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Wednesday, 17 February 2010

Bahrain Said to Hire JPMorgan, BNP, Deutsche for Bond

Bahrain, the smallest oil producer among the six Gulf Arab states, hired JPMorgan Chase Bank NA, Deutsche Bank AG and BNP Paribas SA to manage the sale of a $1 billion-dollar bond, said a banker familiar with the deal.

Lead managers plan to start investor meetings in late March or early in the second-quarter, said the banker who declined to be identified because the deal is private. The sale will be registered in the U.S., he said.

Bahrain’s government plans to issue about $1 billion conventional bond, with a 10-year maturity to fund its budget, the central bank said in January.

Saudi seen leading sukuk issuance in 2010

Sukuk bond issuance in the Middle East will range between 10 and 15 in 2010, with demand mainly expected to come from Saudi Arabia, said Mohd Daud Bakar, managing director of Amanie Islamic Finance Consultancy and Education LLC.

Speaking at the Reuters Islamic Finance Summit in Dubai Wednesday, Bakar said Saudi Arabia will lead the sukuk pipeline this year as it funds infrastructure projects.

Bakar said the kingdom has the economy and population to support such projects. He added that his firm has two to three mandates for sukuk issues in 2010, mainly coming out of the kingdom.

Dubai World expected to present restructuring plan in March

Dubai World is expected to present a proposal in March for the restructuring of its 22 billion dollars in debt, a government spokeswoman said on Wednesday.

"Neither the government nor the company have put forward any restructuring proposals to the lenders at this time," the spokeswoman said. "We expect to put a proposal to banks in March."

Dubai shook global stock markets in November when it called for a debt moratorium for troubled Dubai World.

Abu Dhabi Shares Advance to Month-High on Oil, Economic Data

Abu Dhabi shares advanced to their highest in more than a month as Aabar Investments PJSC approved two joint ventures, oil gained and U.S. economic data indicated the recovery from recession is firm.

Aabar, the Abu Dhabi fund that’s the biggest shareholder in Daimler AG, increased the most in more than two weeks. Emirates Telecommunications Corp., the U.A.E.’s biggest phone company known as Etisalat, rose to the highest in more than three months. The ADX General Index advanced 1.1 percent to 2,759.15, the highest since Jan. 11. Oman’s MSM30 Index added 0.6 percent to 6,741.37, the highest since Oct. 12.

“The global backdrop is helping,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. “Overnight U.S. data shows that manufacturing is consistently firm, potentially positive for oil and oil markets as oil consumption should remain firm in 2010.”

Why a rights issue makes sense for UK-bound DP World

Is DP World, the region’s premier ports and transport business, planning a big cash-raising exercise alongside the listing of its shares in London in a few months time?

That question has been on the minds of many in the Dubai financial community ever since DP World announced its London plans last month. Judging by a recent piece of research by HSBC, the answer is yes, the conglomerate could use the London debut to raise new funds. Furthermore, it has a range of options for liquidity enhancement in London.

The HSBC note went to clients last week, but when word of it seeped into the Dubai market on Sunday, it hit DP World shares quite hard. That was because only the top line of the research got publicised: to the effect that, due to a number of technical factors involving the proposed London listing, the bank was changing its recommendation on the shares from neutral to underweight, and was lowering its target price from US$0.50 (Dh1.83) to $0.38.

Libyan Central Bank to Issue Foreign Bank Licenses

Libya’s central bank plans to issue two licenses for foreign banks to set up units in the country as the holder of African’s largest crude oil reserves seeks to reduce the state’s role in the economy.

Foreign banks will have full management control of the new lenders and a 49 percent stake, the Tripoli-based central bank said in an e-mailed statement today. The remaining 51 percent will be held by domestic investors.

“It is an extremely positive step for the development of the Libyan economy and should help boost bank lending, which has already been expanding rapidly in recent years,” Rory Fyfe, a London-based analyst at the Economist Intelligence Unit, said by e-mail today.

Zain Sale: Remember That It’s Only an “Offer”

After almost a year-long effort to sell the company as a whole or in parts comes the determined Sunil Mittal of Bharti Airtel Ltd with his deep pockets and ambitious plans to finally capture Africa. It’s a nice story that all we beaten down investors want to believe, for sure there’s the unquestionable interest, but what assurance do we have that it will go through? Sadly none.

Kuwait’s Mobile Telecommunications Co., or Zain, and India’s Bharti are set to hold exclusive negotiations until March 25th and by then the final decision will be made. There’s no guarantee the transaction will be consummated, as it remains subject to due diligence and regulatory approval.

It’s worth mentioning that the unsuccessful fate of the Bharti-MTN deal was a result of regulatory hurdles set by the South African government’s treasury. According to sources, the South African government’s pension fund, Public Investment Corp, holds a 21% stake in MTN and the government were under intense pressure to not give a go-ahead to the deal on concerns that MTN’s South African identity, post the deal, would be lost. The treasury insisted that for the deal to go through, the potential merged company should remain domiciled in South Africa and should be listed in both companies, something that was not a possibility under existing Indian laws.

While there seems to be no regulatory threats in Kuwait, shareholder concerns at both Bharti and Zain create obstacles and could yet stop the deal. In India, there is the concern of overpaying as Bharti’s stock price plunged in the last trading sessions breaking support levels. In Kuwait, there is the notion of strategic divergence and the threat of unattractive growth going forward. Not to mention the Zain-Nigeria controversy following the announcement of Econet’s CEO Strive Masiyiwa that Bharti Airtel’s acquisition of Zain’s African assets must exclude the Nigerian unit until an ownership dispute with Econet Wireless Holdings Ltd. is resolved. Zain-Nigeria is an important part of the deal, as it accounted for 16% of group revenues in the nine months to 31 September 2010.

The promising and attractively low penetration levels across Africa (30-50%) might make the deal for Bharti a value trap as Zain has been struggling to deliver value to its shareholders with a 65 million subscriber base that only contributed 15% to the groups net profit. Africa still needs a lot of capital investment as competition intensifies and the average revenue per user (ARPU) has been falling. For example, Nigeria saw ARPU fall by one-third, while revenue and EBITDA drop 17% on a year-on-year basis. Similarly, DRCongo saw ARPU fall from $11 to $8 as a result of higher usage tax and a local recession, with revenues and EBITDA falling 13% and 14% respectively.END

Limitless loan to roll over like other Dubai debt

Dubai World's [DBWLD.UL] lenders have rolled over billions in maturities since May 2009 and a pending $1.2 billion loan payment for its Limitless property unit will also get extended, people familiar with the matter said on Tuesday.

The Islamic loan to Limitless World is due next month. The maturity comes as Dubai World operates a de facto standstill with creditors pending a plan on how it will repay about $22 billion in debt.

"It's going to get rolled over, just like everything has been rolled over for months," said one person who spoke on condition of anonymity.

Gulf Arab Region to Boost Hedge Fund Assets, Investcorp Says

Persian Gulf Arab institutions are likely to boost hedge fund investments this year as they seek to diversify assets and stabilize returns, according to Investcorp Bank BSC of Bahrain, which manages $12 billion.

The Gulf usually follow trends in the U.S., where investors helped push global hedge fund assets to $1.6 trillion last year from $1.3 trillion in 2008, Khalid al-Rumaihi, Investcorp’s managing director for placement, said at a conference today in Dubai. Investcorp manages $4.5 billion in funds of hedge funds after adding $1.3 billion of assets last year, all from U.S. financial firms, he said.

“You will have more investments from the Gulf this year,” al-Rumaihi said. “We would expect a very good year” as global markets are likely to remain volatile, he said.

Bahrain GFH eyes $250 million asset sales

Gulf Finance House GFHB.BH (GFHK.KW) (GFH) plans to raise $250 million through asset sales this quarter, and has made lay-offs to cut costs after a regional real estate boom ended, its acting CEO said on Tuesday.

Ted Pretty told the Reuters Islamic Banking and Finance summit in Manama that the troubled investment house is in talks to sell its stakes in Khaleeji Commercial Bank KHCB.BH as well as its "energy city" real estate projects.

He said the investment house is in talks with banks, sovereign institutions and real estate developers and hopes to complete the sales by the end of the quarter.

CDS report: Indices move wider as sentiment dips

Markit chart of Dubai 5-year CDS

Dubai Metro payment dispute resolved / Middle East / Finance - Dubai Metro payment dispute resolved

Work has restarted on Dubai’s Metro after a settlement was reached with a Japanese-led consortium over disputed payments of about $2bn-$3bn, according to two sources aware of the situation.

The consortium members – including the Japanese companies Obayashi, Mitsubishi Heavy Industries, Mitsubishi, Kajima and a Turkish contractor – slowed down their work in early January to strengthen their hand in talks with the Dubai Roads & Transport Authority.

But construction of the 18 unfinished stations on the main red line and another 18 on the unopened green line started again on February 7, according to contractors.

Andrew Farkas Looks to Write a New Chapter -

Andrew Farkas Looks to Write a New Chapter -

Andrew Farkas rose to the heights of New York real estate in the mid-1990s, as an investor with a penchant for picking through the wreckage of commercial real estate.

Mr. Farkas, 49 years old, has returned to his old stomping ground as another crisis besieges commercial-property owners. His company, Island Capital Group, is negotiating to take over a unit of Centerline Holding Co., one of the largest companies specializing in restructuring troubled mortgages that were securitized into bonds.

The deal marks the latest chapter in the career of Mr. Farkas, who also owns the Montauk Yacht Club in East Hampton, N.Y., and is called "Farkie" by his friends. In 1997, Mr. Farkas's company was accused by the Department of Housing and Urban Development of making $7.6 million in kickbacks. That suit, which ultimately was settled, was authorized by HUD's then-director, Andrew Cuomo, now New York's attorney general.

The murky Gulf

Dubai is a creature of the latest wave of globalisation. It is a modern global transport, commercial and financial hub. Its attitude to transparency, however, is medieval. That is why markets have been baffled by Dubai’s recent problems. Investors do not know where to look to gauge the country’s troubles.

Restructuring talks between Dubai World, the government-owned conglomerate, and its creditors are at an early stage. No offers have yet been made regarding the new terms of the $22bn debt that is being renegotiated. But rumours suggesting that they will recover only one third of their money have rattled lenders to the emirate.

The cost of insuring $10m of Dubai’s government debt has risen steeply to $651,000. (Before the Dubai World restructuring, this figure was half that.) The price of Islamic bonds issued by the city-state continued their decline: they have lost 9 per cent of their value since January. The uncertainty of the Dubai World talks is contaminating the rest of Dubai – and no wonder.

In the statelet, as in the other members of the United Arab Emirates and in Saudi Arabia, the line between the public and the private is blurred. The state of Dubai, its ruler, his personal business interests and the investments of the state, have been conflated. It is also unclear how much debt the royal, statal, state-owned and parastatal institutions even have.

This opacity and ambiguity was constructive during the boom, but is now destructive. Dubai is to blame: it had only recently tried to define relationships between state-owned institutions and the state when this opacity threatened to land it with a large bill. Even now, investors are not sure which of the parts of Dubai Inc will be left holding which losses.

But there ought to be no concerns about the existing explicit debts of the state of Dubai itself. Creditors of state companies may lose out if the businesses they back do not perform. But the emirate will meet its commitments – not least because Abu Dhabi, the oil-rich capital of the UAE, would never permit a sovereign default.

A bail-out by its neighbour and rival would be painful for Dubai: in January, shortly after Abu Dhabi propped up its little sibling, the Burj Dubai – the tallest building in the world that towers over the city-state – was humiliatingly renamed the Burj Khalifa in honour of the ruler of Abu Dhabi. Dubai lives in the shadow of its deep-pocketed neighbour – but it benefits from the shelter.END