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Wednesday, 11 August 2010

FT- Private equity sets its sights lower

Back in the debt-laden years of plenty, the giants of Middle Eastern private equity descended on upmarket conferences to sell the oil-rich region as the fourth global centre of the industry after the Americas, Europe and Asia.

But as the credit crunch sent the world into a tailspin, the massive funds sought by regional players have failed to materialise. A limited pool of partners with deep pockets has refused to stump up cash, banks have reined in lending, and sellers remain in denial about the value of their assets.

As a result, private equity groups are turning to smaller mid-market and venture capital-style deals.

Provisions take their toll on UAE companies

The United Arab Emirates is not having a good time of it. Not only are the emirates’ equity markets the poorest performers in the region in the year to date but second-quarter earnings of the 21 UAE listed companies monitored by EFG-Hermes came in nearly a third lower than the expectations of the bank’s analysts. Just three stocks – Aldar and Abu Dhabi Commercial Bank in Abu Dhabi and Emaar in Dubai – accounted for the bulk of the nasty surprise.

Aldar, the property developer, was hit by a higher Dh250m ($68m) charge for receivables – typically buyers of land bought from the developer who have not yet paid up, says Jad Abbas, EFG’s real estate analyst. The developer has also slowed the handover of some properties at the 500-unit Bandar development on Raha Beach in Abu Dhabi.

“The top line was not that disappointing but the bottom line was hit by the impact of those provisions . . . That’s where the big swing factor was,” Mr Abbas says.

Kuwait's Burgan Bank swings to loss in Q2 | Reuters

Kuwait's Burgan Bank (BURG.KW), made a loss of 8.73 million dinars ($30.43 million) in the second quarter, after booking provisions against high-risk loans, having made a profit in the same period a year ago.

Burgan, the commercial banking arm of Kuwait Projects Co (KIPCO) (KPRO.KW), Kuwait's biggest investment company by assets, said in a statement on Wednesday its outlook for the rest of the year was positive.

The bank made a profit of 760,000 dinars in the same period last year."

Abu Dhabi's IPIC to sell Oilbank stake for US$2.2 billion after rulings

Hyundai Heavy Industries Co. said International Petroleum Investment Co. has agreed to sell Hyundai Oilbank Co. to the world’s biggest shipyard for US$2.2 billion after two courts ruled in favor of the transaction.

The Abu Dhabi government investment arm and Hyundai Heavy signed an agreement yesterday, the shipyard said in a regulatory filing today. Sally Cho, a spokeswoman at a public relations firm representing IPIC, said she is checking the agreement.

Last month, Seoul Central District Court confirmed the right of Hyundai Heavy to buy the South Korean refiner from IPIC, backing a ruling in Singapore last year. IPIC appealed the decision to the Seoul High Court at the end of July."

Dubai, Saudi Shares Retreat to August Low on Global Economic Concern, Oil - Bloomberg

Dubai and Saudi Arabian shares fell to the lowest this month, leading Gulf markets lower, after the Federal Reserve said the pace of economic recovery may be “more modest” than forecast and as oil dropped a second day.

Shuaa Capital PSC, the United Arab Emirates’ biggest investment bank, retreated to the lowest since April 2009 after it reported a second-quarter loss. Saudi Basic Industries Corp. lost 1.7 percent, while Al Jouf Cement Co. jumped on its first trading day. The DFM General Index decreased 0.9 percent to 1,482.58, the lowest since July 7, at the 2 p.m. close in Dubai and Saudi Arabia’s Tadawul All Share Index declined 1.1 percent to 6,193.84, the lowest since July 26, at 2:18 p.m. in Riyadh.

After the Fed announcement “we saw a sell-off in international markets and that’s translating into a lack of interest in our markets,” said Marwan Shurrab, assistant fund manager and chief trader at Gulfmena Alternative Investments in Dubai. “Turnover is low on the first day of Ramadan.”

Dana Reports Second-Quarter Net of $9 Million After One-Time Gain Year Ago - Bloomberg

Dana Gas PJSC, a United Arab Emirates energy company, said second-quarter profit after tax reached 33 million dirhams ($8.98 million) on higher production and hydrocarbon prices.

Net income rose by 62 million dirhams from a year earlier, excluding second-quarter 2009 gains from asset sales, Dana said in a statement to the stock exchange. The company reported 392 million dirhams in profit for the year-earlier period that included proceeds from the sale of a stake in a unit in Iraqi Kurdistan.

Earnings at U.A.E.-based energy companies like Dana and Abu Dhabi National Energy Co., the state-run utility known as Taqa, were helped by oil prices, which rose to an average $78.05 a barrel in the quarter from $59.79 a year earlier. Dana is developing gas deposits, production and transport facilities in Egypt, Iraq’s northern Kurdish region and the U.A.E.

Mashreq, Emirates NBD fail in Libya entry bid

Three Gulf Arab banks have lost out in the bidding for a licence to operate in Libya, but bankers and analysts say such lenders will stay in the hunt as they look to offset slowed growth at home.

'In the UAE in particular, single-digit loan growth forces these banks to look outside their home market,' said a Dubai-based banking analyst.

'Banks in the UAE, Qatar and the Gulf in general are looking outside their home market in places like Syria and North African countries such as Libya.'"

Dubai World sells West End office in one of London's largest property deals - Telegraph

The building, at One Trafalgar Square, was sold by Istithmar to an unnamed Russian investor for £172m and is one of the largest investment deals in London's West End to be carried out. It is thought to be the Russian's first purchase in the UK market.

Grand Buildings includes retail outlets and office space, which is let to Enterprise Oil. The property was constructed in the 1870s and is understood to have been purchased by Istithmar for about £155m five years ago.

Istithmar sold two properties in the capital in November for £10m and a share of future profits to Great Portland Estates.

Dubai Electricity & Water Seeks $1 Billion Guaranteed Loan, MEED Reports - Bloomberg

Dubai Electricity & Water Authority, the government-run utility, has applied to international banks for a $1 billion loan guaranteed by export credit agencies, Middle East Economic Digest reported, citing an unidentified banker close to the transaction.

The loan would be the second such guaranteed borrowing the authority, known as Dewa, has obtained and is part of a bid to obtain low-cost funding to finance contracts with European suppliers, the publication said.

The authority in May 2009 took out a $1 billion loan backed by Germany’s Hermes, Italy’s Sace, and France’s Coface that was priced at less than 3 percent above the London interbank offered rate, MEED said. The same three agencies probably will guarantee the new loan, the publication added.

Ramadan mubarak, wherever you are reading this.

Standard Chartered Plans `Big Push' on Shariah Contracts: Islamic Finance - Bloomberg

Standard Chartered Plc, the U.K. bank that earns most of its profit from emerging markets, plans to introduce Shariah-compliant contracts in Asia to hedge against changes in commodity prices.

The products, which the London-based bank made available in the Persian Gulf in March, will allow buyers and sellers to agree on fixed or floating prices and make it easier for companies to protect themselves from volatility in goods such as sugar, rice, wheat and crude oil, Afaq Khan, chief executive officer of Standard Chartered’s Islamic banking unit in Dubai, said in an interview on Aug. 9.

“This year the big push is on commodity derivatives,” he said. “We will certainly be offering them in countries like Malaysia and Indonesia in due course. When there is sufficient demand we will go to the central banks to seek approval.”

Jailed in Dubai, Accused Wait Long After Good Times Have Gone - Bloomberg

Not long ago, British businessman Ryan Cornelius was living the high life, doing deals out of Bahrain and taking his family big-game fishing on his yacht and on safari in Kenya. He’s now into his third year in a Dubai jail cell, yet to be convicted of anything.

“The worst aspect of the way we’ve been treated is the fact that the legal system seems to be so suspended in its own inefficiency,” he said from a pay phone at Dubai’s Central Prison. “We just don’t seem to move forward. The whole legal system seems to hold you in a state of constant suspension.”

Cornelius, 56, and six co-defendants have been charged with defrauding Dubai Islamic Bank PJSC of $501 million, one of the largest such cases in the history of United Arab Emirates. He says he did nothing wrong, and like others, foreigners and nationals, who profited in Dubai in the boom times, he waits in prison as the legal system slowly tries to separate the guilty from the innocent of those arrested in an anti-corruption drive.

Lehman Brothers Europe Sues Dubai Real-Estate Group Over Disputed Swaps - Bloomberg

Dubai Holding Commercial Operations Group LLC, a real estate and hospitality group owned by the emirate’s ruler, was sued by Lehman Brothers International Europe over the value of swap transactions.

LBIE, which is in administration in the U.K., filed the lawsuit in London, according to court papers. The case is “a straightforward financial dispute regarding the valuation of certain swap transactions entered into between the parties,” LBIE’s administrators, PricewaterhouseCoopers LLP, said yesterday in an e-mailed statement. They declined to provide information on the value of the swaps.

Dubai Holding’s representatives at a public relations agency weren’t immediately available to comment outside normal business hours.

Shuaa Has $15 Million Second-Quarter Loss as Value of Investments Declines - Bloomberg

Shuaa Capital PSC, the United Arab Emirates’ biggest investment bank, reported a second-quarter loss as the value of investments declined.

The second-quarter loss was 56.6 million dirhams ($15 million) after a profit of 91.7 million in the year-earlier period, Dubai-based Shuaa said in an e-mailed statement today. The bank’s first-half loss narrowed 65 percent to 37.1 million dirhams and its cash position of 474 million dirhams is “very comfortable,” it said.

“Our results are strongly influenced by investor sentiment and activity,” Sameer Al Ansari, Shuaa’s chief executive officer said in the statement. “During this period of extreme market stagnation, we continue to rebuild Shuaa with a clear focus on our fee-generating businesses and significant senior management additions.”

Wall St. WTF: UAE Banking Stress Tests brought to you by the shadow central bank: Shuaa Capital

When I first saw an article calling for stress tests of the Gulf Banks I laughed. My opinion was that the Western Governments that had enacted them largely to try to counter the market suspicion that despite the massively unpopular but massively necessary injections of capital that the banks were still in serious trouble. Knowing that they would struggle to muster the political will to rescue the banks again they decided to try to show the world that no more injections would be necessary and then market confidence might build on itself. It seems to me that this is totally unnecessary in the Emirates.

Given that the Emirates were unwilling let Dubai World fold, what are the odds that they’ll let the banks collapse? Zero. More to the point, since the banks will ultimately rely neither on the markets nor the voters for their rescues what is the point of reassuring either as to their health? At the end of the day the largesse which rescues the banking system will come from the Al Nahyan who answer to neither and indeed answer to no one. Thus rather than a statistical shock to the values of the assets on the balance sheets of the banks what a would-be stress tester would have to determine was the odds of the various banks winning the coin toss of Al Nahyan support. Given the fact that they allowed Dubai to pour $15 billion into the Nakheel black hole my guess is the coin they’ll use for banks has heads on both sides.

Apparently the UAE central bank agrees with my conclusion if not my reasoning and has decided not to conduct these stress tests. So it has fallen on the shadow central bank of the UAE, Shuaa Capital, to conduct them. I should say that I have a lot of respect for Shuaa. When I first got to the Gulf I tried to work out partnerships with a lot of local institutions whereby my firm would provide intellectual capital and they would provide the local connections. At the time intellectual capital was rarer than local connections so the deals I struck were generally pretty favourable. When I met with Shuaa they sent me packing. They had intellectual capital in spades which they showed me over the next two years as one of our stiffest local competitors for the equity market access business. They had a vastly more nuanced understanding of the legal and regulatory environment. They knew, in a way that my compliance department in Frankfurt could never know, that you can cross the lines but you can’t cross the men who draw the lines. They were a well led and effective firm.