Saturday, 31 July 2010
The 143-company gauge rose 0.3 percent to 6283.73, the highest since June 28, at the 3:30 p.m. close in Riyadh, after falling as much as 0.2 percent. Al Rajhi Bank, the biggest publicly traded lender in Saudi Arabia, was the leading mover, while Samba Financial services, the kingdom’s second biggest lender by market value, drove lagging movers. Tadawul gained 3.1 percent in July, the highest monthly gain since March.
“Today’s small uptick is nothing to call home about,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. “Oil has been hovering in the high $70s and global equities have been rather flat as the summer lull is taking hold in Europe and the U.S.”
The lender reported a net loss of 531 million dirhams in the second quarter compared to a net profit of 295 million dirhams in the same period a year ago, missing analyst forecasts.
'The enforcement of provisions and impairments, especially those connected with ADCB's exposure to Dubai World, resulted in reporting a net loss,' the bank's chairman, Eissa al-Suwaidi, said in a statement.
In the fallout, the Dubai government reined in some ambitious plans. One government-owned company whose growth plans were severely cut back was Dubai Aerospace Enterprise (DAE), formed with a grand plan to create various aviation-related businesses.
The aircraft leasing unit of DAE was forced to off-load most of the 200 Boeing and Airbus jets that it had ordered in 2007."
The company has stakes in the US-based Carlyle Group and Zurich-based SR Technics. Along with Tata Ltd, the UK arm of the Tata group, it is also a one-third partner in Italian aeronautics firm Piaggio, which specializes in producing business jets, engine parts and structural components.
It now wants to shift part of the manufacturing for Piaggio business jets to India, where they will be cheaper to build than Italy, said Homaid Al Shemmari, executive director for aerospace at Mubadala."
Friday, 30 July 2010
The proposal from shareholder Dubai International Capital LLC “will saddle the business with too much debt and excessive cash interest charges,” Los Angeles-based Oaktree said in the filing to the U.S. Bankruptcy Court for the Southern District of New York yesterday. It “raises questions not only about the debtors’ long-term viability, but the feasibility of the plan in the short-term as well.”
Oaktree, Almatis’s largest senior lender, also said it started talks with the company for a revised restructuring proposal that would cut its debt to a “significantly lower level” and provide junior lenders with better recoveries."
You would forgive UK firms for clambering over each other to escape from Dubai at the moment, yet Hopkins and WSP have vowed to keep their offices open. So do they know something other companies don’t?
Sometimes it’s hard to say goodbye. Hopkins Architects pledged to keep its Dubai office open last week, despite an increasingly nasty legal imbroglio with a major developer there, Dubai Properties. WSP, which made a loss of £2.4m on a turnover of £49m for its Middle East and North Africa business in 2009 and has minimal work in Dubai, is also retaining its office of more than 30 people in the emirate. In light of the rough time they are having, you can’t help wondering what is detaining them.
The decision to stay seems even stranger when you look at some of the ominous signs coming from the wider region. Qatar and Abu Dhabi, the two markets that were touted as the great hopes for UK firms after the Dubai crash, have been slowing down. The building industry in the Gulf Co-operation Council (GCC) region - comprising Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the UAE - shrunk by 2.2% during the final quarter of 2009. So are Hopkins and WSP doing the right thing, or is now the time to leave?
The changes mainly involve delaying or adapting infrastructure projects to match new economic realities, but officials stress that the overall outlines of the 2030 plan remain intact. They also note that the plan was designed to be updated regularly according to macroeconomic conditions.
“As a result of the global financial crisis and its impact on Abu Dhabi’s economy in 2009, a reassessment of certain goals set out in the 2030 Economic Vision, including in particular the planned GDP growth and the population assumptions underlying the 2030 Economic Vision, is being undertaken,” says the prospectus. The document was distributed to investors this month in connection with a $1.5bn bond issued by Waha Aerospace."
New York Supreme Court Justice Richard Lowe III said three lawsuits, including two by United Arab Emirates-based bank Mashreqbank against Ahmed Hamad Al Gosaibi & Brothers and its general partners, should be litigated outside the United States and not in New York.
"The U.A.E. (United Arab Emirates) is the more appropriate forum for determination of the primary actions, and they will be decided in the case that Mashreqbank has already commenced there," the judge said. "Ahab can decide whether it prefers to bring its third-party action in the U.A.E. as well, or to seek redress in Saudia Arabia."
Ahmed Hamad Al Gosaibi & Brothers, or Ahab, sued Mr. Sanea in New York last year alleging he misappropriated about $10 billion. Mr. Sanea strongly denies those allegations.
Ahab filed its suit against Mr. Sanea after Mashreqbank sued Ahab in New York state court, claiming it is owed $150 million by Ahab.
"We are pleased with the court's ruling and, in particular, with its recognition that the Kingdom of Saudi Arabia is the better forum for the resolution of the parties' differences," said Robert Serio, a lawyer for Mr. Sanea.
A lawyer for Ahab didn't immediately respond to a request for comment late Thursday night. In a statement, Mashreqbank said its claims "remain indisputable and we will continue to aggressively pursue those claims in the U.A.E. courts."
Iran Air is seeking to modernize its aging fleet of foreign-built jetliners, which it operates amid political obstacles to the purchase of new planes and spare parts from European suppliers including Boeing Co. and Airbus SAS, Chairman Farhad Parvaresh said.
“Our company will be going into the Tehran Stock Exchange,” Parvaresh said in his first interview with foreign media since his appointment as head of the company last October. “We are creating the conditions for this. Whether that will be 100 percent, 70 percent, 60 percent, we are working on this.” He said it was too early to give a timeframe for the IPO."
“As sentiment toward emerging markets improves globally and default risks wane, Islamic debt will stand to benefit,” said Usman Ahmed, a senior fund manager in Dubai at Emirates NBD Asset Management, which manages $300 million of bonds at the unit of the United Arab Emirates’ biggest lender. “The sukuk market is benefitting from the increased demand, and improved earnings at some of the biggest issuers.”
Global bonds that comply with Shariah law gained 2.1 percent, double the return in June and the most since a 4.1 percent advance in March, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. JPMorgan Chase & Co.’s EMBI Global Diversified Index, which tracks debt from 46 emerging-market countries, climbed 3.9 percent."
Today, in this noisy corner of the city, little has changed.
Along the chaotic quayside there are hundreds of traditional, wooden dhows. Some sit low in the water, packed heavily with boxes and crates."
Thursday, 29 July 2010
The government will sell securities that comply with Islam’s ban on interest payments in the second half of the year and is pressing for legislative changes that would enable companies beyond state holdings and Islamic banks to sell sukuk, said Aibek Bekzhanov, head of Islamic instruments at the Regional Financial Center of Almaty, a government agency set up to develop the country’s capital markets.
“Our goal is to orient this market toward domestic demand, to help develop the market,” Bekzhanov said in a July 27 interview from Almaty. “There are also plans to raise funds abroad via Islamic finance as a way to develop international relations with Asia and the Middle East.”"
Mashreqbank PSC, the United Arab Emirates lender owned by the Al Ghurair family, reported a 54 percent decline in second-quarter profit after setting aside money to cover for bad loans.
Net income fell to 202.2 million dirhams ($55 million), according to Bloomberg calculations based on half-yearly data provided by the bank today. First-half profit was 453 million dirhams, while total operating income dropped 6 percent to 2.3 billion dirhams, according to an e-mailed statement today.
“We see signs of recovery and are optimistic of early economic turnaround,” Chief Executive Officer Abdul Aziz al- Ghurair said in the statement. Mashreqbank set aside 892 million dirhams for impaired loans and financial assets at the end of the second quarter, it said.
Qatar stocks rose for a third day, led by Industries Qatar and Commercial Bank of Qatar, as European stocks rallied on improving earnings and oil advanced for the first time this week.
Industries Qatar, the second-biggest petrochemicals maker in the Middle East, climbed to the highest in a month after Securities & Investment raised its share recommendation. Commercial Bank, which reported a 23 percent profit increase earlier this week, rose to the highest since May. The QE Index gained 0.2 percent to 7,029.45 at the close, bringing the monthly advance to 1.9 percent. The Bloomberg GCC 200 Index added 0.3 percent.
“The earnings announced so far are considered another positive reason for traders to start building up positions at current market prices,” said Mohamed Abu Ghoush, head of equity brokerage at Al-Ahli Bank in Doha.
Aldar Properties PJSC reported its third consecutive quarterly loss as the biggest real-estate developer in Abu Dhabi suffered from lower sales.
Second-quarter loss was 475.3 million dirhams ($129.5 million), according to Bloomberg calculations based on half- yearly data provided by the company today. The average estimate of seven analysts was for a loss of 210 million dirhams for the quarter, according to data compiled by Bloomberg. The company said first-half loss was 789.5 million dirhams after a profit of 1.14 billion dirhams a year earlier.
“The decrease was principally due to lower property sales recognized,” Aldar said in an e-mailed statement. “The second half of this financial year is expected to be different due to the revenue generated from the delivery of Aldar’s projects at Al Raha Beach and Al Gurm.”
DFM acquired two thirds of NASDAQ Dubai in May and the two exchanges began sharing a trading platform on July 11.
So far volumes for NASDAQ Dubai shares are lower than they were in the month before the tie-up, and several companies are exploring measures to reverse the trend."
A Cayman Islands judge has put a multibillion-dollar fraud claim against Maan al Sanea on hold until authorities in Saudi Arabia reach a decision on the main allegations against the financier.
The ruling is a blow to the al Gosaibi family, which has accused Mr al Sanea of running an immense Ponzi scheme.
Ahmad Hamad Al Gosaibi and Brothers lodged a fraud claim against Mr al Sanea and his Saad Group in the Cayman Islands last July. Divisions of the Saad Group are incorporated in Cayman. In its lawsuit, the family-owned Al Gosaibi conglomerate accused Mr al Sanea of committing one of the Gulf’s biggest frauds. A judge later froze as much as US$9.2 billion (Dh33.79bn) of Saad Group assets in the island country. Mr al Sanea denies the allegations.
Vacancy rates reached 8 percent in the quarter and will also probably increase over the coming years, the property broker said in a research report published today. An abundance of supply in neighboring Dubai will help push down rents, Jones Lang said.
Office rents in Dubai dropped as much as 17 percent in the second quarter as new space outstripped demand, CB Richard Ellis Group Inc. said in a separate report today."
In the last few years, those roles have practically reversed: In Dubai, much construction work has stopped while work in Abu Dhabi has gone into full swing. But Abu Dhabi has an advantage Dubai did not: a front row seat on a neighbor's experience and the invaluable hard-learned lessons that came with it.
Abu Dhabi leaders witnessed Dubai's somewhat laissez faire approach to construction, followed by its introduction of freehold real estate. And those leaders took notes."
Abu Dhabi announced plans in October to build the Middle East’s first plant that will only use naphtha to make plastics. Saudi Arabia may develop similar units as part of two refinery ventures, according to state-run Saudi Aramco, France’s Total SA and Sumitomo Chemical Co. of Japan, the partners in the project.
While naphtha, a product of refining oil, is used to make petrochemicals around the world, countries in the Middle East have traditionally preferred cheaper home-produced natural gas. Now, new power plants are competing for those gas supplies, stoking demand for alternatives. That’s being exacerbated as the United Arab Emirates and Saudi Arabia expand petrochemicals production to cut dependence on crude exports."
Wednesday, 28 July 2010
During the past three years the MSCI UAE index has now shed 23.5 per cent, the most in the region after Bahrain’s small, illiquid bourse.
The near-term outlook is hardly encouraging, either. The anaemic summer trading volumes will make it hard for markets to find traction, and Dubai’s financial problems are likely to continue to cast a cloud over the country for the foreseeable future."
Yet today, Air Arabia, which is listed on the Dubai stock market, is competing with a host of other private-sector airlines in Kuwait, such as Jazeera, Saudi Arabia’s Sama and NAS, Bahrain Air and Dubai’s state-owned Flydubai. There are also plans to relaunch RAK Airways in Ras al-Khaimah, another member of the United Arab Emirates.
The low-cost carriers have seen their market share grow to between 6 and 8 per cent in 2009, according to industry participants and analysts. Airlines from outside the region are getting in on the act too: Air India Express, for example, serves the busy Gulf-India routes that have proved so lucrative for Air Arabia."
The Dubai Financial Market General Index climbed 0.9 percent, the most since July 21, to 1,512.9. Emaar, the builder of the world’s tallest tower and the company with the highest weighting in the benchmark, also rose the most this week. Drake & Scull International PJSC, an electrical and plumbing company, advanced after winning four contracts. The Bloomberg GCC 200 Index rose 0.4 percent at 2:33 p.m. in Dubai.
“The rally today is driven by positive global sentiment,” said Saad Al-Chalabi, institutional trader at Al Ramz Securities in Abu Dhabi. Morgan Stanley’s note on Emaar “helped lift the stock,” he said."
The firm made a net profit of 196.3 million dirhams ($53.46 million) for the three months to June 30, it said in a statement.
That was down from 287 million dirhams a year earlier."
"The United States Attorney's Office in Atlanta moved to dismiss the indictment against Holdings, an Agility subsidiary," the firm said in a statement to the Dubai bourse on Wednesday.
"While the prosecutors' motives for seeking this dismissal at this time are unknown ... this request for dismissal comes after motions filed by Holdings to discover the government's evidence against it."
Marcellus Shale drilling drives economic growth - Editorial Columns | Centre Daily Times - State College, PA | Penn State, Nittany Lions, weather, news, jobs, homes, apartments, real estate
While still in its infancy, the environmentally responsible development of clean-burning natural gas from Pennsylvania’s portion of the Marcellus Shale formation continues to create tens of thousands of good-paying jobs and drive economic activity and growth during some of the most challenging economic conditions in decades.
The overwhelming benefits of the production from the Marcellus, which is considered by experts to have the potential to be the second largest natural gas field in the world (second only to one in Qatar), are benefiting all Pennsylvanians.
And while the first Marcellus well was developed in 2004, here’s a snapshot of how far we’ve come in just a few short years and how we intend to achieve even more.
Investors who believed Islamic bonds would somehow be better protected against adversity have had their confidence undermined by four defaults that have returned issuance to the 2005 level of $2.5 billion so far this year.
Yields on sukuk or Islamic bonds are rising – and therefore bond prices are falling – despite a decline in traditional debt interest rates. Bloomberg reported that the average yield on GCC sukuk is 6.99 per cent by comparison with 5.35 per cent for non-Islamic GCC bonds.
Some lenders question Dubai's shortfall guarantees - Business Intelligence Middle East - bi-me.com - News, analysis, reports
The issue arose at Dubai World's all-creditor meeting on July 22, creating another hurdle as the group seeks to push through restructuring proposals.
At stake are Dubai's shortfall guarantees to plug any gap left after asset sales to fund the conglomerate's plan to repay US$14.4 billion in bank debt."
Wall St. WTF: Here's the plan: we liquidate Dubai World in slow motion and hand out the money starting to my left, if the creditors agree they can sit between us...
Last week there were some seemingly minor developments in the Dubai World saga. These were the Nakheel restructuring plan and the presentation of the Dubai World restructuring plan to the general lending community outside the Lenders Committee which had blessed the proposal back in May. On the surface of it this presentation carries with it no new news, the proposal is more or less identical to what the big lenders agreed.
I’ve written about this before at length, but to summarize, the lenders will be asked to roll their loans out into tranches of five and eight years. There will be no haircut on principal but the interest rates will be cut to 1% on the 5 year tranche and between 1-3.5% on the eight year tranche. Apparently the 8 year tranche will have several choices for the lenders on repayment type and the degree to which there is a “shortfall guarantee.” Presumably the more risk the lender takes the higher the rate. It seems kind of a Hobson’s Choice to me because even 3.5% is substantially below a market price for that risk and the word is that there is some question as to whether the guarantees would be enforceable in UK courts.
So what is different about this announcement than the one that was made in May? Well, several things. One is that the lenders are not in a position to negotiate the terms, it is a take it or leave it deal. The big banks had an opportunity to challenge Dubai on the nature and structure of the deal back in May but they were more concerned about not taking too big an immediate loss. They successfully blocked Dubai’s opening gambit of a partial write down of principal but conceded on the structure of the deal and on concessionary interest rates. By doing this they basically enabled the government of Dubai to drain the DFSF, channel the vast majority of the funds to Nakheel, and through Nakheel to the Sukuk holders and the local contractors which had trade claims against Nakheel. The Nakheel creditors, who are also mostly local are getting a much better deal than the creditors of the parent company. Well that’s what happens when you put immediate loss avoidance ahead of your long term strategic interests but considering that this decision was made by western banks it should come as no surprise.
Saudi Arabia may be a more appropriate location for claims in a lawsuit filed in the Cayman Islands against Saudi billionaire Maan al-Sanea by members of the kingdom’s Algosaibi family, according to a court decision.
In the lawsuit, the Algosaibi group alleged Al-Sanea misappropriated $9.2 billion from the group’s units in part to fund his Saad Group of Companies. Al-Sanea has denied any wrongdoing, saying Algosaibi was aware of the borrowing. Smellie stayed the litigation until a committee appointed by the Saudi government rules on related petitions made there by the Algosaibi family. Smellie’s decision couldn’t be immediately confirmed in Cayman Islands electronic records or by a clerk contacted at the courthouse.
Units of the two Saudi family groups have borrowed at least $15.7 billion from more than 80 regional and international banks, including Paris-based BNP Paribas SA, New York-based Citigroup Inc. and Arab Bank Plc in Amman, Jordan, according to documents provided by lenders.
The average yield on sukuk sold by Gulf Cooperation Council issuers rose 38 basis points to 6.99 percent yesterday from this year’s low on April 15, according to the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index. The average yield on the HSBC/NASDAQ Dubai GCC Conventional US Bond Index, made up of notes that don’t comply with Muslim tenets from Qatar to Saudi Arabia, fell 24 basis points in the same period to 5.35 percent. The spread between the two has widened 62 basis points to 164.
International Investment Group KSCC, an Islamic financial company based in Safat, Kuwait, said on July 26 it was unable to pay $152.5 million to bondholders who demanded immediate repayment after it defaulted on a $200 million Islamic bond. Persian Gulf companies have $28 billion of debt maturing in 2012, Moody’s Investors Service said in a report on June 14. Dubai-based companies have $10.4 billion of obligations maturing that same year, according to Moody’s."
George Soros, the billionaire investor, is in final talks to buy Dubai Holding’s 4 per cent stake in the Bombay Stock Exchange, as foreign investor interest in India’s fast-growing financial markets rises, people close to the matter said.
Soros Fund Management is planning to pay about $40m for its stake, valuing Asia’s oldest bourse at about $1bn, said a person involved in the negotiations.
The deal is the latest in a series of strategic investments in India’s stock and derivatives exchanges, which are diversifying into new asset classes and embracing new technologies to attract so-called “high-frequency” traders.
Tuesday, 27 July 2010
An interim trading update indicates a rise in container volumes of up to 16 per cent at the 50 ports it operates around the world in the first half of 2010, compared with the same period last year. But the story varies at home and abroad.�
DP World, part of troubled government-owned conglomerate Dubai World, saw volumes fall eight per cent last year over 2008, but growth in Asia - especially China and Australia - is leading recovery in the first six months of this year."
Saad Trading Contracting and Financial Services Co.’s defenses that Abu Dhabi didn’t terminate the swap agreement on time or specify a bank account for payment were “hopeless,” Judge Michael Brindle ruled today in the High Court in London.
Saad defaulted when its credit rating was withdrawn in June 2009, Brindle said. The company, based in al-Khobar, Saudi Arabia, argued the default applied to other deals between the companies and not to the 2008 swap created for Saad to hedge against future currency fluctuations."
Net income rose 1 billion dirhams ($272 million) from 906.5 million dirhams a year earlier, the bank said in an e-mailed statement today. That exceeded the median estimate of five analysts for a profit of 920 million dirhams, according to Bloomberg data.
“These are a strong set of results in difficult markets reflecting the resilience and strength of the bank,” Chief Executive Officer Michael Tomalin said in the statement."
The Kuwait Stock Exchange Index gained 0.5 percent to 6,677.70, bringing the 5-day advance to 2.9 percent. The measure has lost 4.6 percent this year. Commercial Bank of Kuwait, the country’s second-biggest bank by market value, climbed the most in a week. Boubyan Bank, the Kuwaiti Islamic lender, also rose after posting a profit. The Bloomberg GCC 200 Index advanced 0.2 percent at 1:39 p.m. in Kuwait City.
“Company earnings are positive, boosting the market with liquidity,” said Jasem Al Zeraei, head of institutional sales at NBK capital in Kuwait. “There is more positive news from the government in the form of fiscal spending, spending on mega projects.”
Islamic Bank of Britain, the country's largest Shariah bank, was today bailed out by its largest shareholder Qatar.
Qatar International Investment Bank is injecting £20 million of fresh capital through an issue of two billion new shares at just 1p each.
IBB said that without the injection it would not be able “to continue operating as going concern”.
First half figures show Dubai airports handled 16.3 per cent more passengers than in the same period of last year, a total of 22.5 million people, and 26 per cent more cargo at 1.1 million tonnes.
These figures confirm the resurgence in air travel that has led the economic recovery in Dubai with tourism rather than business the biggest source of additional passengers.
More than 145 new flights were added from Dubai in the first half, with flydubai leading with 48 new weekly flights and Emirates adding 36, including Tokyo and Jakarta.
The bookshelves of Dr Habib Al Mulla’s Sheikh Zayed Road office are littered with photos. One shows Al Mulla with Sheikh Mohammed Bin Rashid Al Maktoum; another with former US president George W Bush; then snaps alongside Bill Clinton, Colin Powell and Al Gore. But the lawyer shows me the one of which he is clearly most proud. It’s his two-year-old granddaughter, up close and grinning.
“I want to enjoy my life, and my family,” he says, smiling. “I remember speaking once to a colleague, and he was retiring at the age of 55. He said ‘Listen, I’ve worked enough, I’ve made some money, and I have two choices – either spend it on enjoyment, or on my doctors’. I prefer to spend it on myself.”
No-one could possibly accuse Al Mulla of failing to earn his family time. One of the Gulf’s most prominent lawyers, the Harvard and Cambridge graduate has spent 26 years in private practice and government.
Emirates NBD, the UAE’s largest bank, plans to sell about Dh1 billion (US$272.2 million) of car loans to Japan.
The complex transaction effectively puts money in Emirates NBD coffers at a lower rate of interest than it could get in the market, Rick Pudner, the bank’s chief executive, said yesterday.
Finding financing for banks has become harder and more expensive during the financial crisis as capital markets have tightened, spurring large lenders to search for innovative new ways to raise money.
The plan would derail a competing plan by Almatis' debtor Oaktree aimed at taking control of Almatis, which has debts of $1 billion, from DIC.
A consortium of banks and debt investors would lend Almatis $600 million, while DIC would inject $100 million in cash under the plan, Almatis said on Monday."
Emirates NBD PJSC reported a worse- than-expected 53 percent decline in second-quarter profit as the United Arab Emirates’ biggest bank by assets set aside money to cover bad loans including exposure to state-owned Dubai World.
Net income dropped to 398.2 million dirhams ($108 million) from 852 million dirhams a year earlier, the Dubai government- controlled bank said in a statement to the bourse today. That fell short of the median estimate of four analysts for a profit of 614 million dirhams, according to data compiled by Bloomberg.
Emirates NBD raised general provisions for future loan impairments by 668 million dirhams in the second quarter, mainly to cover losses related to Dubai World, Chief Executive Officer Rick Pudner said in a conference call. Dubai World, which is delaying repayment of $14.4 billion of bank loans, is likely to complete the accord to restructure the debt by “about September, so we will know the specifics” of provisions then, he said.
Monday, 26 July 2010
|Creating work for young people in the region is one of the goals of SME support- Jun-23|
When Mansoor al-Tamimi left his job at a government-affiliated company three years ago to set up a business offering marine services to Abu Dhabi’s oil and gas industry, the response from local banks was underwhelming.
“Unfortunately the banking system, when we started, was not very much into industrial projects,” he says. “We talked to banks, but they were more interested in financing real estate.”
Mr Tamimi, chief executive of Emirates International Energy Services, had run into the problem facing start-ups everywhere – accessing capital and support from banks skewed towards larger, established companies.
Paul Doany recalls that before his boss, the billionaire and former Lebanese prime minister Rafiq Hariri, was assassinated in 2005, he had recommended his companies invest in Turkey, which he had spotted as a future success story.
That year, Oger Telecom, a Hariri company, paid $6.6bn for a majority stake in Turk Telekom. Two years later, BankMed, another company in which the Hariri family was the big shareholder, teamed with Jordan’s Arab Bank to acquire a 91 per cent stake in Turkey’s MNG Bank. “As a market for Middle East investors, Turkey started to be taken seriously in 2005,” says Mr Doany, chief executive of Turk Telecom. And for good reason. After the spectacular crash of 2001, economic growth rates were high, runaway inflation had been tamed and, more important for Arab investors sensitive to currency exchange risks, the lira had stabilised.
As Turkey has expanded its influence in the Middle East , with an energetic foreign policy that has rattled western allies and surprised traditional heavyweights in the region, policymakers and analysts have been probing with growing curiosity the perceived shift to the east.
On Sunday the country’s telecoms regulator warned that the smartphones currently operate “beyond the jurisdiction of national legislation”. Today it rowed back, claiming to have no plans to introduce a ban.
In an interview with Al Arabiyah, a Dubai-based news channel, an official at the Telecommunications Regulatory Authority (TRA) said that the UAE is “studying all options to regulate the services…but we don’t have plans to stop them.”
Bankers have until the end of August to respond to undisclosed terms of Nakheel's multi-billion dollar restructuring plan, including the rates of interest and repayment schedules for syndicated and bilateral loans.
The source said under the plan, repayment of Nakheel's $1.85 billion Islamic loan, due 2012, would take seven years while all other bank lending debt would be paid after five years."
Net income was 1.5 million dinars ($5 million), according to Bloomberg calculations based on the six-month profit of 2 million dinars provided by the bank in an e-mailed statement today. Gulf Bank reported a loss of 9.1 million dinars in the second quarter of last year, according to Bloomberg data.
“The bank’s provisional requirements up to end of June have been provided for,” Chairman Ali Al-Rashaid Al-Bader said in the statement. “We hope the forthcoming periods will witness an improvement in the net profit, which is, in part, dependent on the economic situation.”"
Emirates NBD PJSC, the United Arab Emirates’ biggest bank by assets, expects state-owned Dubai World to reach an agreement on a debt restructuring plan by September, Chief Executive Officer Rick Pudner said in a conference call today.
Emirates NBD is one of the biggest lenders to Dubai World, which is delaying repayment of $14.4 billion debt as part of a restructuring plan.
The Dubai Financial Market General Index gained 0.2 percent to 1,509.66. Arabtec, the United Arab Emirates’ biggest builder, advanced for the first time this week and Aramex, the Middle East’s biggest courier company, climbed to the highest level in almost four months. The Bloomberg GCC 200 Index, of 200 shares in the Gulf, increased 0.3 percent at 2:53 p.m. in Dubai. Abu Dhabi’s benchmark rose less than 0.1 percent.
“GCC markets are struggling to generate strong catalysts to attract investors,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. Markets rose due to “random price action rather than something specific,” he said."
International Investment Group KSCC said it is unable to pay $152.5 million to sukukholders who demanded immediate repayment after the Kuwaiti finance company defaulted on its $200 million Islamic bond.
International Investment continues to operate its business, the company said in a statement to the Dubai Financial Market today. IIG received approval of its financial statements from the Central Bank of Kuwait, “thereby enabling KPMG to produce a final report which will include an assessment of IIG’s present financial position,” the company said in the statement. IIG can then assess its restructuring options, it added.
In April, IIG became the second Kuwait-based firm in a year to miss a sukuk payment. Investment Dar Co., owner of half of Aston Martin Lagonda Ltd., missed a payment on a $100 million Islamic bond in May 2009, triggering concern about restructuring laws for such securities.
Singapore retailer RSH Limited, controlled by a Dubai-based firm, said on Monday that a company backed by Malaysian businessman Syed Azmin had made a buy-out offer of around S$300 million ($218 million).
Peak Retail Investments is offering S$0.85 per share for all RSH shares, according to a statement.
Peak Retail is incorporated in Singapore and is controlled by businessman Syed Azmin, the brother of Syed Mokhtar, who controls Malaysian construction-to-power group MMC Corp.
In February this year, Dubai's Emaar Properties, which previously had a 30 percent stake in RSH through a joint venture firm with India's MGF Group, had to increase its effective stake to 61.3 percent after it took control of the debt owed by the joint venture firm. The move came after the joint venture firm had defaulted on a loan.
RSH last traded at S$0.60 on March 23.
Emirates NBD, the United Arab Emirates’ biggest bank by assets, is one of the seven biggest lenders to Dubai World and reached a preliminary deal with the holding company to restructure $14.4 billion of bank debt on May 20.
About two-thirds of the loans to Saudi Arabia’s Saad and Algosaibi business groups have been provided for, Emirates NBD said in its second-quarter results presentation today."
The sale is part of the company’s plans to offload assetsand raise cash to pay debts and finish projects.
Khalid bin Kalban said the terms of the deal were still being “exchanged” with a buyer from the UAE, with an official announcement expected this week.
The news came as the value of its investments dropped along with the fortunes of the property and financial sectors in which it invests.
Its net profit dropped to Dh5.9 million (US$1.6m) from Dh59.4m in the same quarter the year earlier, the company said in a statement yesterday on the Abu Dhabi Securities Exchange (ADX) website."
Syria says to allow investment banks, Syria Financial Services, Banking & Investment - Maktoob Business
Syria said it would allow investments banks to do business in the country, as the government extends its liberalisaton of the financial sector.
The official news agency said the government had set 20 billion Syrian pounds ($429 million) as the minimum capital at which investment banks could open and would allow the transfer of profits from operations abroad for foreign shareholders and Syrian expatriates.
Egyptian investment bank EFG-Hermes said earlier this year it planned to set up an operation in Syria, which needs tens of billions of dollars to repair its crumbling infrastructure.
Two years ago, the developer was building everything from 20-story glass towers to luxury villas. It's now shelving projects, the latest a $US12 million contract with a client who has $US2 million and the banks won't give him any more money, said Ziad Ali, whose father founded the company 20 years ago.
'When investors don't get funding, we don't get their business,' Ali, 24, said by telephone from his office."
DLF will buy the 50% held by two Limitless Group entities for a price less than the net worth of the shares, as per the deal. The discount would amount to Rs 10 crore for the entire block of shares held by Limitless.
One person with knowledge of the development said Limitless is likely to be paid around $42.8 million, compared with its investment of $50.5 million. Limitless will get less in dollar terms, due to change in forex rates during the past three years. In rupee terms, however, it would be paid almost the same money it had invested."
The average yield on securities that comply with religious principles sold by Gulf Cooperation Council borrowers dropped four basis points to 7.17 percent on July 23, a day after Dubai World announced the estimated timeframe for renegotiating its debt, according to the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index. The rate reached 8.76 percent on Dec. 11 after Dubai investment companies announced plans to reschedule its obligations in November.
“Most sukuk investors have exposure to Dubai World, so they’re obviously reacting in a positive way,” Nida Raza, senior vice president of capital markets at Bahrain-based Unicorn, said in a telephone interview on July 22 in Manama. “People who were staying away from Dubai government bonds -- both conventional and Islamic -- are going to start buying more and more of it.”"
The United Arab Emirates raised the possibility on Sunday of restricting or monitoring BlackBerry mobile phones, when the country’s regulator said the handsets were not covered by its laws.
Research in Motion’s BlackBerry services, such as e-mail and instant messaging, use internal encrypted networks that are difficult for governments to monitor. This has caused particular concern in nations such as the security-conscious UAE.
The introduction of the BlackBerry predates the passage of the UAE’s safety, emergency and national security legislation in 2007.
Sunday, 25 July 2010
Is a muscular indepedent judiciary coming to a self-legislating financial free zone near you? Inshallah.
In my last post I suggested that Bisher Barazi get out of town because the DIFCI counter-claim reads more like a vendetta than a defence against his lawsuit to recover his severance pay. It looks like he agrees and according to The National, a respected paper in Abu Dhabi, he has sent his family home to Syria and has himself asked the judge to lift the travel ban on him so that he can defend himself from the comfort and relative safety of Damascus. The judge said no dice. This is a little interesting to me because the judge in this case seems to be adjudicating remotely as well as he conducted the hearing from London by video link. This is of particular interest because the DIFC is qualified to hear commercial disputes only. It can only fine and censure its members, it has no criminal authority and therefore cannot imprison Bisher. It can however refer criminal cases to the Dubai courts for adjudication and enforcement. We may be seeing a preview of coming attractions in the DIFC court’s refusal to allow him to leave, which is of course all the more reason for him to do so.
Additionally he has been asked to detail all his assets and sources of income in the UAE. Still more interesting he is required to demonstrate that he actually owned the villa he just sold. This seems a little odd because presumably the buyer would have also checked that he was buying the villa from the actual owner before handing over the cash no? I think I know what the judge is after in this case. When I was in Dubai I heard a lot of rumors about expat civil servants being paid under the table by the various organizations that employed them with certain high value gifts like villas, cars, and everyone’s favourite: off plan real estate. I imagine that in Dubai proper this is not a big deal but given how much emphasis is being placed on “unlawful compensation” on the former management of the DIFC I think this policy, if indeed it took place, is going to get a lot of scrutiny. If Bisher did receive extra undocumented compensation from the DIFC he is almost certainly not the only person to have done so. It will be a cliff-hanger for everyone else living in gift homes as well. My guess is that more than a few people will be watching the Barazi-DIFC litigation with their real estate agent on hold and their travel agent on speed dial.
Most importantly of all, they will get to watch it. The DIFC Court ruled against a request from both parties to close the hearing to the public. Having had my hopes for the DIFC dashed repeatedly I am wary of reading too much into this but I think it might be significant. Firstly, as a point of journalistic honor I have to concede that as with the ESCA ruling on Aabar, I have perhaps taken too dim a view of the DIFC courts and described them as a tool of Sheikh Mohammed in his quest to punish Dr. O and Bisher. But now the DIFC courts have denied two requests from the government: 1.) that the trial be conducted in secret, and 2.) that they cripple Bisher’s capacity to fund his defence by demanding a 500,000 AED deposit. It may not be a first but having a court in the GCC deny a request of an agent of The Ruler is pretty unusual. Is it possible that we are seeing the creation of a independent judiciary in the DIFC? This will indeed be an interesting court case to watch.
Inshallah the Abdullah Brothers will get their day in court as well if the DFSA ever musters the thrasos to take them on.
The index fell 1.4 per cent to 1,507 points in its largest single-day decline since June 29. Emaar and DFM shares fell 3.6 per cent and 3.3 per cent respectively.
Emaar Properties, the Arab world's largest developer, missed analysts' forecasts with a second-quarter net profit of Dh802 million�which it reported on Thursday after the market close."
The Middle East was considered one of the hottest markets globally and it was attracting a vast amount of foreign investments in the past decade. However, due to the tightening of credit and the deterioration in the global economy, Middle East’s foreign direct investments (FDI) were pulled back by nearly a quarter.
A recent report by the United Nations Conference on Trade and Development (UNCTAD) stated that inflows of FDI to the region dropped by 24 percent reaching USD68 billion in 2009 after six years of growth.
On a country to country basis some countries had different fate from the others; for example, in 2009 Qatar had an increase of FDI inflows of 112 percent and Lebanon had an increase of 11 percent, while the UAE was hit the most and the FDI inflows decreased by 71 percent. Saudi Arabia remained the largest receiver of foreign investments, with inflows reaching USD36 billion, 52 percent of the middle east’s total FDI inflows.
Although the FDI inflows were hit hard in 2009, the FDI outflows were hit harder- they decreased by 36 percent, reaching USD23 billion. This decrease was mainly attributed to the UAE as their FDI outflows fell from USD16 billion to USD3 billion. Saudi Arabia FDI outflows increased the most, from USD1.5 billion to USD 6.5 billion. Kuwait was the largest investor, with USD9 billion in outflows.
The bond offering “will definitely happen, as I see it,” Raghavan Seetharaman said in an interview in the Qatari capital Doha today. “I expressed my intention to” sell the bonds in dollars and riyals to the central bank, which must approve the transaction, he said.
Qatar, the world’s biggest exporter of liquefied natural gas, is trying to develop a domestic debt market. The government sold 12 billion riyals ($3.3 billion) of bonds and Islamic debt this year. The Qatar Exchange, the country’s equity market, may start bond trading before September, the exchange’s Chief Executive Officer Andre Went said in February.
Turkey could emerge as a new safety net for Iranian business as the government insists that it will abide by United Nations sanctions, but not the more sweeping restrictions imposed on Tehran by the US and the European Union.
Mehmet Simsek, the finance minister, told the Financial Times that Turkey would not shy away from promoting closer trade links with Iran.
“We will fully implement UN resolutions, but when it comes to individual countries’ demands for extra sanctions we do not have to,” said Mr Simsek.
Egypt’s benchmark rose to the highest in almost one month, leading Middle East markets higher, as concern about the global economic recovery eased and earnings in the U.S. boosted investor confidence. Dubai shares declined.
Orascom Telecom Holding SAE of Egypt, the Middle East’s biggest mobile telephone company by subscribers, advanced to the highest level in more than a week. Delek Real Estate Ltd., Israeli billionaire Isaac Tshuva’s real estate company, jumped the most in three weeks. Egypt’s EGX30 Index gained 1.6 percent to 6,127.79 as of 11:55 a.m. in Cairo, the highest intraday level since June 29. Israel’s TA-25 Index rose 0.7 percent to 1,126.59, the highest in more than a month.
“We’re continuing to catch up with the positive movements in the U.S. and European markets,” said Cairo-based Amr Elfeky, head of technical analysis at Cairo Capital Securities.
Oaktree plans to offer junior lenders of Frankfurt-based Almatis some immediate recovery of their debt, compared with its existing proposal where recovery can only be achieved if Almatis is sold for more than $325 million, said the person, who declined to be identified because the information is private.
Oaktree, the largest senior lender to Almatis, plans to file the revised plan to the U.S. bankruptcy court next week, the person said."
Bahrain plans to privatise national carrier Gulf Air as soon as possible encouraged by positive results in its restructuring, a senior government official said in remarks published on Sunday.
The loss-making carrier could return to profit within a year, paving the way for privatisation, the head of Bahrain's Economic Development Board, Sheikh Mohammed bin Essa al-Khalifa, told newspaper Akhbar al-Khaleej.
Gulf Air was established as a regional airline but has undergone years of restructuring after shareholders Oman, Abu Dhabi and Qatar gave up their stakes, partly to establish national carriers.
Emaar Properties has strong financial fundamentals and will undertake all strategic projects across its key markets, a company spokesperson
told Emirates 24|7.
The Dubai developer said it has “responded on time and with total commitment to the proposals of the Bali Tourism Development Corporation (BTDC) for the Lombok project".
“Emaar also provided recommendations on how it intends to proceed with the development of the project,” the spokesperson added without
confirming the status of the project.
Ras al Khaimah remains committed to a huge coal project in an isolated corner of Indonesia, with plans to “add value” to the development without having to invest more capital, top officials say.
The emirate is still studying how the project would directly tie in to its economy, said Sheikh Saud bin Saqr, Crown Prince and Deputy Ruler of Ras al Khaimah. But under the current plans, RAK entities may not have to put any substantial equity into the project.
“They have a fantastic coal mine and I think we could add value to it,” Sheikh Saud said last Monday. “It’s huge for us.”
Ras al Khaimah is looking inwards for opportunities to attract foreign investment as it pulls back from overseas projects.
The northern emirate, which has some of the UAE’s most striking natural scenery, is now counting heavily on globe-trotting tourists to raise its profile on the world stage. Last week it unveiled a joint venture with an Indian group to develop a huge theme park complex called WOW RAK.
“We wanted to bring something extraordinary to Ras al Khaimah,” said Balwant Singh, the managing director of the developer Polo RAK Amusements.
Vodafone Qatar said it may take further legal steps after the country’s telecommunications regulator ruled on its dispute with Qatar Telecom QSC over Virgin Mobile’s entry into the market.
Vodafone Qatar is reviewing the decision “to determine if they may take further legal action with courts to rectify the impact” of the matter, the company said today in an e-mailed statement.
The regulator, ictQATAR, issued a decision that was sent to the parties involved though it wasn’t posted on ictQATAR’s website. A spokesman for the agency didn’t immediately respond to a phone call or e-mail request for comment.
The Tehran Stock Exchange, home of the world’s second-best performing equity index, today begins offering derivatives based on Iranian banks to diversify its market and attract foreign investors.
The exchange is introducing six futures contracts on two banks, Managing Director Hassan Ghalibaf-Asl said July 23 in a telephone interview. The contracts, based on Parsian Bank and Karafarin Bank, will expire in two, four and six months. The exchange said it hopes to increase the number of companies covered by futures contracts to at least 10 by March.
“This new product will attract the foreign investors to Iran’s capital market, which isn’t very well known to them,” Ali Karamad, owner of Tehran-based asset management company Karamad Group, said by telephone July 23. “It gives them security, knowing that Iran’s market is introducing instruments similar to those in international markets.”
Saturday, 24 July 2010
Dubai Financial Market Company (PJSC) announced today its consolidated financial results for the first half of the year ending June 30th 2010, recording a net profit of AED 79.5 Million, with 57% decline compared to AED 186.7 Million in the corresponding period of 2009. Net profit for the second quarter of 2010 stood at AED 25.9 Million. The Company recorded AED 69.7 Million of revenues in the second quarter of 2010, which comprised of AED 51.5 Million of operating income and AED 18.2 Million representing the return on investments. Meanwhile, operating expenses amounted to AED 24.8 Million.
It is noteworthy that DFM Company's revenue and profit was affected by a 32% decline in trading value during the second quarter of the year to AED 19 Billion compared to AED 28 Billion in the first quarter.
Commenting on the results, Abduljalil Yousuf Darwish, Chairman of DFM Company said: "Over the recent months, DFM Company has embarked upon executing a series of development and investment plans which directly benefit our investors, in addition to the announcement of fully acquiring NASDAQ Dubai, all of which will further support the emirate of Dubai's drive to become the leading financial center in the region. In this regard, the Company successfully finalized the purchase of two thirds of NASDAQ Dubai. Additionally, the company effectively implemented the many stages of the consolidation process between the two exchanges. Undeniably, the management's restless and sincere effort over the last few months is an indication of a clear vision, full understanding of the challenges, and above all, it is based on an undisputed commitment to our investors as our paramount priority".
Saudi Arabian’s benchmark stock index rose the most in almost two weeks, driven by petrochemical companies and banks following an advance in U.S. and European stocks and the price of oil, the kingdom’s main revenue earner.
Saudi Basic Industries Corp., the world’s largest petrochemical maker and Al Rajhi Bank, the biggest publicly traded lender in Saudi Arabia, lifted the Tadawul All Share Index the most since July 11. The benchmark rose 1 percent to 6,149.37 as of 1:03 p.m. in Riyadh, the highest intraday level since July 20.
“A general feeling-good factor is pervading,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. “It is based on overall thin volumes as oil is above $78, global markets performed well over the past two days.” The volume of shares traded on Tadawul was 57.2 million as of 1:09 p.m., compared with this month’s daily average of 107 million.
It is a quiet night, lit by a half- moon and millions of stars above. Nico is flying the A-332, which left Nice some 6 hours ago (having been in the air for some 18 hours on the last 24 hours, one of the world’s highest utilization rates), and he is now preparing his “heavy” for its final approach to DXB (Dubai airport, third largest airport in the world after London Heathrow and Frankfurt) on runway 30. Check list is completed, runway smoothly hurries closer and larger. Touch down.
In one hour, Nico will be back to his flat, supplied at no cost by his employer, carried there by a private taxi. One hour later, the aircraft he flew will leave for another of the 100 cities that Emirates serves in more than 60 countries.
In a few days, he will get his pay, free of any income tax.
The Indonesian government has terminated all commitments with Emaar Properties on a mega-tourism project in Lombok, West Nusa Tenggara after the Dubai-based developer failed to meet its share of the bargain in developing the project, according to a media report.
According to Jakarta Post, the Indonesian government will reissue a tender for the mega resort project to foreign investors two of whom are from Abu Dhabi and Ras Al Khaimah.
"Four investors, from Abu Dhabi, Qatar, India and Ras Al Khaimah are interested in the project," Chairman of the Indonesian Investment Coordinating Board (BKPM) Gita Wirjawan told the newspaper.
You may remember the Middle East as that part of the world that overspent on opulent development.
It was easy to do in the mid 2000s, as oil was ticking up to $147 a barrel...
You've heard the stories of the man-made palm-shaped islands full of luxury villas and indoor ski resorts. Or maybe you've seen the Youtube videos of young sheiks destroying Lamborghinis for fun.
Woman with a mission: Fatma Al-Bader wants Gulf Arab entrepreneurs to realise their dreams - Business Intelligence Middle East - bi-me.com - News, analysis, reports
Fatma Al-Bader is a woman with a mission: to help aspiring entrepreneurs in the Gulf region realise their dreams.
When asked about the state of young entrepreneurs in the Gulf, the Kuwaiti businesswoman beams with pride.
“The Gulf region thrives with young entrepreneurs. There are a lot of them (in Kuwait, the UAE, Oman, Al Qatar, Saudi Arabia) who have come up ideas that not even the West have, but who haven’t had the chance to expose themselves. I hope to be a part of that,” she says.
Friday, 23 July 2010
The ArabianMoney mission to Vancouver to address the Agora Financial Investment Symposium proved not to be wasted time and effort after all with the famous US contrarians showing a big interest in investing in the region in general, and Dubai and the UAE in particular.
This is a tough audience to crack. They understand basic investment principles very thoroughly and have the minds of hedge fund managers. But then many of these individuals dressed in super casual gear are the original wolves in sheep’s’s clothes and are often personally worth a hedge fund-sized personal endowment.
Tax free country
There was therefore a ripple of astonishment in the audience as ArabianMoney newsletter publisher and editor Peter Cooper told them of a land where there is no Inland Revenue Service and no income or capital gains tax.
When should dirty linen be aired in public?
More often than litigators in Dubai might think.
At a hearing at Dubai International Financial Centre Court on Thursday, judge Sir Anthony Colman struck down requests by both the claimant and the defendant to hold hearings in private.
While holidaymakers at the Hotel Atlantis queued up yesterday to experience the Leap of Faith, a heart-stopping plunge from eight storeys high through a tank of sharks, bankers were inside the conference centre being asked to do something similar.
More than 200 of them turned up in pinstriped suits and traditional dress – fortunately none was wearing Speedos – to the hotel that opened just as the Great Recession was taking hold. Built by Nakheel, a Dubai World company, it was opened to a grand fanfare of fireworks and singing from Kylie Minogue in the autumn of 2008. Yesterday was a rather more sombre affair.
There was certainly no singing. In fact, most of the phalanx of PR advisers ensured that hardly anybody bleated. There was one alarm when a wire reporter almost sneaked past the red-roped enclosure by pretending she was planning her wedding. Only the keen eyes of a Bloomberg rival prevented this breach of protocol.
A judge yesterday ordered Bisher Barazi, the former Dubai International Financial Centre (DIFC) executive accused of fraudulently awarding US$4.8 million (Dh17.63m) of bonuses to himself and other officials, to reveal information about his sources of income and the recent sale of his home in Dubai.
Lawyers for DIFC Investments, the DIFC financial arm Mr Barazi headed until late last year, told the court they suspected he may be selling assets and preparing to leave the country.
Although he is subject to a travel ban, which prevents him from leaving the UAE, Mr Barazi has sent his immediate family home to Syria, sold his villa in the Lakes and asked to have travel restrictions removed, a lawyer for DIFC Investments told a DIFC Courts judge yesterday, adding that she believed the conduct to be “evasive”.
Step inside the office of Hamad Buamim and you gain a sense of not only its occupant but also the city the director general of Dubai Chamber of Commerce and Industry represents.
Perched on a cabinet in one side of the room is a small glass ornament replicating the Hong Kong skyline, next to it a model ship encased in a glass bottle from Hamburg. In another corner, stands an antique-looking pot from the southern US below a picture of the Monaco Grand Prix. These far-flung gifts give an indication of how much Mr Buamim travels in his job and how linked Dubai has become to the global economy.
Glance out through the large window at the back of his office and abras can be seen criss-crossingDubai Creek, a reminder of the maritime and trading roots that have sustained the emirate’s economy for centuries.
In this post I put forth a theory as to why Dr. Omar and Bisher Barazi are in so much trouble. Check here for the previous article.
Sometime in late 2006 or early 2007 I sat in a conference room in the DIFC, the one with the imperial view of the massive construction site which composed the vast majority of the Gate District at the time. I was at a meeting with the representatives of the other investment banks and the then CFO of the DIFC Bisher Barazi. Bisher had a voice both nasal and high pitched, kind of like beaker on the Muppets but with a severe head cold. When he became excited he seemed to be out of breath and on the verge of sneezing at the same time. At this particular meeting he was certainly excited.
We were discussing the proposed IPO of Dubai Ports World. It was being proposed that DPW execute a dual listing on the DIFX in Dubai and the LSE in London and we were hoping to convince them to do a DIFX only listing. This was going to be the biggest thing to happen in the DIFC and would prove to Sheikh Mohammed that the guys who were running the Center had not merely snookered a bunch of foreigners into renting expensive real estate but had actually created a functioning financial center. Nothing makes people nervous like scrutiny and, as we now know, the guys who ran the DIFC were not used to scrutiny. So there we were in our meeting with a nervous, and therefore excited, Bisher Barazi.
Bisher had good reason to be nervous. The international banking community had been drinking the DIFC cool-aid for over a year but so far we had little to show for it. My firm in particular, Deutsche Bank, was massively committed. We had moved aggressively into the center and has helped build much of the legal and technical infrastructure that enabled the DIFX to launch on time in September 2006. We intended to use our first mover advantage to establish a dominant position in the center. If you wanted to trade, clear or settle on the DIFX odds were that somewhere along the line you were going to have to pay us. We stood to benefit massively if the DIFC worked out and the DIFX became a major exchange. That said, at the time there was precious little business going on and we in the region were starting to have a hard time explaining to our Lords and Masters in London why we were devoting so much time and effort to the project.
I had seen this before when I worked on an exchange start up in the US. The exchange had an 80% cost advantage over its rivals and still took 18 months to gain market traction against entrenched rivals so I wasn’t too worried. The difference however was that we owned equity in that exchange and made a substantial windfall on its IPO and subsequent trade sale. The DIFC had steadfastly refused to grant us equity in the DIFX which would have helped us justify the efforts we were putting forth. This being the Arab world, with its’ penchant for retaining control, we were continually told no dice. I had confidence that it would work out eventually but it was getting hard for me to keep co-opting the folks back in London and the other DB support centers to continue to pour resources into the project.
So as nervous as Bisher was, it was pretty frustrating to have him pace back and forth and harangue us in his high pitched squeaky voice about all the work that was going to have to get done in order for the DPW IPO to come to the DIFX and for it to come off without a hitch. We need a retail offering, we need DMA access to Europe, we need... we need... as he got more excited he spent more and more time looking at me and his tone switched from “we need to..” to “you need to..” “You need to connect us to Saudi, you need to provide connections to the exchange for UAE brokers, you need to...” I had already been thinking of all the things I was going to have to do to muster the resources within DB to do all these things. I would have to call in favors, I would have to fly to Amsterdam to rally the troops in GTB, I’d have to go through multiple New Product Approval procedures and I would have to go all over the firm making presentations about the bright future of DB in the MENA region. I had practically emptied my account and would now have to blow my own personal credit bubble at the DB favour bank.
Then all at once it hit me that it was entirely possible that all this would be for nothing and I would be holding the bag. So I interrupted the lecture, pointed accusingly at Bisher and said, “Listen here, I don’t work for the DIFC. I’d like nothing more than to build out this infrastructure but you have denied us the opportunity to take equity in the DIFX or any other upside in the success of the DIFC. Nonetheless you continue to demand millions of dollars in infrastructure investment and millions more in free consulting. You have to understand that I work for the shareholders of Deutsche Bank not the DIFC stakeholders and it’s going to be the DB shareholders who decide whether this gets done, not you.” (I really did say that, I was a great believer in the cult of the shareholders)
I’ll admit, I felt pretty clever. I thought that this might open the door a crack and make them cough up some equity in the DIFX so we could really see some upside when the rest of the world joined us in drinking the DIFC cool-ade. Not for the last time in the region did it turn out that I thought myself a good deal cleverer than I was, for Bisher Barazi had a plan.
Unbeknownst to me, DIFCI and my management at Deutsche Bank had been in negotiations for DIFCI to become a massive shareholder of Deutsche Bank. By June of 2007 they had acquired 2.2% of the company and became our fifth largest shareholder. And let me tell you, as far as the DIFX was concerned, Bisher’s plan worked like a charm. No more wisecracking from Ken Monahan about how the DB shareholders would decide the fate of the DIFC, the DIFC was the shareholder. It was worse than that. I had to give Bisher my cell phone number. And whenever it rang no matter the time zone or circumstances in which I found myself I would have to answer it. For the next six months at random I would get phone calls from Bisher demanding status updates, did I do this, did I do that, was it really possible that we would deliver on time and in full? Did I understand how important this was? Where was I? What was I doing? Why was I doing whatever I was doing instead of working on this? Mercifully he did not call all that often but when he did, it was not awesome.
And wherever I was at whatever time and however sober I had to reassure Bisher in as soothing a voice as I could muster that indeed at this very hour an army of people in London, Amsterdam, Dubai, Hong Kong and Bangalore were working night and day to ensure that we delivered on time and in full. And we did. We executed, with a single listing on the DIFX, the largest IPO in the history of the GCC with a simultaneous retail offer in the UAE and an international book build. We created a link to Euroclear so that international investors could buy the shares in their existing accounts and we connected clients in dozens of countries to the DIFX all over DB infrastructure. Yep, as far as the DP World IPO went, the DB investment was a stroke of genius.
Yep, a stroke of genius except for one small detail. DIFCI completed its’ purchase of DB shares in June of 2007, the all time high for the stock. At the time of the announcement the stake was worth $1.8 billion. Then fate took a hand and the financial crisis got underway decimating the values of financial institutions the world over, even companies like DB which took no government money. Today DIFCI’s $1.8 billion investment is worth $720 million and $1.1 billion has been sacrificed to the trading gods. So while from the tactical perspective it was a stroke of genius, from a strategic investment perspective it was a complete fiasco. Add to this the $2 billion loss that Bourse Dubai took on its NASDAQ and LSE shares, a transaction on which the DIFC advised, and it doesn’t look like the guys doing the investing in financial services firms did Dubai any favors. I’ll bet they wish they just let us invest in the DIFX like we asked.
This brings us back to the present, there’s nothing like losing a cool 3 billion of Sheikh Mohammed’s money, or rather money Sheikh Mohammed has borrowed, to put you in the crosshairs of the UAE and the DIFC legal systems. Perhaps Sheikh Mohammed cannot imagine that so much money could disappear without some kind of malfeasance. After all it did take outright theft in order for $165 million to vanish from Damas, surely $3 billion can’t vanish without some fancy footwork by some light fingered subordinates. From my perspective $3 billion did get lost but it got lost the old fashioned way, bad decision making, not fraud.
But there’s a difference between robbing a bunch of international investors and legitimately losing a bunch of Sheikh Mohammed’s money. If you’re an international shareholder you’re forced to rely on the law which is why you get nothing but laughter and forgetting from the Brothers Abdullah. Sheikh Mohammed IS the law so no matter how legitimate your poor decision making if you lose his money you are in serious trouble. No laughter. No forgetting. He doesn't have to rely on the DFSA, he can just throw you in jail until you pay him what he thinks you owe. Don't like it? Too bad. You mess with the bull you get the horns. This is no longer about $544,000 in back pay for Bisher Barazi, it is about Sheikh Mohammed getting some payback. Bisher Barazi had better call up that guy with the submarines and leave town because he is going to get a lot more than $122,000 in emotional damage from Sheikh Mohammed.