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Wednesday, 12 January 2011

Dubai to Cut Spending This Year, Curb Budget Deficit - Bloomberg

Dubai’s government aims to cut spending this year in a bid to shrink its budget deficit after a debt crisis that roiled global markets in 2009.

The government forecasts a gap of 3.78 billion dirhams ($1 billion) this year, down from 5.99 billion dirhams projected for 2010, the emirate’s Media Office said in an e-mailed statement today. That’s “well within” the targeted ceiling of 3 percent of gross national product, it said. Spending is forecast at 33.7 billion dirhams, down by 4.9 percent from the 2010 projection published in a government bond prospectus in September.

Dubai, the second-biggest of the seven United Arab Emirates, had to seek a bailout from neighboring Abu Dhabi after the global financial crisis pushed property prices down by more than half, and frozen credit markets forced some state-owned companies to delay loan payments. Dubai World agreed with creditors in October to restructure $24.9 billion of debt.

Middle East M&A activity hits new high in 2010 -

The Middle East was a hive of Merger and Acquisition activity in 2010 with more than 500 deals announced in the region, the most on record, according to Thomson Reuters 2010 Middle East Investment Banking Analysis.

Thomson Reuters review of the Middle East investment banking industry for the Full Year 2010 covers the region’s M&A, debt and equity capital markets. The review includes rankings of banks and advisors operating in the Middle East based on deal activity and fees and provides and independent assessment of the market.

In 2010, Middle Eastern M&A, based on target nation, reached US$31 billion, more than double the activity seen during 2009. Telecommunications was the most targeted industry in the Middle East with US$13.2billion, while Kuwait was the most active Middle Eastern country accounting for 46% of annual activity.

Bahrain's Arcapita Bank sells US properties - Bloomberg

Bahraini investment house Arcapita Bank said Wednesday it has sold 29 retirement communities in the United States in a deal valued at $630 million.

Arcapita said it completed the sale of the portfolio of properties to a joint venture between McLean, Virginia-based Sunrise Senior Living and CNL Lifestyle Properties, a real estate investment trust in Orlando.

Under the terms of the deal, Arcapita will receive $262 million for the properties. The $630 million figure includes the value of debt the new owners will assume.

What is so Special About Kuwait? « Alpha Dinar- talking GCC finance

Kuwait has been lagging its neighbors for years in terms of Foreign Domestic Investments (FDI) flow. As of 2009, FDI represented 14% of Kuwait’s GDP, ranking Kuwait 141th in terms of foreign capital receipt. This leads us to question, how can Kuwait turn this situation around?

My thoughts were all mostly negative. Although Kuwait has the best democratic system in the Gulf (maybe in the Arab world), the continuous hostility between the Parliament and the Government is deterring investments, which fear from political turmoil. Kuwait has an abundance of oil, but wouldn’t allow foreign companies to extract it. Recent foreign investment track record hasn’t been encouraging, as the Etisalat acquisition of Zain is being grilled by shareholders and Parliament members. Kuwait announced an ambitious 5-year plan, which would see the government spending $140 billion. Unfortunately, the political crisis is deviating the attention of the government away from that plan. The red tape and bureaucracy within the government is crippling projects and deterring Kuwaitis from doing business.

My question is: why would foreigners invest in Kuwait?

MIDEAST STOCKS-Kuwait's Zain dips as etisalat deadline nears | News by Country | Reuters

Kuwait's Zain slumped to a month-low on Wednesday as the deadline for a stake sale to Abu Dhabi's Etisalat (ETEL.AD: Quote) neared.

Zain fell 1.4 percent to its lowest close since Dec. 9.

Major shareholder, the Kharafi group, is leading a consortium selling a controlling stake in Zain to Etisalat.

Report: Dubai crown prince's firm in debt talks - Bloomberg

An investment company controlled by Dubai's crown prince is reportedly in talks with lenders to rework terms on about $1.6 billion in debt.

Abu Dhabi government-owned newspaper The National reported on the talks by Zabeel Investments in its Wednesday edition, citing unnamed financial sources in Dubai.

Difficulties at Zabeel could compound Dubai's fiscal challenges as it works to sort out billions of dollars in state-linked debt.

Gulfinvest Backed By Three Creditors on Restructuring Plan - Bloomberg

Gulfinvest International KSC, a Kuwait-based company that defaulted on loan payments last year, received approval from three of its creditors for a plan to restructure its debt, the company’s chairman said.

Gulfinvest has a total debt of about 44 million dinars ($156 million), AbdulMuhsen Sulaiman al-Meshaan told Bloomberg News in a phone interview today. The company owes Kuwait Finance House, the country’s biggest Islamic bank, about 12 million dinars and is yet to receive a response from the lender on restructuring the debt, he said, without identifying the creditors who approved the plan. The plan will involve increasing Gulfinvest’s capital, he said.

“We are still waiting for Kuwait Finance’s response to the plan and are willing to listen to any remarks they may have,” al-Meshaan said. “No creditor just turns down a restructuring plan without explaining why,” he said.

Dubai Government Estimates Budget Deficit at 3.78 Billion Dirhams in 2011 - Bloomberg

Dubai’s government will run a budget deficit of 3.778 billion dirhams in 2011, within the targeted 3 percent of gross domestic product, the emirate’s Media Office said in an e-mailed statement today.

$70bn of debt due in the UAE this year to force major asset sales « ArabianMoney

Standard Chartered Bank estimates that the amount of short term debt due for repayment this year in the UAE totals around $70 billion, a considerable amount more than the $20 billion reckoned to be owed by the emirate of Dubai. The bank sees a round of further asset sales and bank write-downs as inevitable.

Speaking to Bloomberg yesterday, Nafees Akbarali, regional head of fixed income said: ‘With significant debt maturities coming into the year and concerns over transparency for some GCC economies, risk premiums will build up and this will serve to push up borrowing costs… We’re going to have to see more asset sales this year and going into next year’.

RAK Properties to Collect $474 Million as Homes Are Handed Over - Bloomberg

RAK Properties PJSC, the developer that built Ras Al Khaimah’s first manmade islands, expects to collect at least 1.74 billion dirhams ($474 million) this year as buyers of completed properties make final payments.

The company will complete 3,073 apartments, villas and offices this year starting in February, Chief Executive Officer Mohammed Sultan Al Qadi said in an interview this week. Most buyers have already paid 45 percent of the value of properties they purchased before groundbreaking began, he said. They must complete all payments before getting their keys.

“Our worst-case scenario would be to have only 60 percent of buyers make their final payment,” Al Qadi said. “We expect the balance to be settled this year and that is a challenge.”

Persian Gulf Sukuk Sales Head to 4-Year High on Low Rates: Islamic Finance - Bloomberg

Borrowers from the Persian Gulf may sell as much as $8.2 billion of Islamic bonds this year, the most since 2007, encouraged by the lowest yields in two months and accelerating economic growth.

Average yields on Shariah-compliant bonds from Gulf Cooperation Council countries fell to 5.385 percent on Jan. 4, the lowest level since Nov. 10, according to the HSBC/NASDAQ Dubai GCC Dollar Sukuk Index. Among companies planning to issue sukuk are Albaraka Banking Group BSC, Bahrain’s biggest publicly traded Islamic lender, which may sell as much as $500 million, and Saudi International Petrochemical Co. which may offer as much as 2 billion riyals ($533 million) this quarter, data compiled by Bloomberg show.

“It’s still a low-rate environment, and there’s still a window of opportunity,” Dubai-based Ahmad Alanani, head of Middle East fixed-income sales at Exotix Ltd., said in a telephone interview Jan. 10. “Anyone who will want to issue will have to issue now and lock in these rates before the recovery in the U.S. economy takes hold and yields go up.”

gulfnews : Emaar MGF's guarantee money withheld by court

An Indian court on Monday asked two state-run banks to deposit the Rs930 million (Dh75.68 million) bank guarantee of real estate giant Emaar MGF for constructing the Commonwealth Games (CWG) village with its registrar general till the disposal of a case relating to incomplete work at the site.

The Delhi High Court asked the banks to cancel two pay orders — Rs600 million by the State Bank of India (SBI) and Rs330 million by the State Bank of Patiala (SBP) — to be issued to Delhi Development Authority (DDA) for encashment, and deposit the amount with the high court registrar general.

The court had on October 25, 2010, while approving the Rs900 million partial encashment of the bank guarantee by DDA, asked the housing body not to encash the entire amount totalling Rs1.83 billion.

US court action hangs heavy over Agility - The National

A perceived lack of transparency continues to haunt Agility, the Kuwaiti logistics firm, as investors struggle to understand where the company stands in its lawsuit with the US government.

The company's stock lost almost 8 per cent in the first trading days of the year, touching a 15-week low, before rebounding this week. Agility closed up 2 per cent yesterday at 495 Kuwaiti fils. The company was reported to be facing a new indictment in the US federal courts over allegations of overcharging for food supplies to the US army. The latest court action follows a criminal case filed in November 2009, when Agility was accused of overcharging the American military over 41 months on US$8.5 billion of contracts first signed at the start of the 2003 invasion of Iraq. Agility was subsequently replaced as the main regional supplier to the US army and was banned from bidding for new contracts while the court case was pending.

But in a statement on the Kuwaiti bourse, Agility said the report about a new civil case against the firm was not true. The matter was a "procedural amendment" to the original case, the company said.

Emarat asks for debt help - The National

The state-owned Emirates General Petroleum Corporation (Emarat) has accumulated debt of almost Dh2 billion (US$544.51 million) and will need to raise additional capital as part of an overall restructuring programme, the company's chairman said yesterday.

Obaid Humaid al Tayer, Emarat's chairman and the Minister of State for Financial Affairs, appeared yesterday before the Federal National Council (FNC), the UAE's consultative body, to argue for an amendment that would allow the company to borrow money equal to 50 per cent of its equity.

Previously, the legislation that created Emarat allowed the company to borrow up to 25 per cent of its equity. The FNC passed the amendment, which now needs presidential approval.

Lazard tops bankruptcy deals, global volume down - Monde -

Lazard was the world's top bank for bankruptcy and restructurings in 2010, as debt turmoil in the Middle East and a sovereign debt crisis increased the workload for advisors in Europe.

Worldwide, the total value of completed deals was down 6.2 percent to $305 billion (195.4 billion pounds) in 2010, as a vibrant U.S. high-yield bond market helped firms manage their debt burden, Thomson Reuters data released on Tuesday showed.

There was an increase in the number of debt restructuring deals in Europe, Africa and the Middle East (EMEA) -- where Lazard also came first -- compared to fewer transactions in the United States and Asia including Japan.

gulfnews : UAE could issue bond by year-end

The UAE may issue its first sovereign bond toward the end of the year or early next year, Obaid Humaid Al Tayer, Minister of State for Financial Affairs, said yesterday.

The Federal National Council (FNC) passed a new public debt law last month, paving the way for the country's first debt issues at the federal level.

Asked when he expected to issue new bonds, Al Tayer told reporters on the sidelines of an FNC meeting that "either at the end of this year or the first part of next year".

MGM Resorts Discusses Casino Alliances to Draw Visits - BusinessWeek

MGM Resorts International, the biggest casino owner on the Las Vegas Strip, is negotiating marketing alliances with gaming companies outside Nevada to draw more visitors as it begins a new customer-loyalty program.

The company is in talks with more than three U.S. operators active outside the Strip in regional markets where MGM doesn’t compete, Chief Executive Officer Jim Murren said in an interview in New York without identifying the parties. Las Vegas-based MGM also is talking to American Indian operators in California, the middle U.S. and the Pacific Northwest as it seeks to add to its customer data and extend its marketing reach, Murren said.

The alliances would help MGM blunt the edge that Caesars Entertainment Corp., the largest casino company, has in tapping regional customers via its Total Rewards program. Caesars, formerly called Harrah’s, has led the industry in attracting gamblers to its eight Strip casinos, and has more regional locations than MGM, which owns resorts in New Jersey, Mississippi and Michigan.

Aldar may shed assets - Arab News

Aldar Properties, Abu Dhabi's biggest real estate developer, said Tuesday it may shed assets and issue new bonds while giving the government a larger stake in the cash-strapped company.

Aldar said in a filing to the emirate's stock market that its board will meet Thursday to discuss the proposals in preparation for a possible shareholder vote. It gave few details.

Among the topics up for discussion is the conversion into shares of existing convertible bonds previously issued to state-run investment firm Mubadala Development Co. - a move that would effectively boost the government's equity stake in Aldar.

David Akin's On the Hill :: Are the state-owned United Arab Emirates airlines subsidized?

"Categorically, unequivocally and emphatically, we have never been subsidized," says Tim Clark, the president of Emirates Airlines which, along with Etihad airlines, has been unsuccessful in winning Canadian government approval for new landing rights for its giant A380 superjumbosBoeing 777s at airports in Vancouver and Calgary.

Tim Clark: Subsidy debate has airline boss in a spin [Registration required]

Since the subsidy question will not go away, Mr Clark details the support that got Emirates flying. In 1985 Sheikh Mohammed gave Maurice Flanagan, the airline’s first managing director, $10m.

“He said, ‘Go and set up the airline.’ He gave us two 727s from the Dubai Royal Air Wing and built a training facility. In total it worked out at $50m,” Mr Clark says. “That’s all we have had. And he was absolutely clear: ‘You don’t come to me for money. You will buy your own aircraft.’ And we have done ever since.”

Banks flush with cash

Banks in the UAE are sitting on a huge pile of cash deposits, but are reluctant to open their doors to needy borrowers while capital injection by financial institutions is a must to further boost the economy, according to analysts.

Opinions were divided on whether banks would start increasing lending this year or they would continue to maintain the wait and see strategy. But majority of analysts expect credit growth this year.

“The interbank market is very liquid. All the banks are flooded with liquidity whether it is foreign or local customer deposits,” a treasurer at an Abu Dhabi-based bank told Reuters. “You now face a situation where banks have sufficient cash to lend and corporates now have more profitable projects in which to utilise that cash,” said Mark Watts, head of fixed income at National Bank of Abu Dhabi Asset Management Group. “That is a very good driver for a return to normal markets."

Debt woes resurface for UAE companies - The National

A fresh wave of debt troubles emerged across the Emirates yesterday as three corporations looked to refinance billions of dollars in loans accumulated during the boom.

Zabeel Investments, a holding company based in Dubai, is in talks to extend the repayment of about Dh6 billion (US$1.63bn) of debt, The National has learnt. Meanwhile Emarat, a Federal Government-owned fuel retailer, is retooling its business and trying to raise fresh cash, its chairman said.

The Abu Dhabi Government may also take a bigger stake in Aldar Properties, a major developer, as it grapples with more than Dh10bn of debt coming due this year.

FT Tilt - Frontier markets: a manifesto for a new world order(Registration)

Emerging markets are dead, all hail the new frontier. That’s the new marketing pitch from Swiss & Global Asset Management.

On Tuesday, the Swiss money manager released a bullish report (see attached document, left hand column) projecting frontier stock markets will outperform their emerging market counterparts in the coming years, delivering 11% annual growth over the next decade.

Strong economic growth, positive demographics, strengthening domestic consumption, high commodity prices and expanding financial systems - from its low base - are key. For yield-hungry investors scrambling for returns in an increasingly crowded emerging market space, the allure of frontier markets is obvious. The report argues:

FT Tilt - Seychelles and the prudence of a bond default (Registration)

When Seychelles defaulted on its $230m 2011 bond in October 2008, Africa officially joined the global credit hangover. Representing around 40% of GDP, the debt obligation -- which was subsequently followed-up with a EUR54.7m privately-placed loan and two commercial bank loans -- was a classic sign of excess in a world where there was more money than sense.

The impact of the global crisis, principally the collapse in tourism revenues and years of pro-cyclical government spending, triggered the bond default - as well as a collapse in the country’s economic model. The island nation was subsequently, forced to go cap in hand to the IMF.

But the October 2008 default, together with government spending cuts and the liberalization of the foreign exchange market (which helped to fight inflation), has turbo-charged economic growth. On Tuesday, the IMF said the Indian Ocean archipelago's economy will grow 4.3 per cent this year, 4.8 per cent in 2012 and 5 per cent in 2013, after expanding 6.2 per cent in 2010.