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Saturday, 27 March 2010

Dubai Credit Spreads Are ‘Unattractive,’ Morgan Stanley Says

Investors should “unwind” exposure to Dubai government debt because the restructuring plan proposed for state-owned Dubai World won’t do enough to reduce the emirate’s debt burden, Morgan Stanley said.

“At current levels the risk/reward profile of Dubai sovereign spreads looks unattractive, and we advise investors to close their exposure to the credit,” Morgan Stanley’s London- based strategist Paolo Batori wrote in a research report dated today.END

FACTBOX-What could Dubai sell?

Dubai's $9.5 billion rescue plan for state-owned conglomerate Dubai World [DBWLD.UL] requires the emirate to stump up $3.8 billion from what it called "internal government resources".


Here are some of the assets it could sell:

Capital Intelligence: Qatar Islamic Bank maintains solid capital adequacy

Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed Qatar Islamic Bank’s (QIB) long-term foreign currency rating of ‘A’, its short-term foreign currency rating of ‘A2’ and its financial strength rating of ‘A’.

All ratings carry a ‘Stable’ outlook. At the same time CI affirms the support rating of 2. QIB’s ratings reflect the recently demonstrated government financial support of the Qatari banking system (including support of QIB itself), which has enabled the Bank to maintain its solid capital adequacy and overall sound financial condition, along with its strong franchise and profitability.

The Bank’s ratings are constrained by the volatility in income from investments in real estate property and associate companies as well as by structural balance sheet maturity mismatching. CI notes that the financial strength rating may come under pressure if the weakness in the Bank’s investment and trading income persists in 2010.

Dubai debt plan meant to show emirate back on feet

Dubai's plan to avoid drawing on fresh funds from wealthier neighbor Abu Dhabi in its debt restructuring proposal for Dubai World may be more about presentation than the reality of its balance sheet.

Not taking new cash from Abu Dhabi was meant to show investors that Dubai can still stand on its own feet. But analysts say the hard reality is that the emirate could never navigate its current troubles without Abu Dhabi's support.

Abu Dhabi, which holds over 90 percent of the United Arab Emirates' oil wealth, may yet have to help out Dubai again despite the message of Thursday's plan for the conglomerate.


Rail traffic continues to trend higher according to the latest data from the AAR.  Total carloads rose 4.3% year over year and intermodal traffic jumped 9.5% year over year:
“U.S. railroads originated 287,639 carloads during the week, up 4.3 percent from the comparable week in 2009, but down 10.7 percent from 2008. In order to offer a complete picture of the progress in rail traffic, AAR now reports 2010 weekly rail traffic with comparison weeks in both 2009 and 2008.
Intermodal traffic totaled 201,300 trailers and containers, up 9.5 percent from last year but down 4.6 percent compared with 2008. Compared with the same week in 2009, container volume increased 12.3 percent and trailer volume dipped 3.2 percent. Compared with the same week in 2008, container volume was up 3.6 percent while trailer volume fell 33.1 percent.”
“Sixteen of 19 carload commodity groups showed gains from a year ago, with 13 of them showing double digit percentage gains, led by a 69.2 percent increase in loadings of metals and products. Other commodities showing significant increases included grain, up 24 percent; motor vehicles, up 20.8 percent; waste and scrap, up 33.1 percent; lumber and wood products, up 21.8 percent, and chemicals, up 14.4 percent. Coal loadings lagged 6.4 percent while pulp, paper and allied products slipped 6.1 percent.”
Source: AAR

Fears rise over Dubai World debt plan

Some of Dubai World’s bank creditors are concerned about the company’s proposal to restructure its debts a day after markets broadly welcomed plans to pay back loans in up to eight years.

People close to the seven banks negotiating with Dubai World say concerns centre on the lack of clarity on payment of interest to Dubai World lenders.

The banks, which sit on the co-ordinating committee and include HSBC, Standard Chartered, RBS and Lloyds, are the biggest lenders to Dubai World