UAE'S RAK eyes next tranche of $2 bln bond programme

Ras al-Khaimah, a member of the United Arab Emirates, has started marketing the next tranche of a $2 billion Islamic bond programme, the latest government-backed debt issuance in the Gulf Arab region.

The emirate began investor meetings on July 6 in the Middle East, Asia and Europe, it said in a statement distributed by lead managers Standard Chartered and BNP Paribas.

The roadshow would update investors on its "certificate issuance programme", it said without providing more details.

Gulf Banks Defaults to Rise, Alvarez & Marsal Says

Gulf Arab banks will face rising defaults and rescheduling of debt as the region’s real-estate slump hurts economies, according to Alvarez & Marsal LLC, the firm that is restructuring Lehman Brothers Holdings Inc.

“There will be debt restructuring in the region, involving the majority of the banks,” Sankar Krishnan, managing director for the firm’s Middle East unit, said in an interview in Dubai yesterday. “There are developers that are going to fail and banks will end up holding a lot of half-finished projects. Banks in the region are not sophisticated enough to deal with this situation.”

About a third of bank loans in the region are made to the property industry, according to Moody’s Investors Service Inc., which predicted last month banks may see loan defaults rise in the next nine months as a delayed impact of the global credit crisis hits. Dubai house prices fell an annual 35 percent in the first quarter, trailing only the Latvian capital Riga’s 50 percent slump, according to a survey by Global Property Guide.

Iran Lures Chinese With New Energy Deals

Iran is inviting Chinese oil companies to invest in refineries and a pipeline worth more than $42.8 billion in the Middle Eastern country according to reports. The National Iranian Oil Refinery & Distribution Company is seeking $30 billion for the construction of seven new refining plants in the country’s west, the South China Morning Post reported today, citing Iran’s Ministry of Petroleum.

Chinese companies are also encouraged to expand some of Iran’s existing refineries and build a 1640-kilometre oil pipeline from Neka on the Caspian Sea in the north to Jask on the Gulf of Oman in the south, Bloomberg quoted the report as saying.

The Iranian government is offering foreign investors a 5% discount on the prices of crude supplied to the refineries, an eight-year tax exemption and the right to own as much as 80% percent of the new refining projects, it said.

Lukoil still interested in Iraqi oil fields

Russia's OAO Lukoil Holding is still interested in the second licensing round to award long-term development contracts for Iraq's untapped oil and gas fields and is prepared to change its conditions, a spokesman for the company said on Thursday.

"Yes, we are still interested, we will see the conditions," Lukoil spokesman Dimitry Dolgov told news agency Zawya Dow Jones by telephone from Moscow.

"We might be prepared to change our price conditions if the Iraqi side also change their conditions," he added.

Kuwait cbank says 2nd stress test inadequate

Image via Wikipedia

The Central Bank of Kuwait has told local banks that many of the procedures they have used to carry out their second stress test were inadequate, Kuwait-based Al-Rai daily reported on Thursday.

Most of the scenarios assumed by the banks were not tough and challenging enough, the paper reported, citing a circular to local banks issued by the central bank on Wednesday.

As a result, the stress tests lead to the wrong conclusion that the worst-case scenario does not represent a significant threat to the banks and consequently can be easily faced in real life situations, the paper reported.

Moody's revises Jafz sukuk ratings

Moody's Investors Service yesterday revised the foreign and local currency issuer ratings of Jebel Ali Free Zone (Jafz) and the rating for Jafz sukuk's Dh7.5 billion trust certificates due in 2012 to A2 from A1 and placed the ratings under review for further possible change.

"The revision was prompted by the close commercial relationship between Jafz and Dubai World, its parent company, which has impacted Jafz's baseline credit assessment given the growing financial challenges at Dubai World," Moody's said in a statement.

Jafz holds its surplus funds at Dubai World level under shared treasury services and can call these funds on demand. The total inter-company receivables per 2008 year-end amounted to Dh2.1bn, of which about Dh1.7bn relate to Dubai World, the agency said.

Shuaa seeks damages from OHO

Shuaa Capital yesterday filed a legal claim at the Dubai International Arbitration Centre against Mohamed Abdel-Khaleq Mohamed Abu Al Haj and Orion Holdings Overseas (OHO) for breach of obligations in respect to Shuaa's investment in OHO, a DIFC-based entity.

Shuaa bought a 20 per cent minority shareholding in OHO in February 2008.

The damages sought relate to the losses incurred by Shuaa on its investment. Shuaa has charged Dh115.9 million in losses through its accounts. The value of the stake in OHO was fully provided for in Shuaa's accounts as of March 31, the firm said.

Petra Invest, a shareholder in OHO, also filed a claim against Shuaa with the DIFC Courts.

Saudi exposure forces banks to slow lending

The ongoing financial crisis followed by the Saad-Algosaiby multibillion-dollar crisis involving almost all the 'who's who' in the region's banking industry, are bound to force the banks to go slow on their lending for some time, said leading bankers.

Incidentally, the default crisis of the Saudi duo is exactly a decade after the billion-dollar Madhav Patel scam shook the GCC's banking industry in 1999.

It is more than six months since any noticeable syndicated deal was concluded in the country. This doesn't mean that large corporates and family conglomerates do not need funding. Though several entities have put on hold many of their projects, many family business groups are now planning to raise debt in the form of sukuks or conventional bonds to fund their expansion or new projects.

UAE railway company launched

The Federal Government issued a decree yesterday officially establishing the Union Railways Company, with a capitalisation of Dh1 billion (US$272m), to oversee a planned national rail system.

Sheikh Khalifa bin Zayed, the President of the UAE, established the new company to develop a freight and passenger system throughout the seven emirates, the state news agency WAM reported.

The planned system has been reported as a dual-track line stretching from the Ruwais oil and chemicals centre in Al Gharbia to the northern emirate of Fujairah.
The company will be fully owned by the Government and engage in “the owning, leasing, renting, purchasing and selling of trains, as well as in investing in the transporting of passengers and goods and all businesses related to a modern railway network”, WAM reported.

Nakheel cuts 400 more jobs in overhaul

Nakheel, a property developer owned by Dubai World, has made about 400 more staff redundant as the company continues an overhaul brought on by the downturn in the property sector.

The redundancies were staggered over the past two weeks and are on top of the 500 jobs that were cut last December, a source close to the company said.

"We were given a redundancy package of six months' pay" one former staff member who was laid off last week said.

Former Deyaar chief embezzled funds for personal use, Dubai court told

The former chief executive of the property developer Deyaar allegedly used company money for lavish personal expenses, including hiring a private jet for Dh173,000 (US$47,000), a court heard yesterday.

The executive, ZS, and nine other employees are accused of creating an intricate web of land deals and questionable transactions involving about Dh800m.

Mohammed Mustafa Hussain, the investigator appointed by Sheikh Mohammed bin Rashid, Ruler of Dubai and Vice President of the UAE, told the Dubai Court of First Instance that ZS had failed to provide receipts and ledgers for expenses such as the cost of hiring the private plane for a day.

Fugitive Al Barakah chief turns himself in to police

The chief executive of a property development company, who had been on the run for seven months amid accusations of writing bad cheques, has surrendered to the police.

IK, the head of Al Barakah, the developer behind what would have been the tallest tower in Ajman, surrendered to Dubai Police last Thursday and was officially arrested on Sunday, according to the public prosecutor’s office at Muraqqabat police station.

First Sgt Khaled Barakat said IK had told the police his business had worsened and he wanted to solve everything in the courts.

Comment: US helps sukuk bounce back

The sukuk, or Islamic bond market, has been severely tested over the past 18 months. After five years of growth in issuance, size and investor appetite, last year saw a contraction of 50 per cent in the value of sukuk issued. The second half of 2008 and the first quarter of this year saw the market effectively closed.

While governments and investment-grade corporates in North America, Europe and Asia were issuing record amounts of bonds in the first and second quarters of this year, their Middle Eastern counterparts were also issuing – but in the conventional markets, not the sukuk market.

A well-publicised criticism of the mudaraba sukuk structure made by Sheikh Taqi Usmani, a prominent sharia scholar, in February 2008, is often blamed for the drying up of the market. Of more impact, though, was the global credit crunch that struck shortly afterwards.

Troubled Saudi groups hit bank shares

Image via Wikipedia

The financial difficulties of the Algosaibis, one of Saudi Arabia’s richest families and one of the country’s most prominent billionaires, sent bank shares tumbling across the region.

Saudi banking stocks have shed 12.5 per cent since June 1, when Maan al-Sanea’s Saad Group first admitted that it planned to restructure its debts, outpacing the 9 per cent decline of the Saudi stock market. Samba Financial Group has lost nearly a fifth of its value since early June.

Overall, banking shares have performed better in other Gulf markets, but certain banks have slumped on worries that they are exposed to the two groups.

Gulf’s green shoots remain feeble

When observers were seeking to gauge the full impact of the economic crisis on the United Arab Emirates – and Dubai in particular – many suggested that the summer would be critical.

The belief was that the end of the academic year would act as a barometer to judge the number of people leaving the country. Some doom-mongers predicated an exodus.

Yet when Indian and Pakistani schools, which account for about a third of the students at private colleges in the emirate, began their academic year in April, enrolment in Dubai was up 1 per cent, according to the Knowledge and Human Development Authority, the regulator.