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Friday, 12 February 2010

Dubai CDS jump to 627 bps; highest since Nov 2009-CMA

Dubai's debt insurance costs jumped on Friday, with five year credit default swaps rising above 600 basis points for the first time since November 2009, CMA DataVision said.


The CDS were quoted at 627 bps by 1345 GMT, a rise of 43 bps since Thursday's close. This means it costs over $600,000 to insure $10 million of Dubai sovereign risk for a five-year period.

Dubai CDS have been steadily rising since the end of January and are up more than 130 bps this month.

Dubai shocked world markets last November when it asked creditors for a multi-billion dollar standstill on the debt owed by subsidiaries of state-run conglomerate Dubai World.

"Basically it is a continuation of the Dubai World saga. They are yet to come out with any restructuring plan so people are starting to get worried," said Elisabeth Gruie, emerging debt strategist at BNP Paribas.

She said the postponement of several corporate bond issues this week was impacting sentiment on Dubai, seen as vulnerable to the downturn in global sentiment.

"There is a bit of a liquidity crunch in the making so that's reflecting on the Dubai sovereign," Gruie said.END

The Lessons of Dubai

If the rulers of Dubai cringe at the bad publicity the emirate city-state has copped since its go-go economy burst in 2008, they have only themselves to blame. After all, it was they who courted the media glare in the first place. Little more than empty desert a generation ago, Dubai had no logical reason to build a Manhattan-style skyline, let alone the world's tallest building. No reason, that is, except the kind of grandiose ambition that turned what was a backwater into one of the world's most dynamic cities.

When construction began on the Burj Dubai — as the record-breaking tower was originally called — Dubai was in the midst of an epic boom, fueled by foreign speculators and one luxury development project after another. By the time the tower opened on Jan. 4 with a lavish fireworks display, though, the showmanship had faded. Weeks earlier, Dubai's biggest state-owned development company had declared it was unable to pay its debts. Officially, Dubai owes its creditors $80 billion, though a recent report by regional investment bank EFG-Hermes estimates that the city may be in the hole for as much as $170 billion. After Sheik Khalifa al-Nahyan, the oil-rich ruler of neighboring Abu Dhabi, stepped in with $10 billion to stave off an embarrassing default, the skyscraper's owners changed the building's name to Burj Khalifa. For a city used to grand statements, it was a remarkable comedown.
(See pictures of the world's tallest building.)

In all the panic, finger-pointing and schadenfreude that has ensued, though, it's easy to forget that the gulf is more than just Dubai. Neighborhood rivals — some of them much wealthier than Dubai thanks to much bigger oil and gas deposits — have emerged from the financial crisis in better shape than their badly bruised neighbor. The gulf region is poised not only to recover from the global slump this year, but could become the second most important center of world economic growth after the economies of east and south Asia, according to John Sfakianakis, chief economist for Banque Saudi Fransi in Riyadh and Crédit Agricole in Paris. "The world has always been too focused on Dubai, but Dubai is not the GCC," he says, referring to the Gulf Cooperation Council, a loose political and economic union of gulf nations. "In the short term, Dubai's problems may impact how the world sees the region. But over the long term, the region has and will show a tremendous amount of growth."

ANALYSIS - GFH woes offer glimpse into Bahrain offshore banks

Debt woes at Gulf Finance House (GFH) offer a rare insight into the fragile state of Bahrain's offshore investment houses and give a hint that damage is mounting across the sector.

GFH, hit hard by a property market crash in the Gulf region, escaped default on Wednesday when lenders agreed to postpone repayment of a third of a $300 million loan.

But analysts say the group is not yet off the hook as it needs to raise cash through asset sales or receive some outside assistance if it is to avoid further funding difficulties.

Shipper sees signs of rebound

United Arab Shipping Co (UASC), which is owned by six Gulf countries, finally turned an operating profit last month on some routes in a sign that the brutal conditions in global shipping have begun to improve.

Last year was one of the worst on record for seaborne trade as demand fell and shipping firms continued to take new vessels ordered during the boom years of last decade.

Industrywide losses have been forecast at between US$12 billion (Dh44.04bn) and $15bn last year, said Jorn Hinge, the president and chief executive of UASC, based in Dubai.

Another News Corp tie-up for ADMC

Behind all the flash bulbs and sobbing -- yes, I heard at least one journalist let out a star-struck wail at the sight of Shahrukh Khan descending from the podium -- at yesterday's premiere of My Name is Khan at Emirates Palace was a quiet little business story. The film is being distributed through a partnership of Fox Star Studios, a joint venture between India's Star TV and News Corp, and Imagenation Abu Dhabi, a wholly owned subsidiary of Abu Dhabi Media Company, which also owns and publishes The National.

It marks the second time in less than a year that ADMC has partnered with a News Corp subsidiary. The first was the launch of the National Geographic Abu Dhabi channel, a partnership between ADMC's television arm and National Geographic Channels International, a joint venture between the National Geographic Society and News Corp.

It's certainly hard to swing a cat these days in the media world without hitting something owned by News Corp, but there may me more to the story that that. Rupert Murdoch is co-chairing the Abu Dhabi Media Summit in March, which ADMC is sponsoring. If more of these partnerships happen to emerge from that conference, this reporter -- who, I have to emphasize, has no inside knowledge of any of this -- won't be surprised.END

Dubai mulls extending power of DIFC courts

The Dubai International Financial Centre (DIFC) Courts may have their jurisdiction expanded to include other commercial cases in Dubai under plans being reviewed by the Government, a top judge says.

Sir Anthony Evans, the Chief Justice of the DIFC Courts, said efforts were under way to allow the court to handle specific types of commercial cases involving banking, shipping and financial services that took place outside the DIFC zone.

“In the medium term, there is a possibility that the court’s jurisdiction might be expanded,” Sir Anthony said. “As a specialist court, we may be of use outside the DIFC.”

Saudi Dar Al Arkan Prices $450M 5-Year Sukuk To Yield 11%

Saudi Arabia's Dar Al Arkan Real Estate Development Co. (4300.SA) sold $450 million, five-year Islamic bonds, or sukuks, Thursday, offering a yield of 11%, according to a person familiar with the matter.

Proceeds from the 144a sale will go to fund the company's current and future development projects.

Deutsche Bank, Goldman Sachs and Unicorn Investment managed the deal.

Moody's rates the securities Ba2 while Standard & Poor's rates them BB-.

The deal is seen testing the waters for Middle Eastern credits after the debt woes of Dubai World sparked a panic across global markets late last year.

Henry Azzam, Deutsche Bank's chief executive for the Middle East, told attendees at a conference in Dubai Wednesday that Dar Al Arkan is in the process of selling $750 million of sukuks.

The company last raised 750 million Saudi riyals ($200 million) through a locally issued sukuk in May 2009.

Terms were as follows:

Amount: $450 million
Maturity: Feb. 18, 2015
Coupon: 10.75%
Price: 99.058
Yield: 11%
Ratings: Ba2 (Moody's Investors Service)
BB- (Standard & Poor's)END

Mashreq Seeks to Raise Size of Euro-Medium Note to $5 Billion

Mashreqbank PSC, the United Arab Emirates lender owned by billionaire Abdul Aziz al-Ghurair, plans to seek shareholders approval to raise the size of its euro medium-term notes program to $5 billion from $2 billion.

The lender has scheduled an extra-ordinary general assembly meeting in Dubai on March 7 for the approval, it said in a statement to the Dubai bourse today.END

Qatar woos foreign cash with ownership reforms

Qatar, one of the fastest growing economies in the Middle East, is stepping up efforts to attract foreign investment as neighbour and long-time business magnet Dubai struggles through a debt crisis. New laws to allow full foreign ownership in sectors such as consultancy services, information technology, entertainment and sport will relax restrictions that had limited non-Qatari ownership outside free zones to 49 percent.

The reforms highlight a debate about the merits of liberalising foreign residency and ownership rules to increase competitiveness as Gulf nations attempt to diversify their economies away from dependency on energy exports.

Qatar's neighbour United Arab Emirates, of which Dubai is a member, proposed a draft law last year allowing foreigners 100 percent ownership outside the free zones that have long lured businesses with the promises of tax-free earnings.

Saudi Has Spent Almost Half of $400-Billion Plan

Saudi Arabia has spent about half of its $400 billion five-year economic development plan and may finish the program ahead of schedule, Finance Minister Ibrahim al-Assaf said today.

“We’ll see the expenditure accelerating” this year, al- Assaf said in an interview in Kuwait. “I think we’ll be ahead of the timetable.”

The kingdom, the world’s largest oil exporter, announced the spending program in 2008 to bolster the economy. It was the largest stimulus package in the Group of 20 nations as a percentage of gross domestic product. Al-Assaf told an investors’ conference in Riyadh on Jan. 24 that “continuous stimulus” is needed even as the economy rebounds from last year’s stagnation.

Market overview: FTSE 100 up 29

15:15 Sainsbury's is now among the top risers in the FTSE 100 amid renewed talk that the Qatari sovereign wealth fund, which already owns 26% of the supermarket, is looking to do some kind of deal. Aero-engineer Rolls-Royce and medical devices group Smith & Nephew are currently jostling for top spot. Rolls posted a 15% improvement in 2009 revenues and S&N reported a 2% increase in full year sales and said is has seen signs that conditions in its markets are stabilising.


The latest data on rail traffic continues to show an upward trajectory though recovery is still showing signs of being weak. The AAR reports that US railroads originated 268K carloads up 1.4% versus 2009 and off 14.7% from 2008. Intermodal traffic rose 5.1% from 2008 and declined 10.7% from 2008.

Breadth continued to improve as 14 of the 19 commodity groups are now reporting year over year gains. Metals, nonmetallic minerals, farm products and motor vehicles all reported double digit gains.