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Monday, 10 January 2011

FT Tilt - The bell tolls for Orascom in Algeria (Registration required)

There was a time when the nationalisation of foreign assets in the Middle East involved the uttering of secret codewords in presidential speeches, but that time is long past. These days, it's a pretty straightforward process, as the Algerian government has shown in is nationalisation of Djezzy, the country's largest mobile operator.

The nationalisation took another step forward on Monday as the government announced the appointment of white-shoe New York law firm Shearman & Sterling to advise it on the process, saying it will come up with a valuation of Djezzy within 100 days. What exactly Djezzy's owners, Egypt's Orascom Telecom, can do if they disagree with the valuation is anyone's guess.

Shearman have yet to discuss the new brief, but it's fair to assume that Emmanuel Gaillard, head of the firm's international arbitration practice, will take a lead in the process. Gaillard has previously represented the Algerian state oil firm Sonatrach - itself made up of nationalised foreign assets - in international disputes, including a claim against two Spanish oil firms that saw Sonatrach awarded $580 million worth of assets and successfully dismiss a $3.6bn counterclaim. Shearman have been working with Sonatrach and the Algerian government since the 1960s.

VW CEO:Qatar Backs Merger Plan,To Participate In Porsche Cap Increase -

Volkswagen AG (VLKAY, VOW.XE) Chief Executive Martin Winterkorn said Monday the auto maker is "slightly more optimistic" about the prospects and timeframe of the merger with Porsche Automobil Holding SE (PAH3.XE), after a U.S. court last month dismissed a lawsuit filed buy a group of hedge funds over alleged market manipulation.

Winterkorn added that major shareholder Qatar Holding LLC is set to participate in the planned capital increase at Porsche, which is part of the merger plan.

"Qatar is a very stable major shareholder ... We wouldn't do this if they wouldn't back it," Winterkorn told reporters at the North American International Auto Show. He noted, however, that some legal issues still need to be resolved before the deal can be completed.

Winterkorn is the CEO of both Volkswagen and Porsche's holding firm, which plans a EUR5 billion capital increase to reduce debt ahead of the planned merger with VW. The emirate of Qatar holds voting stakes of 17% and 10% in Volkswagen and Porsche, respectively, and is set to emerge as the third anchor shareholder of a combined company along with Porsche's owner family and the German state of Lower Saxony.

MGM, Dubai World's CityCenter To Offer $1.1B In Notes -

MGM Resorts International (MGM) said CityCenter Holdings LLC, its joint-venture with Dubai World that owns an eponymous casino complex in Las Vegas, plans to offer $1.1 billion in notes through a private placement.

MGM's shares dipped 2 cents to $16.33 in recent premarket trading.

The move is the latest by the owners of the $8.7 billion project to fix CityCenter's financial problems. They plan to use proceeds from the offering to reduce the balance outstanding under the project's credit facility.

MGM itself has raised capital lately through stock and bond offerings, leading the three major rating agencies to raise their outlooks on the casino operator last year. It has struggled amid steep drops in tourism and consumer spending in its home town, Las Vegas. A heavy debt load taken on to fund expansion efforts has also weighed on the bottom line.

Meanwhile, Dubai World has been seeking to get back on a growth path after securing creditor approval to restructure almost $25 billion worth of debt.

U.A.E. Shares Fall on Earnings, Provisioning Concern; FGB Drops - Bloomberg

United Arab Emirates shares declined, with Dubai’s benchmark stock index retreating for a second day, on speculation fourth-quarter earnings will disappoint given bank’s need to raise provisions.

Emirates NBD PJSC, the U.A.E.’s biggest bank, fell 2 percent and First Gulf Bank PJSC in Abu Dhabi dropping for the first time this week. The DFM General Index lost 0.3 percent to 1,660.64, the lowest intraday level since Jan. 6, at 12:25 p.m. in Dubai. Abu Dhabi’s ADX General Index decreased 0.2 percent.

“There’s some investor concern fourth-quarter earnings will disappoint,” said Waleed Al Khateeb, senior finance manager at Dubai-based Daman Securities LLC. “There is a lot of pressure on banks given the provisioning issue.”

Saudi bourse moving closer to foreign access-document | Reuters

Saudi Arabia's stock market committee is moving closer to allowing foreign investors direct market access, a document seen by Reuters showed.

At a Dec. 21 meeting bourse officials asked representatives from regional banks and brokerages to check capabilities for handling foreign accounts, the document showed.

"We might see the markets opening up in the first half of 2011 or probably in the second quarter," a source familiar with discussions said.

Emirates Said to Seek $1 Billion Revolving Credit Line to Finance Aircraft - Bloomberg

Emirates, the Dubai government-owned airline, is seeking to borrow $1 billion through a revolving- credit facility, according to three bankers who received requests from the carrier.

Emirates asked banks to propose conditions for the borrowing including the lifetime, said two of the bankers, who declined to be identified because the talks are private. The money would be used to fund aircraft purchases, said two of the bankers.

Emirates, the world’s biggest carrier by international traffic, has ordered 203 planes and will take delivery of two aircraft a month on average for the next six years. The airline needs more than $28 billion through 2017 for the expansion of its fleet, double the amount it has raised since 1996, Gary Chapman, head of finance and services, said Sept. 1.

Abu Dhabi-controlled microchip giant to invest $5.4bn - The National

Globalfoundries will double its capital spending this year to $5.4 billion (Dh19.83bn) as it makes a strong push to become the world's top microchip foundry.

The company is controlled by Advanced Technology Investment Company (ATIC), an investment firm owned by the Abu Dhabi Government, that holds an 86 per cent stake in the firm. AMD, the chipmaker's former owner, holds the remaining stake in Globalfoundries.

Globalfoundries manufacturers silicon wafers which are later cut out to build microchips that will be installed in a variety of consumers electronic goods such as smartphones, desktop computers and laptops.

Etisalat in Nomura downgrade - The National

Etisalat's growth across the Middle East and Africa is beginning to draw the attention of analysts concerned about its spending plans.

The UAE's largest telecommunications operator is planning to aggressively expand across the region after offering to buy a 51 per cent stake in Kuwait's Zain in a deal that would be worth about Dh44 billion (US$11.97bn). It is also bidding for licences in Syria and Libya and extending its operations in Nigeria and India, two potentially lucrative markets.

Competition in the UAE comes from, du, which has signed up significantly more mobile and internet users in the past year than the bigger company.

Faster Growth in Mideast Economies Expected in 2011 |

Rising oil prices and massive government spending are likely to boost economic growth throughout the Middle East this year, but not enough to keep pace with the world’s most dynamic emerging market economies, a survey of forecasters by The Media Line shows.

Among the region’s leaders, Saudi Arabia’s $450 billion economy is expected to accelerate growth to 4.3% this year from an estimated 3.6% in 2010, according to a median of seven economists polled by The Media Line. Egypt, whose gross domestic product reached about $220 billion in 2010, will grow 5.7%, hastening from 5.1% in 2010, the forecasters say.

Qatar, a relatively small economy with a GDP of about $55 billion, is evolving into a major regional factor, propelled by rapidly growing energy revenues. Five forecasters surveyed by The Media Line see economic growth slowing but remaining well into the double digits – a median forecast of 14.3% this year versus 16% in 2010.

FT Tilt - A square meal and a smoke in Egypt keep getting pricier

New figures from CAPMAS, the Egyptian national statistics agency, show 2010 ending with an inflationary bang (Arabic), with food prices in December up by 16 per cent on the previous year.

The most basic staples were hardest hit, with cereals, bread and rice up by 21.5 per cent for the year, and vegetables up a hair raising 13.9 per cent in a single month. Overall, Egyptian CPI was up 10.3 per cent for the year.

Egypt's food woes are part of a bigger picture where, with less fanfare, food prices have now risen to higher levels than during the great food panic of 2008, when riots broke out across the developing world as food inflation soared. Globally, the UN says food is more expensive todaythan at any point since it began tracking prices in 1990.

FT Tilt - Africa/Mideast retail in 2010: When not bad is pretty good

After two years of stagnation in 2008-09, retail sales returned to growth in key markets across the Middle East and Africa in 2010, according to new numbers from the Economist Intelligence Unit (EIU).

But for foreign retailers looking to get in on the action, the days of plunking down a store in a crowded mall in Dubai or Jeddah and watching the cash registers spin into overdrive are over. Two of the three fastest growing markets in the region are Iran and Algeria, both of which have fairly well documented issues with foreign investors.

Those looking for somewhere a little friendlier should keep an eye on South Africa, the region's second-best performer after Algeria, where retail sales grew 9.4 per cent last year. While sliding in the rankings, South Africa is still listed above emerging-market favourites like Brazil, Turkey and Russia in the WEF's 2010-11 Global Competitiveness Index, and the World Bank rates the country in the top four places to do business in Africa and the Middle East.

FT Tilt - The other UAE property bubble keeps deflating

While oceans of ink have been spilled in the analysis of Dubai's property woes, the real estate market in neighbouring Abu Dhabi continues falling back to earth, with commercial rental rates down by 45 per cent on their 2008 peak.
But that fall, outlined in a new report (PDF) by the property consultancy Cluttons, doesn't make Abu Dhabi anything close to a bargain destination for office space. As Cluttons point out:
One ongoing problem is that many landlords are still quoting Grade A rents for secondary grade stock. Abu Dhabi office supply has been artificially constrained in previous years and so some landlords have been slow to adjust their expectations in line with current market conditions. Tenants are expected to relocate to higher quality space at the same rent as the space they currently occupy.

Shuaa plans to expand brokerage as rivals close - The National

Shuaa Capital, the largest domestic investment bank in the UAE, is to expand its brokerage business as other share dealers fail amid huge declines in trading volumes on the country's exchanges.

The strategy is one element of Shuaa's bid to overcome big losses suffered in 2008 and 2009 as a result of soured investments, disputes with shareholders, fines from regulators and the global financial crisis. Shuaa, based in Dubai, lost Dh948.5 million (US$258.23m) in 2008 and Dh529.8m the following year before returning to almost break-even levels last year.

"Really, 2010 was a year for fixing and rebuilding at Shuaa, whether it's strategy, whether it's rebuilding the management team, whether it's addressing the balance sheet and liquidity issues and so on," Sameer al Ansari, who was appointed chief executive in August 2009 to try to turn around the company, said yesterday.

Istanbul stock exchange launches Islamic-style index

Turkey's Istanbul Stock Exchange on Thursday launched an index comprised of 30 listed companies that comply with Sharia banking principles as the country seeks to attract interest in its burgeoning Islamic finance sector.

The Participation Index will include discount retailer BIM, Turk Telekom, the main landline operator and builder Enka Insaat, said Avsar Sungurlu, deputy CEO of Bizim Securities, which is consulting for the index.

Bank Asya, an Islamic participation bank, and Emlak Konut, a real estate trust, are also among the index's major holdings, Sungurlu said.

U.A.E. Sukuk to Gain on Debt Restructuring, Yield Pick-Up: Islamic Finance

Islamic bonds from the United Arab Emirates are poised to extend gains after climbing to a record last week, buoyed by progress in debt restructuring and a pickup in appetite for high-yielding assets in the Persian Gulf.

The HSBC/NASDAQ Dubai UAE US Dollar Sukuk Index, which tracks 10 sovereign and corporate securities, climbed to 131.15 on Jan. 4, the highest since HSBC started tracking their performance in January 2005. The notes returned 16.5 percent last year after a gain of 23 percent in 2009, the index shows. Shariah-compliant debt sold by Dubai issuers will gain between 6 percent and 7 percent in 2011, outpacing counterparts in the Persian Gulf, according to Dubai-based Mashreq Capital DIFC Ltd.

Dubai World, one of Dubai’s three main state-owned holding companies, received approval from its creditors in October to change terms on $24.9 billion of loans. Nakheel PJSC, a property unit of Dubai World seeking to delay payments on at least $10.5 billion of debt, said Dec. 30 it received funds from the Dubai government to repay Islamic bonds maturing this month.

Shuaa expects Dubai World deal by March

Dubai World is expected to sign off its debt-restructuring deal with creditors in February or March at the latest, Chief Executive Officer of Shuaa Capital said on Sunday.

“The debt restructuring deal is finalised but the signing off is expected in February, March at the latest,” Sameer Al Ansari told reporters at a media roundtable in Dubai.

“The Dubai World template is a good precedent for future financial restructuring for both government and private companies,” Ansari said. He said the company was not asked to sell assets to help its controlling shareholder Dubai Banking Group, which is restructuring debt.