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Monday, 8 March 2010

Gulf Arab Banks’ Non-Performing Loan Peak Yet to Come, S&P Says

Gulf Arab banks may see further increases in non-performing loans as defaults by two Saudi Arabian conglomerates and Dubai World’s restructuring tarnish balance sheets, Standard & Poor’s said.

“The cleanup of Gulf banks’ loan portfolios has not yet come to an end,” the ratings company said today in an e-mailed report. The ratio of non-performing loans to total loans climbed to 5.4 percent on Sept. 30 from 2.7 percent at the end of 2008, and “these ratios are set to further deteriorate in the next few quarters,” S&P said.

Banks across the Gulf region have suffered after the multi- billion dollar debt restructuring of two Saudi family holding companies, Ahmad Hamad Algosaibi & Brothers Co. and Saad Group. In the final quarter of last year Dubai World, the emirate-held holding company, announced it would delay payments on $26 billion in debt, putting more pressure on bank balance sheets.

Tabreed Seeks Talks on $663 Million Debt After Loss

 National Central Cooling Co. plans to renegotiate terms on $663 million Islamic bonds after the Abu Dhabi-based company posted its first full-year loss since listing in 2000. The shares plunged to a three-month low.
The company, known as Tabreed, is seeking shareholders’ approval to change the terms on a $200 million floating note and a 1.7-billion-dirham ($463 million) fixed rate convertible bond, it said in a statement to the Dubai bourse today.Tabreed’s board also approved 1.3 billion dirhams in short-term financing from state-run Mubadala Development Co. The funding “may be converted to long-term capital,” it said.
Tabreed is among Gulf Arab companies seeking debt renegotiations after the global economic crisis dried up financing and brought a property boom to a halt. Dubai World, the state-owned holding company seeking to renegotiate terms on about $26 billion of debt, will ask banks to roll over loans for years when it presents a restructuring proposal to creditors this month, three bankers familiar with the plan said.

Dubai Index Climbs to 3-Week High on Dubai World Rollover Plan

Dubai shares rose to the highest in more than three weeks after bankers said Dubai World will ask lenders to roll over loans when it presents a proposal to creditors this month.

Emaar Properties PJSC, developer of the world’s tallest skyscraper in Dubai, jumped to the highest in almost two months. Emirates NBD PJSC rose to the highest in more than a week. The DFM General Index jumped 1.7 percent to close at 1,649.14 in Dubai, reversing earlier losses of as much as 0.8 percent. Credit default swaps linked to Dubai fell 20 basis points to 487 basis points, according to prices provided by CMA DataVision in London. Nakheel PJSC bond prices rose.

“As long as there’s some sort of compromise that’s available, the news is very good for the market,” said Vyas Jayabhanu, head of Al Dhafra Financial Brokerage LLC in Abu Dhabi. “Investors are looking for some positive input from the Dubai World fiasco because it’s eroded a lot of confidence after all the negative impact it’s had.”

Dubai World lenders await debt plan

Dubai World is expected to approach lenders for the first time this week with a suggested proposal for restructuring $22bn of its debts, according to people close to the situation.

The conglomerate has called leading -creditors to London for meetings starting as early as today.

Bankers expect the one-on-one meetings to reveal the first details of a formal proposal, which the government has said should be finalised in March.

The Leverage Effect (Re-post)

March 8, 2010 by Sal

Back in December 2009, Keynesian wrote an article titled Dubai’s W Hotel-Union Square Sold for $2M where Istithmar World PJSC was forced to accept $2M for its W Hotel in New York at a foreclosure auction, leaving it with a $283M loss. The move was not a surprise and as part of a restructuring program, the debt-laden emirate had to start offloading its portfolio of trophy assets. The highly leveraged portfolio was built during a huge global spending spree at the peak of the oil and property bubble. According to a report by Monitor Group, between 2003 and 2007 Istithmar invested $3.8 billion of its own capital, but took on a further $14 billion in debt. Today, Istithmar is going through a deleveraging process, one that some argue might mark the end of the once notorious investment arm.
On March 3rd, Istithmar lost its second Manhattan property in three months as it defaulted on its $300 million mortgage on the former 300,000 square-foot Knickerbocker Hotel site in Times Square turning the property over to its lender Danske Bank A/S. It was planning to convert the site and an adjacent vacant lot it had purchased for $76 million into a high-end hotel. Moreover, its two properties W Washington D.C. and Mandarin Oriental New York are on credit rating watch lists for performance issues.
If Istithmar learned anything from past experience, it’s that expectations always fall short of reality.END

Kuwait's NBK shareholders approve rights issue

Shareholders of the National Bank of Kuwait NBK.KW, the Gulf Arab state's biggest lender, approved a 10 percent capital increase through a rights issue to fund expansion.

This issue, at a price of 500 fils per share including premium, will raise 32.7 million dinars ($113.4 million), according to Reuters calculations. There are 1,000 fils to the dinar.

The bank has said the capital increase is intended to support expansion plans.

Dubai debt deal expected this week: bankers

Troubled conglomerate Dubai World expects to put its debt plan to creditors as early as this week but the final proposal is being delayed by efforts to accurately value developer Nakheel's assets, bankers said on Sunday.

Dubai World's plan for repaying $26 billion in debt will not include a proposal to raise capital or contain any surprises, one of the bankers said, such as the repayment of Nakheel's Islamic bond in December after a last-minute bailout by Abu Dhabi.

The bankers spoke on condition of anonymity.