#GCC and #MiddleEast Finance News: 23 Jul 2009

Thursday, 23 July 2009

Emirates Telecommunications Corportation (Etisalat) said Thursday it has not made any proposals to acquire a stake in Kuwait-based Zain Group and is not in any talks with the telecom operator.

“We would like to inform you that Emirates Telecommunications Corportation (Etisalat) did not present any proposal or bid to acquire a stake in Zain or any of its assets in Africa,” a statement by the telecoms firm to the Abu Dhabi Securities Exchange said on Thursday.

“We would also like to inform you that Etisalat did not negotiate nor discuss any of these issues with Zain officials,” the statement continued.

UAE tells banks to up provisions sharply

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The United Arab Emirates central bank has directed banks to take provisions up to 75 percent against their exposure to a pair of troubled Saudi firms over two years, bankers told Reuters on Thursday.

The central bank held a meeting with bankers last Thursday to review the lenders' reports on their exposure to Saad Group and Ahmad Hamad Al-Gosaibi & Bros.

"According to the guidance of the central bank, banks should take provisions of 50 percent over two years on exposure to Al-Gosaibi and 75 percent on exposure to Saad," a banker who attended the meeting said.

ANALYSIS-Saudi corp bond market needs sovereign, new laws

Saudi Arabia's first corporate bond market is unlikely to become a success without a sovereign bond and the removal of legal obstacles, even if Gulf issuances are slowly picking up.

The launch of the Gulf's third bond trading platform after Bahrain and Nasdaq Dubai comes when troubles at several Saudi family-controlled firms are making headlines, underlining the problems of opacity of financial markets in the biggest Arab economy.

Last month, the world's largest oil exporter launched a secondary trading platform for conventional and Islamic bonds, or sukuk, the latest step to open up after allowing foreigners limited ownership on the Saudi bourse a year ago.

Now that’s a payoff

From FT.com on Thursday.

Porsche on Thursday dismissed chief executive Wendelin Wiedeking, as the debt-ridden German sports carmaker prepared for an increase of its capital base by at least €5bn ($7.1bn) ahead of a merger with rival Volkswagen.

In a controversial 15-hour boardroom showdown that stretched into Thursday morning, Porsche’s family owners agreed on an immediate dismissal of Mr Wiedeking and Holger Härter, chief financial officer.

Mr Wiedeking, once one of the highest paid managers in the world, agreed to a compensation package of €50m.

Global's Egypt Weely Market Report - July 22, 2009

Porsche plans to add €5bn to capital base

Porsche plans to increase its capital base by at least €5bn in a move to bolster its sagging balance sheet ahead of a planned, though controversial, integration of carmaking operations with its German rival Volkswagen, the FT reported. The sports car group gave few details of the structure of any capital boost and said nothing on the future of its chief executive Wendelin Wiedeking; nor did it comment on speculation that the emirate of Qatar would be taking a stake.

GCC Investors Guide 2008 (PDF)

Global Investment House is pleased to present the third issue of its “GCC Investors Guide”, for the top 100 companies listed in the GCC stock markets. Publication of this guide intends to serve two purposes. First to put together basic information and financial data of the biggest 100 GCC companies in terms of market capitalization, and to present them in a coordinated and uniformed manner. Secondly to enhance investors’ awareness through comparing financial ratios, thus enable market participants to take enlightened decisions.

The year 2008 proved to be one of the toughest years for stock markets all over the world. Global markets saw record falls in 2008 as the financial turmoil and economic slowdown ended the stock markets boom. GCC bourses were no exception. Though during the first half of the year, the markets performed well, they succumbed to financial crisis during the second half of the year. The biggest regional market – Saudi Arabia – as measured by Tadawul All Share Index ended the year 2008 at 4,803.0 points, thereby recording a decline of 56.5 percent YoY. The Kuwaiti & Qatari markets were also hit hard, as they ended the year 2008 down by 45.4 percent and 24.6 percent respectively. The market capitalization of GCC stocks stood at US$611.3bn (US$1.1 trillion in the end of 2007). The top 100 GCC companies constituted 73.6 percent of that amount, US$449.9bn.

Global's Kuwait Weekly Report - July 22, 2009 (PDF)

Saudi Stock Market Weekly Report - 22-July-2009

DIFC's pro bono guidelines to mitigate judicial process

As part of its aim to make justice accessible to all, the DIFC Courts, the Dubai International Financial Centre's (DIFC) independent, common law judicial system, yesterday posted for consultation a set of guidelines for a pro bono programme.

The programme will allow individuals who cannot afford a lawyer the ability to seek free advice from lawyers registered with the DIFC Courts.

The DIFC Courts' pro bono programme is the first of its kind in the region and was created to address a need in the community for access to justice, even where an individual cannot afford a lawyer. All of the services offered as part of the pro bono programme, ranging from basic advice to full case management and representation in proceedings, will be delivered to eligible individuals approved by the DIFC Courts' Registry Office.

RAK completes $400m sukuk

The Ras Al Khaimah Government yesterday completed the formal documentation signing for its landmark $400 million (Dh14.69 billion) sukuk issue, with Standard Chartered Bank, BNP Paribas and Liquidity House acting as joint bookrunners.

This issuance is both the first US dollar sukuk issued by a sovereign under a programme and by an emirate in the UAE.

This is the second issuance under the government's $2bn sukuk programme. The first issuance was a Dh1bn sukuk issue in May 2008 in which Standard Chartered Bank acted as a sole arranger and bookrunner.

Etisalat, Reliance unveil Dh8b deal

Etisalat, one of the Middle East's largest telecom operators, on Wednesday announced a $2.2 billion (Dh8.07 billion) infrastructure share agreement with India's Reliance Communications.

The 10-year deal is part of etisalat DB's (a joint venture between etisalat and Dynamix Balwas) roll-out of telecom services across 15 circles in India that cover a population of over 900 million.

The operator will outsource its nationwide infrastructure needs for tower and transmission to Reliance Infratel Limited and Reliance Communications Limited.

Dubai’s bond ‘is not a bailout’ (Interview thru Press Release)

In an interview published by the Government of Dubai, Abdul Rahman al Saleh talks for the first time since replacing Nasser al Shaikh in May as director general of Dubai’s Department of Finance about how the US$20 billion (Dh73.46bn) in bond money will be distributed to government-related companies.

Q Can you tell me what is the purpose of this fund?

A I would like to go back to earlier this year when the Government has taken a very important step in issuing the $20bn bonds. That was an immediate decision to support the government-related entities to meet their obligations. From there we have been working closely with our consultants to get the right set-up: the right set-up in the sense of how we manage the funds, how we’ll be able to raise additional funds and how we can work very closely with the government-related entities. And now we have the decree, signed by His Highness, setting up the Dubai Financial Support Fund to be a separate legal entity, working very closely with the Government and supporting all strategic projects which are very important for the government strategy. The fund will be working with the government-related entities and supporting them, but it will be on a commercial basis so that it’s challenging for them to meet their obligations and to be able to manage their requirements in the long term.

Media firms plan to become mobile operators

Two of the Middle East’s largest media companies are considering becoming mobile phone operators in a bid to capture a larger portion of the region’s lucrative telecommunications market.

The MBC Group and Abu Dhabi Media Company, publisher of The National, are in talks to create branded mobile services which would include exclusive content such as entertainment, news and sports designed to match subscribers’ lifestyles.

Dr Ammar Bakkar, the group director of new media at MBC Group, said: “MBC is a pan-Arab brand, which means that it is a brand that is strong in any Arab country. So we are not looking to do something in one or two countries, we are looking at something in all Arab countries.”

Support act a welcome start

Since Nasser al Shaikh exited stage left from Dubai’s Department of Finance in May, the market has been waiting for his successor to emerge from the wings to face a potentially hostile audience.

Abdul Rahman al Saleh, Dubai’s new finance chief, walked into the spotlight yesterday, complete with a carefully crafted script, as the government revealed its new fund that will manage the proceeds of a US$20 billion (Dh73.46bn) bond programme.

The news was dispatched to the media complete with a video interview and accompanying transcript, courtesy of the recently appointed public relations company Brunswick.

Local financial gossip starting to smell a bit fishy

Everyone knows that flamingos are not naturally pink. They obtain that colour from their diet, which is dominated by tiny crustaceans from their wetland habitats.

What is less well-known is that this steady intake of uncooked shrimp cocktail causes flamingos to emit a particularly foul-smelling effluent, and that any large group of flamingos kept in one place can’t be kept secret for long. Besides, flamingos are really noisy.

Therefore the rumour floating around that a flock of African, or Floridian, or whatever kind of flamingos was stranded at Dubai International Airport appears to have been an apocryphal tale, utter hooey.

Boubyan Bank: Which Bidder Makes the Most Sense? (Re-post)

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The purpose of this article is to determine which bidder for KIA’s Boubyan Bank stake (National Bank of Kuwait, Securities Group, and Althemar Holdings) makes the most sense. To do that we look at the following issues:

Current Holdings in the Bank:

The Securities Group does not own a stake in Boubyan, while Althemar owns 4.7%, according to Alqabas Newspaper. NBK owns 14.33% of Boubyan’s equity, and they are going to buy the Commercial Bank of Kuwait 19.2% stake once legal matters are settled. With the addition of the KIA stake, NBK’s ownership will equate to 52.53%. NBK is the only bidder that will own a majority of the bank’s stock if it outbids the other parties. A majority is needed to turnaround the ailing bank and to instate new management.

Synergies:

The Securities group is an investment firm, while Althemar is listed as a real estate company in the Kuwait Stock Exchange. NBK is the only bank bidding for the Boubyan stake, thus, more synergies exist between NBK and Boubyan as opposed to the other bidders. NBK has an extensive knowledge of the Kuwaiti banking industry that it can share with Boubyan. Boubyan can also make use of NBK’s employees and management.

Buying Power:

231 million shares of Boubyan Bank are up for grabs. The minimum price that KIA designated is KD 0.550, yielding an overall price of KD 127.5 million. As of March 31, 2009, NBK had KD 3.2 billion in cash, Securities Group had KD 8.645 million in cash, and Althemar had KD 2.137 million in cash. In fact, the value of Securities Group and Althemar’s total assets equal to KD 128.6 million and KD 166.5 million, respectively. The two companies seriously need leverage in order for them to acquire the Boubyan stake. Also, NBK’s financial strength may allow it to have more flexibility in choosing the bid price.

According to my short analysis, I believe that the National Bank of Kuwait seems to be the most appropriate buyer of KIA’s Boubyan Bank stake.

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NBK bought a 13.2% stake for KD 0.550, while Securities Group bought the remaining 6.6% for KD 0.560. Our analysis is supported by the outcome of the auction that NBK is the most relevant buyer.END

Revisit investment strategy

Last week’s visit by Tim Geithner, US Treasury secretary, to Jeddah and Abu Dhabi highlighted the importance of Arab Gulf countries to the United States. The six countries of the Gulf Co-operation Council have come to rival China when it comes to financing the US current account deficit.

However, this year two changes to the status quo have emerged: first, Gulf countries are likely to have much reduced surpluses and less money to spend; and second, by dint of printing money, the Fed has emerged as a third major customer for US securities alongside oil exporters and Asian manufacturers.

This policy of quantitative easing has raised concerns on the part of US creditors about the quality of their assets.

Index upgrades halted

When index provider MSCI Barra announced last month that it would not upgrade the stock markets of Kuwait, the United Arab Emirates and Qatar to its influential emerging markets index, investors largely shrugged.

The index provider had already held extensive talks with asset managers and indicated that an upgrade of the three markets was unlikely.

Kuwait had never been considered a likely candidate for a promotion from the Frontiers Markets Index.

Gulf loans to troubled groups ‘manageable’

The exposure of the largest banks in the oil-rich Gulf to two of Saudi Arabia’s most prominent companies struggling with financial difficulties is significant but manageable, Standard & Poor’s said on Wednesday.

The ratings agency reviewed 30 commercial banks it rates in the six countries of the Gulf Co-operation Council – Saudi Arabia, Kuwait, Qatar, the United Arab Emirates, Bahrain and Oman – to gauge their exposure to Saad Group, which is owned by Maan al-Sanea, a Saudi billionaire, and entities owned by the Algosaibi family.

The banks surveyed by S&P represent about two-thirds of the total assets of GCC banks, said Emmanuel Volland, an analyst at the ratings agency. S&P did not reveal the scale of the exposure of the banks reviewed.

Project finance picks up

The regional project finance market has been mauled by the credit crunch resulting in a raft of cancelled deals – but it has recently shown a glimmer of life.

In June, Qatar’s Nakilat raised $949m to pay for liquefied natural gas ships. Financing deals for three large projects – $1.7bn for Bahrain’s Addur power and water project and two multi-billion dollar deals in Abu Dhabi – are expected to close shortly.

It is still a far cry from the happy days of only last year, when major deals became routine and banks jostled for business, bringing prices down. Senior bankers say the project lending market is still shell-shocked from the turmoil of last autumn.

Dubai in drive to raise $10bn bond tranche

Dubai said yesterday it had begun the process of raising a second $10bn tranche of a $20bn sovereign bond programme and was setting up a new fund to manage the proceeds.

The news was intended to reassure investors that the city state, which has been hit hard by the economic crisis , is actively seeking to manage its huge debt problems. The government and government-related entities are saddled with at least $80bn of debts .

The emirate, which has established itself as the business hub for the oil-rich Gulf, managed to avert a potential debt meltdown this year when the federal central bank stepped in to buy the first $10bn tranche in February.

#GCC and #MiddleEast Finance News