Tuesday, 15 June 2010
United Arab Emirates banks would likely record 10 percent of their exposure to Dubai's debt-laden conglomerates as non-performing loans, while growth is expected to resume only in 2011, a Credit Suisse executive said.
Mohamad Hawa, head of MENA equity strategy at Credit Suisse, said the remaining exposure would likely be booked as lower interest income and considered a restructuring of debt rather than non-performing loans.
"Although you can argue that the economic value of the restructured debt is around 60-70 percent on the dollar, we don't really think that banks have to or will take an effective rate cut of 30-40 percent," he told on the sidelines of a research roundtable on Monday.
The United Arab Emirates will double its current investment in Iraq’s semi-autonomous Kurdistan region to $6 billion by 2013, said Abdullah bin Ahmed al-Saleh, director general in the emirates’ Ministry of Foreign Trade.
Kurdistan is a important partner for the U.A.E., which is keen to “develop and upgrade” ties between them, al-Saleh told delegates today at the Kurdish Regional Government’s two-day trade and investment conference in London. Iraq ranks 11th among his country’s trading partners, al-Saleh said.
A delegation of Kurdish cabinet ministers and business owners accompanied the northern Iraqi region’s prime minister, Barham Salih, to the conference with a message that Kurdistan presents an ideal investment opportunity.
Dubai World’s creditor banks may have lost as much as 56 percent of the value of the loans they made to the state-owned holding company after it altered the terms on $14.4 billion of debt, and lenders may have to aside 10 percent of these loans to cover losses, analysts said.
Dubai World’s loans have a fair value of 44 cents to 46 cents to the dollar after the restructuring proposal, JPMorgan Chase & Co. said in a research report e-mailed today. The company’s $4.4 billion of Group A debt has a fair value of 58 cents to 61 cents, and $10 billion of Group B debt a fair value of 36 cents to 41 cents, it said.
“The steep discounts from face value mostly reflect the below-market cash interest of 1 to 2 percent being proposed by Dubai World on both tranches,” London-based analyst Zafar Nazim wrote in the report. He estimated the “appropriate yield” for Dubai World bank debt at 14 percent to 17 percent.
Dubai and Bahrain shares declined, leading a drop in the Gulf, as Moody’s Investors Service said banks in the United Arab Emirates face challenges in a weak environment and lowered Greece’s credit rating to junk.
Dubai Islamic Bank, the United Arab Emirates’ largest Islamic bank, retreated 1.5 percent and Emaar Properties PJSC decreased to the lowest level since March. The DFM General Index slid 1.3 percent, the most since June 6, to 1,502.69. Bahrain’s gauge retreated 0.8 percent to 1,392.32, the lowest since at least 2004, when Bloomberg started tracking the data. The Bloomberg GCC 200 Index, which tracks 200 equities in the region, dropped 0.4 percent.
Moody’s statement on U.A.E. banks “reminds us that the real problem is financing; there is no incentive to put money in the market and take on more risk,” said Saud Masud, a Dubai- based analyst at UBS AG. Investors will “fall into any reconfirmation of a bearish outlook and will take international cues.”
Former Dubai Properties chairman Hashim al-Dabal has been released after repaying $35 million in public funds which he was accused of embezzling, the emirate's government said on Tuesday.
The executive, who was detained in late 2009, still faces questioning over suspected wrongdoings, the government media office said in a statement.
"Dubai's attorney-general, Issam Humaidan, decided to release the accused Hashem al-Dabal after he repaid to 130 million dirhams ($35.40 million) in public money he had embezzled by exploiting his position and authority," it said. Prosecutors started questioning Dabal late last year, one of many cases launched in an anti-corruption drive.
If the United Arab Emirates' initial public offering pipeline were anything like the crude oil ones that pump life into the country's economy then its equity markets would be dancing to a merry old tune.
But, sadly, it isn't and they aren't.
In fact, such share sales around these parts are now about as common as snowfall. So recent whispers of an imminent return of IPO activity in the emirates certainly made this writer sit up and take notice. After all, the last IPO to get off the ground in the U.A.E. took place about two years ago; almost an eternity. Back then, crude was parked at about $130 per barrel and the world was still happily accepting Dubai's bouncy checks.
But, just last month, the chief executive of Shuaa Capital, the largest investment bank in the U.A.E., said his team was working with an unnamed Abu Dhabi-based company in an effort to bring it to market later this year. Then, low and behold, a few days later, local media reported that Emirates NBD Capital was advising on three different IPOs for this year. Could it be the U.A.E. is standing on the cusp of an IPO bonanza?
Just hold up one darn second. The common thread in these reports was a lack of any firm details about the planned share sales. There were no company names, nothing on the size of issues; heck, not even rough dates were supplied.
The promotion of an 'IPO market' that's more fantasy than fact shouldn't surprise anyone though. Investment banks continue to scramble for any crumbs of activity that will help prop up sagging fee and commission income. Suggestions of an active IPO revival might very well be aimed at inspiring firms to consider coming to market.
But talk is cheap, and the cold reality of selling and listing shares here at the moment is a scary proposition. Conditions for IPOs are far from ripe. In fact, the current environment is probably about as lousy as it can get. Dubai's equity benchmark, the DFM Index, has slumped 11% over the past month alone, while neighbor Abu Dhabi has given up about 10%. With no immediate cure in sight for Europe's festering credit problems, and worries about global economic growth escalating by the day, further downside for stocks can't be ruled out in the coming months.
The fear, nay embarrassment, of a company's shares sinking below the issue price on market debut is a terror that should keep even the bravest of potential IPO-ers at home. Anyway, it's debatable whether there would be sufficient investor appetite to soak up any new share issues over the coming months. The blistering hot summers here tend to drive all and sundry to cooler climes and, with the holy month of Ramadan just around the corner, liquidity will fast become a precious commodity.
Selling and listing shares can and should be a profitable route for companies to pursue. It's also a great provider of depth and liquidity for local exchanges. But timing is everything for an IPO and there are precious few signs that this time is now in the U.A.E.
(Tim Falconer is currently News Editor, Middle East for Zawya Dow Jones. He has been a financial news reporter since 1999. He has reported on equity, money and commodity markets for Dow Jones Newswires in Wellington, London and Dubai. He can be reached at +971 04 446 1690 or by email: firstname.lastname@example.org)
BP gave itself – and the rest of the Oil & Energy world – a breath of fresh air by publishing its annual ‘Statistical Review of World Energy’ last week. Despite the high quality of the report, both the objective data and the personal conclusions are open to discussion though, especially since yesterday, with Exxon taking the floor.
BP Statistical Review of World Energy: summary
In short, this highly respected report gives a clear and objective view on the evolution of global resources and yearly evolution of consumption. It states that energy consumption lowered for the first time since 1982, reflecting largely the evolution of the economic recession and recovery. Industrialized countries consumed less energy (-5%), while consumption increased in the rest of the world (+1.7%).
Lease rates in Dubai continued to decline in June compared to April, as more housing stock was released into the market, a real estate consultancy said.
Landmark Advisory, in its Dubai lease guide, said although the units in lower-quality buildings and less prestigious locations are experiencing the strongest rent declines, the more significant trend is the resumption in rent declines for quality units in prestigious locations.
"Declines are primarily attributed to increasing supply, a trend that will continue with 100,000 new units anticipated for delivery over the next two years," the report said.
Dubai may launch a dollar-denominated Islamic bond as early as the third quarter of this year after well-received presentations to investors last week, banking sector sources familiar with the roadshow said on Monday.
One source at the arrangers of the roadshow — run by HSBC and Mitsubishi UFJ — declined to confirm whether Dubai might issue a bond later this year.
But a fund manager familiar with the presentations said they had pointed to a 7-10 year sukuk, and a senior fixed income trader said the issue could come in the third quarter.
Ithmar Capital, a private equity company based in Dubai, has taken a Dh1 billion (US$272.2 million) majority stake in Al Noor Medical Company in Abu Dhabi.
Ithmar’s capital injection is designed to fund an expansion of Al Noor through acquisitions, new development, public-private partnerships and strategic equity investments. The idea is to create a regional healthcare services company, said Faisal bin Juma Belhoul, the founder and managing partner of Ithmar, which has more than Dh2bn in assets under management.
“Al Noor is the largest healthcare operator in the country,” he said. “We’re going to build on that.”
Large chunks of London from London Bridge to Chelsea are set to be transformed by the oil and gas riches of Qatar.
The tiny emirate, which recently bought Harrods for £1.5bn, is likely to be the largest overseas property investor in the world this year, according to a report today, as it targets the capital's assets in an aggressive spending spree.
"Cash-rich and with a strong appetite for splashy overseas assets, Qatari [investment] vehicles have lately outshone their counterparts from the region and are projected to carry on with their rapid expansion across the real estate world," said the report by real estate consultancy Jones Lang LaSalle (JLL).
Nasdaq Dubai on Monday announced its new board of directors, led by Abdul Wahed Al Fahim as chairman.
In a statement, the bourse operator said the board will drive Nasdaq Dubai’s expansion and development following its acquisition by the Dubai Financial Market, or DFM, last month. Al Fahim is also the group deputy CEO of wholesale banking for Emirates NBD.
Shuaa Capital Chairman Majid Saif Al Ghurair, DFM Vice-Chairman Rashid Al Shamsi, National Bank of Abu Dhabi Regional Director in the Northern Emirates Abdulla Ghobash, Nasdaq OMX Group Executive Vice-President Edward Knight and Jamal Nasser Lootah have also been appointed.