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Wednesday, 17 March 2010

Petkim Says Iran Joint Venture in Chemicals at Feasibility Stage

Petkim Petrokimya Holding AS, Turkey’s biggest chemicals maker, said a $2 billion joint venture in Iran is still at the feasibility stage, Kenan Yavuz, chief executive of parent Socar&Turcas Enerji AS, said in an interview in Istanbul today.END

Bharti Said to Plan Agreement on $8.5 Billion Loan This Week

Bharti Airtel Ltd. plans to agree to terms with banks this week for an $8.5 billion loan that would help it buy most of Zain’s African assets, according to two people with direct knowledge of the matter.

Bharti, India’s biggest wireless operator, is seeking a six-year loan with an average life of 4.75 years, said the people, who declined to be identified as the details are private. The New Delhi-based company may pay interest of 2 percentage points more than the London interbank offered rate, they said.

Zain, Kuwait’s biggest phone company, said on Feb. 15 that it entered exclusive talks to sell Bharti its African operations, excluding those in Morocco and Sudan, for $10.7 billion including assumed debt. The exclusive talks will continue until March 25, the companies said.

Dubai allows Hindujas to offer full range of banking services

The Dubai Financial Services Authority has upgraded the Hinduja Bank's licence, a move that will allow it to provide a whole range of financial services to clients in Europe, Middle East and South Asia.

"The new licence enables it (Hinduja Bank-Middle East) to provide full range of banking services from the Dubai International Financial Centre (DIFC)", the bank said in a release.

Hinduja Bank (Middle East), a subsidiary of the Hinduja- promoted bank in Switzerland, started operations 16 months ago and now has been provided the licence to operate as Category-1 bank by the DFSA.

Dubai World to offer full debt repayment: report*

Dubai World will offer banks a single proposal to repay in full the $26 billion debt it is renegotiating, with interest likely linked to LIBOR, Al Arabiya reported on Wednesday.
Officials from Dubai and neighboring emirate Abu Dhabi have been working with restructuring experts to devise a viable debt restructuring plan acceptable to some 97 creditors to Dubai World, the state-controlled holding company.
Dubai World will propose to repay the debt over seven years, the Dubai-based broadcaster said on its website.
Implementing the proposal would cause banks to book losses this year due to the differences between the proposed rate and the rates in the original contracts, the report said.
Any interest losses should be declared in banks' financial statements this year, the broadcaster cited "informed banking sources" as saying.
Saudi-owned Al Arabiya also cited the sources as saying a problem had developed in the accounting process that could force Dubai World to review some minor technical, but "not fundamental," aspects of repayment.
Dubai shocked the market in November when it said it would ask creditors to delay repayment on $26 billion in debt linked to Dubai World.
A last-minute $10 billion bailout from wealthier Abu Dhabi helped Dubai avert an embarrassing default on an Islamic bond linked to developer Nakheel, builder of the artificial palm-shaped islands off Dubai.
The firm, which ringfenced key assets like ports operator DP World from the restructuring, has been in talks with a seven-member committee which represents the 97 creditors.
The panel is made up of Standard Chartered, HSBC, Lloyds, Royal Bank of Scotland, Emirates NBD and Abu Dhabi Commercial Bank, which are believed to have two-thirds of the total exposure.
A seventh lender, Bank of Tokyo-Mitsubishi, a unit of Mitsubishi UFJ Financial Group, joined the panel this year.
(Reporting by Raissa Kasolowsky and Rania Oteify; writing by Thomas Atkins; editing by Karen Foster)END

Falcom Saudi Equity ETF approved by CMA, open to foreigners

Saudi Arabia has approved its first exchange-traded fund, which will be accessible to foreigners as part of efforts to open up the biggest Arab bourse, reported Reuters.

Saudi financial firm Falcom Financial Services won approval to list the "Falcom Saudi Equity ETF" on the bourse, the capital market authority said in a statement on Tuesday.

The world's top oil exporter has been trying to encourage more foreign money to its bourse, having recently allowed indirect foreign ownership via so-called swap agreements.

Britain's Whitbread Buys Out Dubai Partner

Whitbread, Britain's biggest hotel and coffee shop operator, has bought out its Indian joint venture partner Emaar MGF of Dubai.

Specific terms of the deal were not immediately disclosed, according to City.Aim, a London online publication.

"Whitbread confirms that Premier Inn has completed the acquisition of the 50.1 per cent stake it did not own in the JV with real estate developer Emaar MGF," the company said in a statement.

Van Agtmael singles out small caps, Qatar and Saudi Arabia for 2010

Antoine van Agtmael, the Chairman and CIO of Emerging Markets Management (EMM), and whom Bloomberg credits with coining the term “emerging markets” back in 1981, opined that while equities among developing nations are probably fairly valued (the corresponding MSCI trades at 12.8x estimated earnings for 2010, compared with its four-year average of 12.1), small caps in said markets are still lagging (6.2x after doubling last year) and may see increased interest from institutions going forward.  He also mentioned Qatar and Saudi Arabia in particular among those “frontier” countries where market sentiment may currently lag inherent value: 
“Qatar may be one of the most attractive among the smallest developing nations known as frontier markets, van Agtmael said, citing the pace of economic growth, the development of the Middle Eastern country’s real estate market and its gas reserves.  The investor also favors Saudi Arabia, saying the nation is a ‘huge economy with huge oil reserves.’”
Two industries to keep an eye on in each country, respectively, continue to be real estate and banking.  While commerical prices in Qatar fell between 20-30% in 2009, for instance, they are likely to stabilize in the second or third quarter of this year according to DTZ, an industry consultant, whereupon they should trend up again on the back of the overall economy’s expected, LNG-fueled 16% growth, as well as the overall industry’s cemented and collective distrust for “Dubai’s flawed, speculative building model.”  Furthermore, government endorsed consolidation in the property development market may ultimately concentrate the allocation of revenues going forward, leading to higher enterprise values.

Dubai World’s Resolution May Not Be as Bad as We Thought

We are still awaiting a formal announcement from the government of Dubai regarding the restructuring of the USD26 billion of debt. As we get closer to the announcement date, the market seems to be recovering. Given that GCC markets tend to be leaky, the news flow suggests good news.
The plans were informally discussed with the creditor’s representatives, in which they were offered different prepayment proposals, none of which will have a “haircut” (reduction in principal payment). However, all will have no or low interest. The proposals includes a full repayment of principal within five years without any interest; repayment within seven years with 2% interest payment; or repayment within at least eight years with an interest of close to the 1 year Libor. The final proposal needs to be approved by the Dubai government.
Looking at the CDS (Credit Default Swaps) chart below, investors seem to be relatively happy compared to a month ago (Dubai World to Restructure its Debts). The news on receiving the full principal payment decreased the CDS spreads by 200bps and tightened the yields of some Dubai Inc. papers. Although these are good news, it remains that forgoing interest payments will affect the future cash flows of banks.
“Receiving 100 per cent of the principal and zero per cent interest is better than taking a 30 to 40 per cent haircut. On this basis, the banks involved will not have to incur a loss other than the time value of money which is not insignificant but may be better than the alternative,” said Jawad Ali, the managing partner of the Middle East offices of the law firm of King and Spalding. (TheNational)
If the 97 creditors do not agree on a deal, Dubai World may start the bankruptcy procedures.

Citi seeks to fix Gulf business amid Abu Dhabi and Kuwait friction

Citigroup plans to step up its activities in the oil-rich Gulf to rebuild its long-established regional franchise that has been tarnished by disputes with regional investors.

Citigroup has operated in the Arab world for almost 50 years and the Gulf came to the rescue of the embattled bank in the early stages of the credit crunch when the sovereign wealth funds of Abu Dhabi and Kuwait pumped billions into the US-based lender.

However, the relationships with two of the world's largest institutional investors have since soured .