Thursday, 27 May 2010
Dubai stocks rose for a second day as oil climbed above $73 a barrel and China said it remained a long-term investor in Europe, boosting appetite for riskier assets. Oman’s benchmark jumped the most since December.
Emaar Properties PJSC, developer of the world’s tallest skyscraper, rose 1.8 percent. Emirates NBD PJSC had the biggest gain since April 11. The DFM General Index advanced 0.9 percent to 1,605.22, paring the drop for the week to 5.1 percent. Oman International Development & Investment Co. led that country’s gauge higher as EFG-Hermes Holding SAE initiated coverage with a “buy” recommendation. Egypt’s EGX 30 gained 2.2 percent.
European stocks rallied and the euro advanced as China’s foreign exchange regulator said reports it was reviewing its euro holdings are “groundless.” Asian shares rose on bets corporate profits can withstand any slowdown caused by the European debt crisis. Crude climbed as high as $73.67 a barrel.
Blue City, a $20 billion real estate development, was supposed to help transform Oman, the Persian Gulf nation of about 3 million people. Government officials extolled the project as an important step in its plan to diversify the economy and prepare for the depletion of oil reserves. But Blue City, envisioned as a community for more than 200,000 people, missed sales targets as real estate speculators left Middle Eastern markets and a legal battle between the project's owners made potential buyers wary. Now it may face liquidation.
Oman, bordered by the United Arab Emirates, Saudi Arabia, and Yemen, has been ruled by Sultan Qaboos bin Said since he overthrew his father in 1970. Heavily dependent on dwindling oil reserves, it managed to boost production in 2009, according to the CIA World Factbook. It's not an OPEC member.
Blue City, an hour's drive from the capital, Muscat, was to be "a whole new city for the present and future generations," according to its website. The first phase would include more than 200 villas, 5,000 apartments, 4 hotels, 2 golf courses, and a clubhouse, according to the prospectus. A total of $925 million was raised from bondholders, and construction started in 2006. Blue City turned down requests for interviews with its executives.
National Central Cooling Co., the refrigeration company that delayed payments on an Islamic bond, is in talks with banks to restructure about 3.7 billion dirhams ($1 billion) in loans, the chief financial officer said.
“We are in discussions with about a dozen banks,” Stephen Ridlington said in a phone interview from Abu Dhabi today. “We don’t have a proposal on the table yet. Banks need to see the business plan we are developing.”
Tabreed is among Gulf Arab companies seeking to restructure debt after the global economic crisis dried up financing and brought a property boom to a halt. Dubai World, one of the emirate’s three main state-owned holding companies, said on May 20 it reached an agreement with its main creditor group to restructure $23.5 billion of liabilities. Dubai International Capital LLC, a unit of Dubai Holding LLC, today sought a three- month extension on some of its loan payments.
Dubai World’s chairman has declared victory. At the opening of a Mars confectionary factory yesterday, Sultan bin Sulayem said Europe could learn from the emirate’s experience in restructuring its debts, estimated by the IMF to total $109bn.
“From experience, I know we should be confident that the worst is over,” he said. “Not a single bank is in danger, not a single company is going to be losing.”
But companies owed billions of dollars by Nakheel, the troubled development arm of Dubai World, may raise their eyebrows at the optimistic outlook.
Dubai International Capital, the investment arm of conglomerate Dubai Holding, said Thursday it has asked lenders for a three-month extension on some of its debts, indicating the financial challenges still facing the city-state.
The news comes six months after Dubai's much larger conglomerate Dubai World shocked markets by announcing the need for a standstill on its debt pile. Last week, Dubai World said it has agreed in principle with its main creditors to restructure $23.5 billion of debt and that it will now seek a final deal with all its creditors by end June.
DIC said in a statement Thursday that the debt extension to Sep. 30 would allow it to implement a "consensual longer term plan" that would allow it to "maximise the value of its business for the benefit of all its stakeholders".
DIC has $2.6 billion of debt maturing by 2011, with $1.25 billion falling due next month, a banker familiar with the matter said Thursday.
DIC said it made the debt extension presentation to its lenders alongside a coordinating committee of banks.
The coordinating committee is co-chaired by HSBC Holdings PLC (HBC) and Emirates NBD PJSC (EMIRATES.DFM), the banker said.
Financial services firm Deloitte is advising DIC's lenders, another person familiar with the matter said.
Dubai Holding, which has overall debt of around $12 billion, is controlled by the emirate's ruler Sheikh Mohammed bin Rashid Al Maktoum.
Earlier in May, Dubai Holding's subsidiaries--Dubai Holding Commercial Operations, which oversees Dubai Holding's property, business-park and hospitality investments, including hotel operator Jumeirah; Dubai Group, which is one of Dubai Holding's investment arms; and DIC--all appointed financial advisers ahead of a potential debt restructuring, people familiar with the matter told Dow Jones Newswires at the time.
In April, German aluminium company Almatis--one of DIC's portfolio companies--filed for U.S. Chapter 11 bankruptcy protection.
The Chapter 11 process will be used to bring about a debt-for-equity swap that will lower Almatis' $1 billion debt to around $422 million and will see distressed debt investor, Oaktree Capital, take control of the company.
Under Oaktree's plan, DIC, subordinated-mezzanine and second-lien lenders would all see their investments wiped-out.
DIC has said it will "vigorously dispute" Oaktree's plan and is pursuing its refinancing plans of its own.
The six-member states of the Gulf Cooperation Council suspended free-trade negotiations with the European Union that have been going on for about two decades after failing to overcome obstacles to an agreement.
“In view of the fact that there was no progress as the European side held its previous position, the council countries have suspended the negotiations,” GCC Secretary-General Abdul Rahman al-Attiyah said in a speech posted on the Gulf bloc’s website today. It didn’t provide further information.
Free-trade negotiations between the 27-nation EU and the GCC, which includes Saudi Arabia, the world’s largest oil producer, and the United Arab Emirates, have faltered over disagreements on tariffs, petrochemical subsidies and foreign companies holding majority stakes in GCC companies. Attiyah’s statement dated May 25 was made as German Chancellor Angela Merkel tours the Persian Gulf.
Saudi Basic Industries Corp., the world’s biggest petrochemicals maker, and Malaysia are among issuers delaying bond sales as Europe’s debt crisis sent emerging market borrowing costs to near their highest since September.
Sabic Capital, a unit of Sabic, delayed its offer because the spreads were “not what we wanted,” Chief Financial Officer Mutlaq Al-Morished said in a telephone interview today. Malaysia postponed making a decision on the size and timing of its first sale of Islamic bonds in eight years due to unstable market conditions, said two people with direct knowledge of the plan. Bahrain-based retail lender BBK also delayed a bond sale, said a banker familiar with the plan.
Emerging-market assets have slumped this month as the debt crisis in the European Union fueled concern the global economic recovery will stall. The extra yield investors demand to hold debt of developing nations over U.S. Treasuries widened 71 basis points in May to 336 basis points today, according to JPMorgan Chase & Co.’s EMBI+ Index. The spread reached 354.7 basis points yesterday, the highest since Sept. 11.
Jordan Dubai Islamic Bank INDV.AM made its market debut on the Amman stock exchange on Wednesday, nearly 18 months after UAE-based investors bought a majority stake in a local Jordanian bank and rebranded it.
The UAE's Dubai Islamic Bank had bought a 52 percent stake in Industrial Development Bank of Jordan and shares in the predecessor of Jordan Dubai Islamic Bank were then suspended on Dec. 30 2008.
The newly branded bank began commercial operations several months later. Its shares closed at 2.09 dinars ($3) on Wednesday, or 11.4 percent lower than its forerunner's last close.
The Citigroup bandwagon may have a new passenger.
The Financial Times reports that the Qatar Investment Authority is mulling whether to buy a big slug of the Treasury Department’s 7.7 billion-share stake in the New York financial-services company.
University of Louisiana Finance Professor Linus Wilson would argue that the Treasury should run–not walk–to Qatar to do a deal. Wilson has been watching with trepidation as Citigroup’s shares have fallen to as a low of $3.65 last week from a six month high of $4.97 on April 20, amid the broader swoon in the stock market.