Google+ Followers

Monday, 19 April 2010

Nomura Sees Value in Dubai Bonds, Recovery in Economy

Dubai government bonds and credit default swaps offer “value” after a proposal by Dubai World to restructure $24.8 billion of debt and renewed appetite for quasi-sovereign securities, according to Nomura Holdings Inc.

“Market pricing of Dubai’s sovereign risk does not reflect current fundamentals, and we therefore recommend exposure either through CDS or government bonds,” Ann Wyman, head of emerging market research Europe at Nomura, wrote in an e-mailed report dated April 16 and received today. “We continue to see value.”

Dubai World, one of the emirate’s three main state-owned holding companies, and its property unit, Nakheel PJSC, are seeking to renegotiate their debt after the global credit crisis battered Dubai’s real estate market and left companies unable to raise new funds. Dubai World asked its almost 100 creditors on March 25 to roll over debt into two new loans of five-year and eight-year maturities.

UAE telecoms group Du sets $273 mln rights issue

Dubai-based telecoms provider du DU.DU will pursue a 1 billion dirham ($272.3 million) rights issue to fund infrastructure improvements beyond 2010, it said on Monday.

Chief Executive Officer Osman Sultan said during a call with reporters that the issue was already fully subscribed by its major shareholders and will meet the financial needs of the company for three to four years.

Du had previously said it has an investment programme exceeding 2.2 billion dirhams ($599 million) for 2010. Sultan said that the 1 billion dirhams rights issue would allow for financing beyond this year.

Dubai Benchmark Leads Gulf Shares Lower on Global Markets, Oil

Dubai shares fell to the lowest in a month, leading declines in the Gulf, as global markets retreated after calls for regulatory probes on Goldman Sachs Group Inc.’s widened and as oil dropped.

Emirates Integrated Telecommunications Co. declined the most this year after it announced plans to raise money by selling shares. Emaar Properties PJSC, the developer of the world’s tallest skyscraper in Dubai, retreated for a fifth day. The DFM General Index lost 1.7 percent to 1,746.02, the lowest close since March 18. Saudi Arabia’s Tadawul All Share Index dropped 0.2 percent at 1:34 p.m. in Riyadh.

Asian stocks declined the most in two months, while commodities and currencies slumped, after the U.S. Securities and Exchange Commission sued Goldman Sachs for fraud and China curbed property loans. European stocks also fell as the U.K. and Germany probed Goldman and parts of Europe’s airspace remained shut after a volcanic eruption in Iceland grounded tens of thousands of flights. The MSCI World Index lost 0.8 percent.

Qtel AGM Approves 70 Percent Share Face Value Cash Dividend

The Annual General Meeting of Qatar Telecom (Qtel) QSC today approved the recommendation of the Board of Directors to issue a total annual cash dividend of QAR 7 per share. This represents 70 percent of the share face value.

Addressing the general assembly, His Excellency Sheikh Abdullah Bin Mohammed Bin Saud Al-Thani, Chairman, Qtel, discussed the reasons for Qtel’s success in a challenging year, and underlined his confidence in the company’s strategy for growth and development.

His Excellency Sheikh Abdullah said: “2009 was a year of clear achievement for both Qatar and for Qtel. While the world experienced a profound economic crisis, Qatar continued to stride forward steadily, guided by the wisdom of its leadership and its clear vision for the future.”

Saudi Arabia set to establish civil nuclear energy centre

Saudi Arabia , the world's largest oil supplier, is set to establish a civil nuclear and renewable energy centre to help meet demand for power as it pushes forward with economic expansion plans.

The Saudi press agency said at the weekend that the centre, the King Abdullah City for Nuclear and Renewable Energy, would be based in Riyadh and would be led by Hashim Abdullah Yamani, a former commerce and trade minister.

While discussions have focused on civil uses of the technology, analysts note that Saudi Arabia and other Arab Gulf states do not want to lag further behind Iran and Israel in developing nuclear technologies.

Dubai to Creditors in "interest rate stand off:" DODGE THIS!

So I have to admit that I am a little disappointed. I expected there to be a lot more suspense with regard to the Dubai World restructuring talks. Sure, there is a dispute regarding the interest rate that Dubai World will pay on the extended maturity loans that the banks will get. It seems that Dubai wanted to pay 1% fixed, a better rate than the US government gets for a similar term and the banks want them to pay 3% over LIBOR something more in line with what the actual risk of default is. To be fair this has the makings of some interesting drama. 1% flat vs. 3% over LIBOR is a pretty wide Gulf. At stake for the banks is a pretty big write down. You have to remember that when the banks put these loans on their books they include the future interest they are going to receive and therefore if they are going to get less interest that have to book a loss. At the Dubai rates the losses are over between 5% and 25% of the face value of the loans depending on the costs of funds of the banks. The FT describes the negotiations over rates as a “stand-off.”

So what exactly is the “stand-off?” The 
FT article goes on to say that the banks are not concerned about principal repayment and are not negotiating the fundamentals. Personally I think those issues merit far more attention. The fact is that in this transaction Dubai has completely drained the DFSF, the restructuring is completely a Dubai only affair. $1.5 billion of the remaining funds go to pay interest on the Dubai World debt the other $8 billion goes to Nakheel where the Sukuk holders are to be PAID OFF IN FULL. That’s right, the creditors of the subsidiary are getting 100% of their money back while the creditors of the parent are taking a 5%-25% hit to their P&Ls.

This is a huge victory for Dubai. The Dubai World creditors are going to sit back and watch while $8 billion is pumped into Nakheel to rescue the Emirati trade creditors and real estate investors. Thier principal repayments will threfore hinge on whether Nakheel can be brought back from the dead. The seem blisslfully unaware of the fact that Dubai real estate is off 30%, and the last thing Dubai needs is for Nakheel to come back to life and create even more supply. If I were a member of the creditor committee there would be a “stand-off” all right but it would sure as hell involve the fundamentals. There is no way I would allow the Sukuk holders who in event of default get worthless desert to be paid off in full when in event of default I get Dubai Ports World and whatever assets in Istithmar are above water as well as the JAFZA. Yep, that would be my stand off.

When someone says the word “stand-off” to me I generally think of Clint Eastwood on the main street of some town in the American West facing off against some other gunfighter or the final scene in a Quentin Tarantino film where everyone is pointing a gun at everyone else and there’s some real tension. In this case I don’t think it’s like that. I think it’s more like the joke where an aging Winston Churchill asks a young socialite whether she’ll sleep with him for five million pounds. The socialite, after some reluctance flirtatiously agrees. Then Churchill asks her whether she’ll sleep with him for five pounds. At this the socialite declares “Mr. Churchill, what kind of woman do you think I am?” To which Mr. Churchill responds: “Madam, we’ve established that, now there is simply a matter of price.”

HSBC, Standard Chartered Shortlisted for Libya Entry

Six lenders including HSBC Holding PLC and Standard Chartered PLC were short-listed for two banking licenses in Libya, the central bank of the North African oil producing nation said today.

The other four are UniCredit Group, Emirates NBD PJSC, Qatar Islamic Bank and Mashreqbank PSC, the United Arab Emirates lender owned by billionaire Abdul Aziz al-Ghurair, the Tripoli- based central bank said in an e-mailed statement.

“Application packages have been sent to the qualified banks which will have to” send them back by June 15, the central bank said.