Distressed-asset investors are beginning to look at the burgeoning number of defaulting loans at regional banks as a potential future windfall.
Essdar Capital, a Dubai investment and advisory company controlled by two members of the Abu Dhabi Royal Family, is planning a US$500 million (Dh1.83 billion) fund that would buy such loans at a severe discount. The fund would then restructure them or sell the underlying assets to turn a profit.
While the Central Bank puts the total amount of non-performing loans at banks at Dh37.2bn, Essdar predicts the amount will more than double in the near future when the full impact of the property downturn and global financial crisis on banks' balance sheets becomes clear. Suketu Sanghvi, a senior managing director at Essdar, pointed to the rising number of loans that are being restructured at UAE and Kuwaiti banks as a clear indication that things were going to get worse.
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