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Wednesday, 16 December 2009

Dubai Shares Advance as Investors Speculate Drop Is Overdone

Dubai shares advanced for a third time this week, led by Emaar Properties PJSC and Arabtec Holding Co., on investor speculation that declines so far this quarter are overdone given growth prospects.

Emaar, the biggest property developer in the United Arab Emirates, climbed to the highest in three weeks, recovering most of the losses since Dubai World first announced it would seek a standstill agreement on its debt repayments. Arabtec, the U.A.E.’s largest construction company, rose to the highest in more than a week. The DFM General Index, down 15 percent this quarter, gained 1.4 percent to 1,868.36 at 12:44 p.m. in the emirate. Abu Dhabi’s ADX General Index declined 1.1 percent.

“Given the pressure the market has been under recently, investors realize there is value out there,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. The index has been lagging behind other emerging markets and is struggling to make up some of the losses before yearend, Khan said.

Dubai Said to Have Sold Abu Dhabi Bonds at 4% Return (Update1) - Bloomberg.com

Dubai Said to Have Sold Abu Dhabi Bonds at 4% Return (Update1) - Bloomberg.com

THE PRAGMATIC CAPITALIST » » THE FOUR REASONS EMERGING MARKETS WILL OUTPERFORM IN 2010

THE PRAGMATIC CAPITALIST » » THE FOUR REASONS EMERGING MARKETS WILL OUTPERFORM IN 2010

UAE says $10 bln Dubai aid was in bonds -report

Abu Dhabi's $10 billion financial aid to fellow United Arab Emirates member Dubai to meet debt obligations was in the form of bonds, the UAE foreign minister said in remarks to the Jordanian state news agency.

BONDS

"The aid did not come late and was in the form of bonds," Sheikh Abdullah bin Zayed al-Nahayan told the agency, Petra, on the sidelines of a Gulf Arab summit in Kuwait on Tuesday. "They are debt instruments that would be paid back and carry interest just like loans."

Sheikh Abdullah expressed "optimism about the capability of Dubai to reach satisfactory solutions with its creditors -- international banks", Petra said.

"Those who question the solidarity of the seven (UAE) emirates do not know the truth of the federation," he said.END

Dubai Reminds Some Edinburgh Money Managers Crisis Persists - Bloomberg.com

Dubai Reminds Some Edinburgh Money Managers Crisis Persists - Bloomberg.com

New bankruptcy law to be announced in the UAE within months

A comprehensive bankruptcy protection law is expected to be announced by the UAE Federal Government ‘within months', which will give adequate legal cover to companies under financial stress, a top Dubai Government official said.

"The government is working on issuing a comprehensive bankruptcy/insolvency law that will protect businesses under financial stress and help them move forward," Hamad Bu Amim, director-general of the Dubai Chamber of Commerce and Industry told Gulf News. "This is in final shape and could come anytime soon."

The news comes a day after the Dubai Government announced a legal framework to deal with Dubai World's debt restructuring by setting up of a court under the Dubai International Financial Centre (DIFC).

For Dubai World, the hard part begins

With the threat of a multinational battle over the US$3.5 billion (Dh12.85bn) bond of its development subsidiary behind it and a new tribunal created specifically to referee its negotiations with creditors, Dubai World now embarks on the painstaking task of restructuring another $22bn in debt.

The process will undoubtedly involve more painful cuts at the company, which has already announced plans to lay off 12,000 employees and will involve selling off assets not essential to its core business to raise cash, even if it means selling them at a loss.

But it will also mean asking creditors to ease its debt burden, extending payment terms and even forgiving debts. If they prove unwilling, Dubai World can now seek the protection of the new tribunal, giving it up to 10 months, and perhaps more, to negotiate with lenders.

Public relations machine spins out of control

Dubai went to sleep last Monday night in roughly the same shape it did on the night of November 24 – assured that the troublesome US$3.5 billion (Db12.85bn) Nakheel sukuk would be repaid on time, but with questions still to be answered about its remaining debts.

So that was a lot of fuss about nothing then, wasn’t it? In the 20 intervening days, global markets briefly convulsed immediately after the standstill request, regional markets took a bigger hit over a longer period, and Dubai found itself for a short time compared with Iceland and Argentina as economies that had let their financial situation get out of hand, to the extent that their standing in the world took a serious knock.

In the course of the global crisis, much has been written about “moral hazard”, but there is an equally serious danger out there too: reputational hazard. Dubai has run the gauntlet of reputational hazard these past 20 days.

Lehman was a bad call the UAE avoided

It came down to the wire. After more than two weeks of financial turmoil of unprecedented scale for the economy of Dubai and the broader UAE, triggered by the request for a payment freeze and debt restructuring by Dubai World, an 11th-hour relief package arranged by Abu Dhabi has managed to avoid what would have otherwise been an imminent default on the government-owned group’s most immediate liability to come due. It seems that crisis has been averted.

It is inevitable that over the next few days, many commentators will start wondering what all the fuss had been about.

They would assert, naturally with the benefit of hindsight, that the conclusion was inevitable and that there never should have been any real doubt about the timely and successful repayment of all outstanding debt of the group and all other strategic commercial entities owned by the Dubai Government, given the collective scale of economic resources available to the UAE Government and the dire potential consequences of failing to do so.

Evans, head of Dubai financial tribunal, a sharp 'legal brain

Sir Anthony Evans has the looks, the persona and the easy smile of a favourite uncle. Yet beneath the white, slightly wavy hair and the avuncular manner is “a legal brain as sharp as you are likely to find anywhere in the world,” a barrister in London has said.

Sir Anthony is likely to need every bit of that grey matter as he rises to his latest challenge. He is chairman of a special tribunal set up to deal with financial claims arising from the financial woes of Dubai World.

Nervous stock markets around the world had been looking to see how Dubai would handle the group’s huge debts. After Abu Dhabi weighed in with US$10 billion (Dh36.73bn) on Monday, Sir Anthony got the call to sort out the nuts and bolts.

Meeting of creditors is next test for Dubai World

Dubai World faces another test when it meets creditors next week to begin discussions on its other debts, totalling US$22 billion (Dh80.8bn).

After the relief of having met the deadline on Monday to repay the $3.52bn plus profit owed by Nakheel on its sukuk, UAE markets yesterday appeared to recognise that Dubai World still has a way to go to resolve its financial problems. The Dubai Financial Market Index fell 1.49 per cent and the Abu Dhabi Stock Exchange shed nearly 1 per cent.

Meanwhile, Moody’s Investors Service, the ratings agency, placed under review three UAE banks and the regional business of global banking giant HSBC for possible downgrade because of exposure in Dubai. Abu Dhabi Commercial Bank, Commercial Bank of Dubai, and Dubai Bank, may have their ratings cut.

Bargain Hunters Take a Look at Dubai


Amid international worry over Dubai's debt load, property investors are giving this city-state a second look.

Last month, Dubai sent global markets into a swoon after announcing a standstill to debt payments for its flagship corporation, Dubai World. The group said it would seek to restructure $26 billion in debt, including that at two of its property developers, which have been caught in a real-estate crisis. This week, Abu Dhabi stepped in with a $10 billion bailout for the conglomerate, which has helped ease concerns over Dubai's debt levels.

Though a property-price rebound may be years away, real-estate brokers said the international headlines have triggered a bout of interest by bargain hunters.

Citigroup Says Abu Dhabi Seeks to End Share Purchase

Citigroup Inc. said the Abu Dhabi Investment Authority is seeking to end an agreement to buy the bank’s stock for more than 8 times its current price, or to receive more than $4 billion in damages if the deal is upheld.

Abu Dhabi Investment, one of the world’s top two sovereign wealth funds, filed a claim alleging “fraudulent misrepresentations” tied to its agreement to buy $7.5 billion of common stock, Citigroup said yesterday in a statement. The claims have no merit, Citigroup said. Abu Dhabi would acquire the shares for $31.83 to $37.24 apiece, under the agreement.

The New York-based bank announced this week that it would sell common shares to help repay $20 billion in bailout funds to the U.S. government. “It is going to be tough” for Abu Dhabi to evade losses tied to the agreement, said Eric Barden, chief investment officer of Barden Capital Management in Austin, Texas.

Dubai May Need More Help to Repay Debt After Bailout

Dubai, the recipient yesterday of a $10 billion bailout from Abu Dhabi, has yet to convince investors it will meet all of its obligations.

Debt from Dubai state-controlled entities DP World Ltd., Dubai Commercial Operations Group LLC and Nakheel PJSC remains as much as 28 percent lower than before the emirate said on Nov. 25 it was seeking a “standstill” from creditors. Standard & Poor’s said it won’t automatically reverse downgrades made to ratings on state entities since the announcement.

Dubai’s cash needs are “not going to stop and go away,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. “There is still debt that needs to be settled in 2010 and 2011.”

BUY OR SELL-Will MGM Mirage's gamble on CityCenter pay off?

MGM Mirage (MGM.N) has bet big on the $8.5 billion CityCenter complex on the Las Vegas Strip, where the flagship casino-hotel will open this week, but skeptics say it could be tough to get recession-battered consumers to pay up for the new resort.

Most of the six-tower project, a joint venture with the now well-known Dubai World, opened earlier this month. The centerpiece 4,004-room Aria will open to the public just before midnight on Wednesday.

Shares of MGM, which have fallen about 22 percent year-to-date, rose 6 percent on Monday and were down 0.6 percent at mid-day on Tuesday.

Gulf 'not threatened' by Iraq's oil output plans

Energy-rich states of the Gulf Cooperation Council do not feel threatened by Iraq's plans to massively expand its oil production, Kuwait's foreign minister said on Tuesday.

Iraq has awarded a number of contracts to international oil companies with the aim of boosting its crude production from the current 2.5 million barrels per day to above 10 million bpd during the next several years.

"We are not threatened by Iraq's plans to expand its oil production," Sheikh Mohammad al-Sabah, whose country is the current president of the GCC, told a press conference.

Kuwait says had offered UAE help over Dubai debt

Kuwait, which has one of the world's largest wealth funds, had offered the United Arab Emirates help in overcoming the Dubai debt crisis, Kuwait's foreign minister said on Tuesday.

"I called my brother the foreing minister of the UAE ,... and offered help," Sheikh Mohammad al-Salem al-Sabah told a news conference at a Gulf Arab summit.

"I said we are with you in good times and the bad," he said.

UAE member Dubai shocked world markets on Nov. 25 when it requested a standstill on $26 billion worth of debt owed by state-owned conglomerate Dubai World, a flagship of the emirate.

Fellow UAE emirate Abu Dhabi, the federation's largest member, extended Dubai $10 billion on Monday to help with the debt crisis.

The UAE is also one of the wealthiest Arab countries and the world's third-largest exporter.END

Gas glut risks spoiling Russia’s power games

For the past few years Europe has been fretting about its dependence on Russia for gas.

The bout of Russian muscle-flexing with Ukraine and with western energy companies such as Shell and BP has intensified concern that Europe is becoming increasingly vulnerable to the big bear on its eastern borders.

But few seem to have realised that in fact there may be an opportunity for European countries and their big energy companies to wield the stick against the Russians.

Unpaid contractors join queue for Dubai’s cash

For more than a year, international and local contractors working on Dubai’s vast array of real estate developments have borne the brunt of the emirate’s financial woes as billions of dollars of bills have gone unpaid.

All work on numerous grandiose projects has duly ground to a halt. Now, however, they may find reason for cheer, as much of the $10bn (€6.9bn, £6.2bn) loan from Abu Dhabi to its neighbour, announced on Monday, has been set aside for outstanding bills.

Some $4.1bn will be used to repay a bond issued by Nakheel, the real estate wing of Dubai World, which triggered the crisis by trying to restructure $26bn of debt. Those funds were sent to the principal paying agent on Tuesday, a company statement said, helping Dubai avoid an embarrassing default and stemming the contagion effect of the emirate’s travails.