Friday, 17 September 2010
November 2009: that was the month the city-state almost self destructed like one of the messages in the classic spy series. The government told the international financial community that despite months of assurances it would not be able to repay its debts.
With $20bn in help from oil-rich neighbour Abu Dhabi, a default crisis was averted and refinancing plan cooked up."
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Malaysia’s 3.928 percent dollar-denominated Islamic notes due June 2015 fell 0.1 percent this month, according to prices from the Royal Bank of Scotland Group Plc. The debt yields 142 basis points more than Treasuries and has averaged 153 basis points over the past three months. Dubai’s sukuk, or bonds that comply with Shariah law’s ban on interest, returned 2.1 percent in September, according to data compiled by Bloomberg.
“Some investors may be attracted to the Gulf market and buying more Gulf papers after the Dubai World debt-restructuring deal,” Mohd Farid Kamarudin, who helps manage 1.3 billion ringgit ($417 million) of Shariah-compliant assets at Kuala Lumpur-based AmInvestment Management Sdn., a unit of the fifth- biggest sukuk underwriter this year, said in a Sept. 15 interview. “Malaysian sukuk may rally, especially toward the end of the year with new funds being created.”
Abu Dhabi Mar to take control of Greek shipyard - Business Intelligence Middle East - bi-me.com - News, analysis, reports
"After tough and painful negotiations that on occasion reached the limit of failure, the negotiating teams today initialled the deal," the ministry said in a statement.
The ministry did not disclose the terms of the contract.
Nakheel and Dubai Holding are likely to be the next companies in line for financial shake-ups that could hurt lenders in the region, analysts say, while other corporate restructuring proposals could be in the pipeline.
“There could be surprises to come,” said Raj Madha, a senior banking analyst at Rasmala Investment Bank in Dubai."
Growth in the U.A.E. will be better than the current forecast of 1.3 percent and the 0.4 percent contraction for Dubai this year, Ahmed said in a telephone interview today. He declined to give the new figures, which are due in four weeks time.
Dubai had to seek a $20 billion bailout from Abu Dhabi last year after borrowing $109 billion, according to IMF estimates, to build itself into a tourism and financial center. Dubai World, the state-owned holding company said Sept. 10 it got approval from 99 percent of creditors for its $24.9 billion debt plan. The company in November sent emerging market stocks tumbling after it sought to delay loan payments.
“This is like Aston Martin bringing out a new make,” said Mr Burt, the UK’s Middle East minister. “It’s already a great car, but you can always make it even better.
“That’s what we’re doing with the relationship. It goes right across the board. It’s defence, it’s security, it’s trade, it’s shared foreign policy objectives."
A dizzying property boom has already deprived Beirut of many of its old houses, not to mention almost a third of the 300 buildings designated as “top priority heritage”, according to Lebanon’s culture ministry. Nearly 6,000 people have joined a Facebook group called “Save Beirut Heritage”, fearing that their city is steadily losing its historic Mediterranean identity and becoming an ersatz Dubai.
Many parts of the city, particularly its historic downtown, were destroyed in the 1975-1990 civil war, making the preservation of its remaining heritage a particularly poignant issue for locals.
It remains unclear whether investors have made a wise decision by going further out on the yield curve and snapping up speculative-grade bonds in near-record amounts. (An updated estimate from Reuters (HT Lex) in early September puts global high yield debt issuance at $177bn this year.)
But the rally has certainly brought welcome relief to companies with debt maturing in the next few years.
In a new report, Moody’s starts to put some numbers on just how much of this year’s junk bond and leveraged loan issuance has eased the pressure on companies to pay off their investors and lenders. The agency estimates that nearly two-thirds of the junk debt issued this year has gone to refinance existing debt, with about a quarter issued to finance mergers and acquisitions.
Since February, when Moody’s last produced this report, speculative-grade companies have refinanced 37% of junk bonds that were coming due this year through the end of 2012, reducing the burden from $87bn to $55bn.
It’s no secret that emerging market bonds are booming. As worries grow over the west’s growing debt pile, investors are piling into EM bonds. Judging by credit default swaps, investors think Chile is less risky then France and Malaysia safer than Austria.
But the FT’s James Mackintosh warns that investors need to remember their history.
It is true that emerging markets are safer than in the past, thanks to political stability, strong fiscal positions and vastly improved monetary policy. Standard & Poor’s has upgraded 11 in the past year, with only two downgrades.
Even so, prices have run ahead of fundamentals. These are mostly not mature, stable democracies. Shareholders seem happy to trade higher growth for more political risk. But bondholders do not share in the upside, and are paying too little attention to the dangers.
Be wary that the past, though it may seem far behind us, can return with a vengeance, Mackintosh says.