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Sunday, 28 March 2010

Limitless seeks extension on $1.2 bln loan

Dubai World property unit, Limitless, wants creditors to agree to a 90-day extension on a $1.2 billion loan due March 30, two bankers familiar with the matter said Sunday.

"During this time, a comprehensive proposal to restructure Limitless' debt will be decided," one of the bankers told Zawya Dow Jones.

A spokesperson for Dubai World declined to comment on the details of the Limitless debt negotiations.

Kuwait's NBK gets nod for Boubyan buy

National Bank of Kuwait (NBKK.KW) (NBK), the country's biggest lender by market value, has received the central bank's approval to raise its stake in Islamic lender Boubyan Bank (BOUK.KW) to up to 60 percent.

Shares of NBK were down 1.6 percent, underperforming Boubyan's shares which were up 5.4 percent at 0825 GMT.

"The central bank of Kuwait has approved the request of (NBK) to acquire a maximum stake of 60 percent of Boubyan Bank's capital," NBK said in a statement on the Kuwaiti bourse website on Sunday. The approval is valid for three months starting March 22, it added.

Bankruptcies and liquidations still likely in Dubai real estate (Re-post)

Last week’s government rescue plan for its wholly-owned property group Nakheel should not obscure the fact that Dubai still faces a difficult recovery from its 18 month old real estate crash.
To date their have been no large bankruptcies or liquidations, and only a few properties have been repossessed by the banks. As in the rest of the world the local banks have been highly supportive of their clients in this crisis. But this is not a situation that can last indefinitely, globally or locally.


Put at its most simple there is always a point at which a client must go bankrupt. If they are hopelessly trapped with no way of ever repaying a loan then all that happens as time goes on is that the amount owed gets bigger and bigger as interest is not paid.
Consider the position of some of the developers of Dubai skyscrapers. They funded these projects with a mixture of off-plan sales and bank debt. Sales dried up. Bank credit ended with the crisis. The contractor walked off. So they have a half-finished tower, no money and no contractor.
What are they going to do? Well there is not much they can do, it is up to their banks to say ‘hold on, how are we ever going to get our money back?’ That can only happen if the project is liquidated and the assets sold for whatever they will realize in the market place. Even providing money to finish the project might just end up funding an empty building with even more debt.
Now banks are not stupid, whatever their recent lending practices might suggest. They will always try to delay a liquidation until the sale will at least recover what they have loaned. They are not that interested in whether anything is left for other parties.

Calling in loans

So the moment the banks can sense a market upturn they are likely to pull the plug and call in the loans from Dubai developers. It does not need a great deal of imagination – just by looking around Dubai at the number of stalled projects – to realize that this is a big problem.
However, it is very hard to see how it could be addressed without a substantial number of bankruptcies and liquidations. The government can summon up enough capital and rally the support of banks to save Nakheel, but can it really do the same for all the other developers now in trouble?
Sure it makes sense to cushion the blow and make this as orderly a process as it can be. But market forces will sort out the aftermath of a real estate crash far more effectively than a wider government support program, which is probably just not practical in any case.END

Damas Signs ‘Standstill’ Accord on Debt With Lenders

Damas International Ltd. reached a “standstill” accord with most of its creditors to defer payments as the jewelry retailer seeks to restructure its business after it was fined by the market regulator for unauthorized deals.

“A restructuring plan is currently being developed by the company, which will be implemented at the end of the standstill period,” the Dubai-based company said in an e-mailed statement today. Damas didn’t give details of its lenders or the amount involved in the standstill agreement.

The retailer had 3.25 billion dirhams ($885 million) in liabilities at the end of September, according to its financial statement on the Nasdaq Dubai bourse Web site. The company posted a six-month loss of 714.8 million dirhams for the period ended Sept. 30 after reporting a profit of 91.1 million dirhams in the year-earlier period.

Dubai Shares Rise to Highest This Year on Dubai World Terms

Dubai shares gained for a second day, rising to the highest level this year, as the emirate said it will support Dubai World’s $24.8 billion debt restructuring.

Arabtec Holding Co., the United Arab Emirates’ biggest construction company, increased the most in almost three months on improved sentiment following the announcement. Emirates NBD PJSC, the U.A.E.’s largest bank by assets, climbed for a seventh day after saying it may sell debt when the restructuring is complete. The DFM General Index rose 1.9 percent to 1,880.62, the highest since Dec. 16. Abu Dhabi’s ADX General Index rose 0.9 percent to 2,929.32, the highest since Nov. 18.

Dubai shares jumped 4.3 percent on March 25 after the government said it will support state-owned Dubai World with as much as $9.5 billion, doubling to $20 billion the amount the emirate paid to holding company. Lenders to Dubai World will be repaid their principal in full by swapping loans with two tranches of new debt with five and eight-year maturities, according to the proposal.

Dubai Debt Plan May Be ‘Negative’ for Banks, JPMorgan Says

Dubai World’s debt restructuring plan may be “negative” for its bank creditors as they will have to rely on asset sales and dividends for principal repayment, JPMorgan Chase & Co. said.

Dubai World, a state-owned holding company, is asking creditors to wait as many as eight years to receive all their money back as part of its $23.5 billion debt restructuring plan announced last week.

“There is no mention of a government repayment guarantee for Dubai World’s bank creditors,” Zafar Nazim, a London-based analyst at the bank, wrote in a report dated March 25.

“The government intends to inject only $1.5 billion cash into Dubai World to support its creditors and working capital commitments,” JPMorgan said. “In essence, Dubai World’s creditors will be relying upon assets sales and dividends for eventual principal repayment.”END