Tuesday, 13 July 2010
Qatari Diar Real Estate Investment Co. will price its first dollar bonds tomorrow, according to a banker involved in the transaction, as the developer owned by the country’s sovereign wealth fund seeks to raise $3.5 billion.
The five-year notes may be priced to yield about 200 basis points over similar-maturity U.S. Treasuries and the 10-year debt may have a spread in the low 200-basis-point range, the banker said, declining to be identified because terms aren’t set. The company will complete meeting investors in the U.S. today, he said.
The Gulf nation, the world’s biggest producer of liquefied natural gas, tapped international debt markets in a multi- tranche sale in November, raising $7 billion. Qatar is spending billions of dollars diversifying its economy and plans to invest in infrastructure projects, international oil and gas industry, and sports and cultural attractions.
Saudi banks, like their nation, have won a reputation for being among the most conservative in the oil-rich Gulf.
This approach helped them avoid some of the worst excesses in the credit boom when lending growth soared at unsustainable levels across the region. And recently released second quarter 2010 results show them to be reaping the rewards of their prudence.
According to Credit Suisse, all but one of five of the kingdom’s main banks – Riyad Bank – beat consensus expectations. The better than expected results were driven by solid revenue growth of between 4 and 8 per cent, on strong fee income, up 9 to 22 per cent quarter on quarter, and resilient margins as net interest income grew between 1 and 7 per cent, Credit Suisse said in a research note.
This was also supported by lower than expected provisioning.
Abu Dhabi’s crown prince, a member of the board of one of the world’s largest sovereign wealth funds, said the emirate is considering an investment in BP Plc after the company lost half its value following the worst oil spill in U.S. history.
“We are still thinking about it,” Sheikh Mohammed bin Zayed Al Nahyan said in an interview in Abu Dhabi today, when asked about potentially buying a stake in the London-based oil producer. “We are looking across the board. We have been partners with BP for years.”
BP Chief Executive Officer Tony Hayward said on July 7 that he had a “very good” meeting with the crown prince as analysts said the oil producer may be looking for support from Middle East investors. Hayward pledged last month to set aside $20 billion for spill victims and cleanup, to be paid for by scrapping the dividend, reducing investment and asset sales.
“Lots of people would like to get into BP now,” said Christine Tiscareno, an analyst at Standard & Poor’s in London. “Hayward has assured people that things are under control. If Abu Dhabi increases its stake, it is saying that there is a future for BP, it’s not a dying company.”
Nakheel PJSC, the property developer owned by Dubai World, plans to offer lenders interest of 4 percentage points more than benchmark rates as it seeks to restructure $10.5 billion of debt, according to two bankers with knowledge of the plan.
Nakheel, the state-owned builder of a palm tree-shaped island development off Dubai’s coast, will offer the new interest rate on its loans in dollars and dirhams at a meeting tomorrow, said the bankers, who declined to be identified because the matter is private. In return, lenders would agree to extend the lifetime of the loans by five years, the people said.
The proposed terms aren’t final, according to one of the people. The loans make up part of the debt that Nakheel is seeking to reorganize, which also includes outstanding payments to suppliers and contractors. The spreads will be over the Emirates interbank offered rate or the London interbank offered rate, the bankers said.
Qatar shares declined the most in more than a week, leading a drop in the Gulf, on concern second- quarter earnings may fall and as China reaffirmed a commitment to curb lending.
Qatar’s QE Index slipped 0.9 percent, the most since July 4, to 6,955.42 at 11:47 a.m. in Doha. Industries Qatar, the second-biggest petrochemicals maker in the Middle East, retreated 1.7 percent and Qatar Islamic Bank fell the most in almost two weeks. The Bloomberg GCC 200 Index of stocks in the region dropped for a second day, declining 0.4 percent.
“Investors are awaiting second-quarter results of big companies,” said Mohammed Ali Yasin, chief executive officer at Shuaa Securities LLC in Abu Dhabi. “Day traders are anticipating and moving with the global markets.”
National Bank of Kuwait (NBKK.KW) (NBK), the country's largest bank by assets, posted a 10 percent rise in second-quarter net profit on Tuesday.
Reuters calculated second-quarter net profit of 68.9 million dinars ($237.5 million) based on previous financial data, which showed NBK posting a net profit of 76.3 million dinars in the first quarter.
Net income in the first half of the year was 145.2 million dinars, NBK said in a statement.
How stable is Saudi Arabia? Not very, according to at least one member of the Kingdom's ruling class. Last month Prince Turki bin Abdul Aziz Al Saud, a prominent dissident now in exile in Cairo, issued an open letter to his fellow royals, urging them to abandon their desert fiefdom for greener pastures. According to the prince, the current social compact between the House of Saud and its subjects had become untenable, with the government no longer able to "impose" its writ on the people and growing grassroots discontent at the royals "interfering in people's private life and restricting their liberties." His advice? That King Abdullah and his coterie flee the Kingdom before they are overthrown--and before their opponents "cut off our heads in streets."
Or so the story goes. Reports of Turki's missive have understandably made a splash in the Iranian press, with Riyadh's regional rival engaging in some thinly veiled schadenfreude. But the actual letter itself is exceedingly hard to come by, at least in its English translation. Were it not for a report from the country's official news agency denouncing the communiqué, you might think the entire episode was made up.
Real or fabricated, however, the warning is instructive. Seventy-eight years after Abdul Aziz ibn Saud triumphantly carved out his kingdom on the Arabian Peninsula following a quarter-century of warfare against rival tribes, Saudi Arabia is living on borrowed time. And the likely culprit of its eventual undoing is the one commodity that allowed ibn Saud to secure international legitimacy in the years following his country's founding: oil.
Emaar Properties PJSC’s second- quarter earnings are likely to “surprise on the upside” because of income from the handover of apartments at Burj Khalifa, the world’s tallest tower in Dubai, Deutsche Bank AG said.
“Emaar remains our top pick, offering undervalued recurring income-generating assets and reduced exposure to the Dubai market,” analysts Nabil Ahmed and Athmane Benzerroug wrote in a report dated July 12. Property companies in Abu Dhabi should post weak numbers in the second quarter because of the lack of land sales and unit deliveries, according to the report.
Deutsche Bank said Dubai property prices continued to decline moderately in June. “Even if the worse of the downward trend is behind us, we believe it is still too early to call it as through, given the massive oversupply and lack of buyers appetite,” it said.
The Dubai debt crisis is prompting investors in the $130 billion Islamic bond market to seek stronger rights of ownership of assets to protect against defaults, said a U.S.-based Shariah scholar.
Funds will favor asset-backed debt, in which the ownership of collateral is transferred after a default, said Sheikh Yusuf Talal DeLorenzo, the Washington-based chief Shariah officer at Shariah Capital Inc., a consulting company. Only 4 percent of the $32 billion of Islamic bonds Moody’s Investors Service rated in 2009 contain such provisions, the company said in an April report. The rest rely on the issuer agreeing to a sell assets financed by the bonds if they can’t make payments on time.
“Clearly, Islamic investors have felt that the present generation of sukuk has not met expectations for ownership, so changes are being demanded,” DeLorenzo said in a telephone interview on July 7. They “will require greater due diligence with regard to transfer of ownership,” he said.
Aabar which earlier in the year had attempted to execute a take-under of Arabtec the Dubai based construction firm at a discount to the prevailing price has done itself one better, it is taking itself private 1.45 AED per share. That’s down about 15% from the pre-delisting announcement and about 25% below the high for the past year. Those guys over at Aabar are some smart folks. Not only do they get to take their company private so there won’t be any more of these pesky disclosures as to what the investment arm of IPIC is doing but the valuation they are granting themselves is also 50% of book value. Nice trade.
Most of what I have read in the press makes no sense. There was something about how the shareholders though they might get taken out at the conversion price implied by the bonds that were issued in May. There is NO reason to think that, the conversion price in a mandatory convert is not designed to give a valuation but to imply upside. There has been some talk of ESCA demanding an independent valuation. That would shock me because clearly the IPIC guys have more power than the ESCA guys and whoever was hired to do the “independent valuation” would have a lot to gain from future business from IPIC and little to gain from the gratitude of the minority shareholders.
So what do the minority shareholders have to say about this? We’ll never know. Aabar asked ESCA to allow it to delay the meeting to discuss the delisting to August 8th, from July 27th. ESCA granted the request the same day. Given that the offer expires on August 1st the offer will have ended by the time the meeting is held. Well done Aabar, no need to discuss the merits of the offer at the meeting because anyone who takes it will of course no longer be a shareholder and therefore won’t be there. Aabar may well be addressing an empty room, quiet (rightly) as a tomb. Aabar has once again made an “O plato, o plomo” (lead or silver) offer, this time to its’ own shareholders.
Transportation projects in the UAE, Saudi Arabia, Qatar and Kuwait worth an estimated $170 billion will change the way trade is done. Railway projects alone will be worth an investment of $108 billion, according to Satish Khanna, General Manager of Al Fajer Information and Services, the organisers of the GulfRail 2012, an exhibition and conference set to take place from April 17 to 19, 2012.
An $11 billion UAE railway network that will be 1,500km long is scheduled to roll out over the next 7-8 years.
Abu Dhabi has also revealed its plans for a new rail network, called the Union Railway, that would serve Al Ain. The construction of the Union Railway is about to start this year and will cost between Dh30 billion and Dh40 billion.
Exchange traded funds (ETFs) are sure bet for Qatar as well as other Gulf bourses to increase the liquidity and to enhance global visibility for their listed entities, according to a UK-based asset management firm Blackrock.
“If more ETFs are in the region, there should be more liquidity. International investors will have more access to the region,” Blackrock vice president Robert Blackwell told Gulf Times in an interview.
ETFs are mostly (but not exclusively) index-based open-ended funds that can be bought and sold as quickly and easily as ordinary shares on a stock exchange. They provide investors with the opportunity to access markets that were previously closed to them.