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Sunday, 4 April 2010

Dubai’s old guard takes the reins

Ibn Khaldoun, the great Arab philosopher-historian, predicted that urban elites would grow so fat on the excesses of power that they would be ousted by hardier Bedouin tribes. They, in turn, would be seduced by the ease of sedentary life and succumb to another generation of desert warriors, creating an endless circle of renewal.

In Dubai, a contemporary version of his theory is being played out 18 months into the emirate’s deepest recession since the famines that followed the second world war.

The giants of the Dubai boom years are seeing their influence wane, or being ousted altogether, as the ruler of the city state, Sheikh Mohammed bin Rashid al-Maktoum, allows a more conservative class to return to prominence.

Two listed Saudi firms fined for poor disclosure | Reuters

Two listed Saudi firms fined for poor disclosure | Reuters

Saudi Arabia's bourse regulator has fined two listed firms for inadequate disclosure as it tries to improve the image of the local bourse and appeal to foreign investors.


The Capital Market authority (CMA) said in a statement on Sunday it has fined Al Jazira Bank 1020.SE 50,000 riyals ($13,330) for not immediately notifying it about changes in its senior management.

A similar fine has been imposed on Advanced Petrochemical Company 2330.SE for not disclosing the shutdown over the Aug 13-Sept 25 period of a plant for unscheduled maintenance, CMA said.

Advanced Petrochemical Co announced the closure of the plant when it published third-quarter earnings in mid-October, it added.END

Iran seeks $12.5 bln through privatisation

Iran aims to raise about $12.5 billion by privatising more than 500 state firms during the 2010-11 year, including two refineries and two car makers, a senior official said in remarks published on Sunday.

Mehdi Aqdaie, deputy director of Iran's Privatisation Organization, said the Bandar Abbas and Abadan refineries would be among the first companies offered for sale on the Tehran Stock Exchange.

Quoted by the Iran daily, he did not give details on the size of the stakes Iran wanted to sell and how much ownership the state would retain.

Abu Dhabi Shares Rise Most in Week on Oil; Aldar Leads Gains

Abu Dhabi’s benchmark index advanced the most in a week, led by Aldar Properties PJSC and Sorouh Real Estate Co., after the price of crude oil reached the highest level since 2008.

Aldar, Abu Dhabi’s biggest real-estate company, is headed for the highest close since January. Sorouh, the developer of the $11 billion Lulu Island project in Abu Dhabi, rose the most in a week. Abu Dhabi Commercial Bank PJSC, the United Arab Emirates’ third-biggest bank by assets, gained 2.9 percent. Abu Dhabi’s ADX General Index increased 0.3 percent, the most in almost a week, to 2,866.85 at 12:28 p.m. in the emirate.

Crude oil surged to a 17-month high April 1 on signs global economic growth is accelerating, bolstering optimism that fuel consumption will increase this year. Crude for May delivery closed at $84.87 a barrel in New York, the highest settlement price since Oct. 9, 2008. Prices have soared 75 percent in the past year. Abu Dhabi is the capital of the U.A.E. and the holder of about 7 percent of the world’s proven oil reserves.

Quiet SWFs no good for companies

Companies do badly after foreign sovereign wealth funds buy their shares, according to new research* that points to the funds’ hands-off approach as the source of the problem.

When an SWF invests, the target company’s share price often jumps in the days surrounding the investment, the research found, but over the following year or two, the share price significantly underperforms its peer group.

“It’s not that they’re poor stock-pickers,” said Professor William Megginson of Oklahoma University. “It’s less what they do than what they don’t do.”

Aabar's $2 bln convertible bonds to be issued to IPIC

Aabar Investments (AABAR.AD), which has stakes in Daimler (DAIGn.DE) and Virgin Galactic, said its planned $2 billion convertible bonds sale will be made to International Petroleum Investment Co (IPIC).

IPIC, wholly-owned by the government of Abu Dhabi, is the majority shareholder in Abu Dhabi-listed Aabar. No date has been set for the conversion, Aabar said in a statement on Sunday.

In a regulatory filing on Thursday, Aabar said it was mulling convertible bonds worth up to 7.35 billion dirhams at a conversion price of 2.5 dirhams per share.

Emaar to roll over Dh4.5 billion of debt maturing this year

Emaar Properties is planning to roll over most of its loans maturing in the current year into long-term project financing deals, according to company sources.

Out of the Dh8.625 billion interest bearing loans and borrowings as of December-end, 2009, more than half of this, at Dh4.5bn, is maturing within 12 months (from December 31, 2009), the remaining being Dh4.125bn.

During the year, Dh1.706bn worth of loans were written down as part of the discontinued operations of the company's US subsidiary – WL Homes that incurred Dh1.761bn loss during 2009 alone. To a query by Emirates Business as to what Emaar is planning to do about the short-term loans [worth Dh4.5bn] maturing during the current year, a company spokesperson said Emaar Properties will seek to convert them into long-term project financing in the next year.

Etisalat hits back at Pakistan's inquiry call

A top Etisalat official yesterday hit back over a proposed inquiry into the company’s conduct in Pakistan, claiming it “applies the highest standards of transparency in conducting its business operations and international expansion strategy”.

Mohammed Omran, the chairman of Etisalat, was responding to remarks by Waqar Ahmed Khan, Pakistan’s minister of privatisation, who called for an inquiry following a dispute between Etisalat and Pakistan over the sale of a 26 per cent stake in Pakistan Telecommunications.

While Etisalat concluded the deal in 2006, it has withheld for the last year a US$800 million (Dh2.93 billion) payment because it claims the Pakistani government had not lived up to obligations to transfer 3,500 properties to Pakistan Telecommunications.

Fujairah fuels up to expand oil hub

The world’s second-largest pit-stop venue for international shipping will more than double in size in three years as Fujairah undergoes a transformation into an oil hub to rival Singapore and Rotterdam.

The business of supplying and trading fuel is the quieter side of an oil industry that dominates Middle Eastern economies. Gulf states are big exporters of crude oil but many also import fuel oil, a viscous product of the refining process used in shipping and power stations. Much of that fuel oil is stored, blended and re-exported from Fujairah.

Fuel oil is the fuel of choice of the global shipping industry, and Fujairah has historically been a strategic refuelling stop for ships travelling between the western hemisphere and the Orient. But the new capacity will also cater to rising demand for the same fuel from power stations in the Gulf and Indian subcontinent, said Walter Moone, the general manager of Vopak Horizon Fujairah, one of the largest fuel suppliers based in the emirate.

Vultures are an essential part of any major clear-up

Dubai’s tussle with an oversized debt load, falling property values and corporate scandals – perhaps the three most visible symptoms of the global economic downturn in the emirate – has attracted armies of foreign consultants, accountants and lawyers.

Bad times can mean good business for the restructuring experts, auditors and spin doctors. Just ask Alvarez and Marsal, a law firm working for Lehman Brothers, the US investment bank that went bust in 2008: the firm recently revealed charges of US$233 million (Dh855.6m) for managing the company as it winds down.

Dubai World, which recently proposed a $24.8 billion debt restructuring to its creditors and contractors, has at least five outside advisers. Government agencies are seeking help, as are plenty of industrial companies and banks.

Lack of corporate governance holds Gulf states back

Over the past two years, the Gulf has witnessed a number of major scandals in public corporations which have come to light despite the secretive nature of the region’s business world. Even in the 1990s, it was not uncommon for rulers to get involved to resolve problems, regardless of a company’s transgressions. Not surprisingly, some remember that period as the “good old days”.

Today, corporate governance must be taken more seriously. The growing economies of the Gulf states are becoming a centre of attention in financial circles. Unfortunately, despite many people’s efforts to reform corporate governance laws and stamp out corruption, very few changes have actually been made and collective action has been largely absent.

The issue of the Saudi Arabian Al Gosaibi and Saad groups, which are in debt to the tune of $20 billion (Dh73.5 billion), much of which is owed to Gulf and Emirati banks, highlights the importance of collective reform and responsibility. Ideally, the collective leadership of the GCC would function as a board of directors, with citizens as shareholders and expatriate residents as stakeholders in the establishment. In the business world, a board of directors represents the interests of both the shareholders and the stakeholders – the latter need not own shares in a firm to still be affected by its decisions.

It’s A Small World After All

Today, I applaud ZAIN and its board for offloading the African beast, and finally delivering value to their shareholders, and in unison pity Dr. Saad for his shattered island of dreams.

Under the management of the vigorous Dr. Saad the company launched its expansion plans, aggressively targeting to achieve a prestigious global position.  The company rebranded itself with a new theme- A wonderful world. However, this theme fell short from expectations as its no longer wonderful for Zain, nor its stakeholders. Throughout the journey, Zain’s shareholders were always inline and ready to inject money to support its future expansions plans. Through two market offerings, Zain was able to secure $6.79 billon ($2.3bln in November 2005 and $4.49bln in September 2008). Thus, with the successful completion of its capital increase came shareholder dilution.

In 2009, Zain’s net income fell 39% to 195 million dinars, or 51 fils a share, from 322 million dinars a year earlier. Out of its 72.5 million active customers, Zain has lost or “sold” 41.9 million for a $3.3 billion profit that it plans to distribute to its shareholders. According to Mr. Asaad Al Banwan “While the profits from the sale of Zain Africa will be used in support of dividends for the coming financial years, which are expected to not be less than the cash distributions for the current year.”  It plans to distribute a special cash dividend of 170 fils for 2009. I certainly don’t agree and think that its extremely vital that it keeps an extra cushion of cash at such uncomfortable times, as the company is dry on cash and without a clear outlook. Going forward, Zain will no longer be competing in 24 countries. It will be focusing on the remaining highly penetrated markets it competes in and try to survive as long as possible.

On a side note, I wish Mr. Asaad would use some of the profits from the sale of Zain Africa into the restructuring of all of Zain’s customer service departments and try to retain whatever customers they have left.END

UAE Plans to Coordinate Securities Rules, Markets, WAM Reports

The United Arab Emirates proposed a creating a panel of regulators from the six member states of the Gulf Cooperation Council as a first step toward integrating their securities markets, WAM reported,

Better coordination was needed between member states, which include Saudi Arabia and Qatar, as other companies, countries and blocs were forming their own alliances, the news service cited Sultan bin Saeed al-Mansouri, the UAE’s minister of the economy, as saying in a speech to the council in Riyadh.

The committee would meet at least three times a year and devise laws and policies that would be implemented across the region, WAM added.

The panel’s first task will be to unify licensing and listing rules for companies that want to publicly trade their shares. At a later stage, member states would adopt a common database network for their securities markets and devise rules for derivatives and short-selling, WAM said.END