default, just as a C-rated borrower might not.

Iraq awards contract for giant field

Iraq has awarded a contract for one of the world’s biggest oilfields to a partnership of Russia’s Lukoil and Norway’s StatoilHydro, and struck several other deals to boost its crude output by millions of barrels per day (bpd).

The deals, in Iraq’s second post-war auction of oil licences, would bring the country US$200 billion (Dh734.59bn) of revenue, while the companies winning contracts would spend about $100bn to develop the fields, said Dr Hussain al Shahristani, the oil minister.

Lukoil and StatoilHydro agreed yesterday to develop the West Qurna 2 oilfield in southern Iraq for just US$1.15 a barrel, beating three rival consortiums for access to the 12.9 billion barrels of reserve. The Russian company had set its sights firmly on the field after failing to convince Baghdad to revive a Saddam-era development contract.

Sukuk deadline looms for Nakheel

Holders of the Nakheel sukuk, which matures tomorrow, are braced for a decision by Dubai that could see them be offered less than the value of their investments in the US$3.5 billion (Dh12.85bn) issue.

And a senior banker has warned that Dubai faces harsher credit terms and a possible liquidity squeeze if its financial problems are not resolved.

Advisers to Dubai World, the conglomerate that owns Nakheel, still say it is possible that the sukuk could be repaid in full, as one of a series of options senior government officials are considering. With the profits due to bondholders, the total owed by Nakheel is more than $4bn.

Early action shielded Qatar from crisis: Official

Crude oil prices has recovered to acceptable levels while the gas sector is yet to see a similar recovery after a drop in demand due to the financial crisis, said Dr Ibrahim B Ibrahim, Economic Adviser to the Emir of Qatar and Secretary General–General Secretariat for Development Planning.

Dr Ibrahim was speaking at the International Petroleum Technology Conference (IPTC) 2009 which was held in Doha recently. Energy industry leaders from around the world including government and representatives from global financial institutions took part in the event.

The demand for energy is expected to grow between 20 percent to 40 percent by 2030. The level of demand growth, however, will depend on the nature of environmental regulations to be introduced and implemented, he said.

Gulf States to Compete More for Money as Banks Balk After Dubai

The emirs, presidents and sheikhs of the six members of the Gulf Cooperation Council meet in Kuwait this week with the days of easy credit over following a year of debt defaults and deferred payments.

Dubai World said Dec. 1 it was seeking to restructure $26 billion of borrowing, and the race to build financial centers and skyscrapers is now turning into a competition to convince banks simply to keep lending to the region, investors and economists said. The GCC annual summit starts today.

“Financing will be harder to attract for all companies in and related to the Gulf in the next few quarters as international banks will be loath to have any association with regional corporates and governments, regardless of their stability,” said Emad Mostaque, who helps manage $100 billion at Pictet Asset Management Ltd. in London.

Emirates transparency is a lesson for Dubai Inc.

Part of the problem with the Dubai debt crisis is the actual debts left over from the oil and property boom that ended in September 2008. The other part is a horrendous PR failure.

Emirates Airline, owned by the Investment Corporation of Dubai holding company, chose to publish its debt position at the end of last week to clear up any potential misunderstandings about its financial position.

‘Gross debt is $9.9 billion and net debt is $8.2 billion. Our debt is paid over a long term,’ President Tim Clark told Gulf News.

Goldman Sachs conference call on the Dubai debt crisis

This is a recording of the recent conference call on the Dubai debt crisis organized by Goldman Sachs (click here).

Goldman Sachs estimates Dubai debts total around $120 billion. The events of the past few weeks are the start of a wide ranging restructuring of Dubai but there will be no global contagion, predicts the bank.

Thank you to the ArabianMoney.Net reader who sent us the link to this recording which we think is a matter of public interest and greater transparency.