Wednesday, 21 October 2009
Nakheel loaned $3 bln to Dubai World in '08
Struggling property developer Nakheel loaned its parent Dubai World almost $3 billion last year before the extent of its financial problems emerged, figures show.
The company's financial statement for 2008 shows that Nakheel provided Dubai World with 11.01 billion U.A.E. dirhams ($2.99 billion) of loans described as "short-term in nature".
Nakheel, which has a $3.52 billion Islamic bond due December, declined to comment on the matter when contacted. Dubai World was immediately unable to comment.
"Loans to a related party represent amounts advanced to Dubai World, the ultimate parent company. These loans are short-term in nature, unsecured and carry an effective interest rate of 3%," Nakheel said in its report on NASDAQ Dubai's Web site.
According to the filing, Nakheel had approximately AED9.29 billion identified as "loans to a related party" still outstanding at the end of 2008.
Dubai World said in July it has almost $60 billion of liabilities on its books, which bankers say accounts for at least half of Dubai's total debt estimated to exceed $80 billion. The term liability refers to a company's legal debts or obligations arising from its business operations.
Dubai World's Nakheel unit, which is building the emirate's iconic palm-tree-shaped archipelagos, has been particularly hit hard by a near 50% slump in property values in the emirate.
It's also at the center of concerns over the emirate's ability to repay billions of dollars in debt, with its bond due in December seen as litmus test for the market. Whether the bond is refinanced or paid off, is weighing heavily on the minds of analysts rating Dubai's government-owned companies.
Earlier this week, media reports said Nakheel had repaid a AED4.4 billion securitized bond issued in January, one month ahead of schedule.
In May, Nakheel said it received funds from the $10 billion that Dubai borrowed from the Abu Dhabi-based central bank. The company declined to say how much funding it got, but analysts at the time put the figure at AED2 billion.END
The company's financial statement for 2008 shows that Nakheel provided Dubai World with 11.01 billion U.A.E. dirhams ($2.99 billion) of loans described as "short-term in nature".
Nakheel, which has a $3.52 billion Islamic bond due December, declined to comment on the matter when contacted. Dubai World was immediately unable to comment.
"Loans to a related party represent amounts advanced to Dubai World, the ultimate parent company. These loans are short-term in nature, unsecured and carry an effective interest rate of 3%," Nakheel said in its report on NASDAQ Dubai's Web site.
According to the filing, Nakheel had approximately AED9.29 billion identified as "loans to a related party" still outstanding at the end of 2008.
Dubai World said in July it has almost $60 billion of liabilities on its books, which bankers say accounts for at least half of Dubai's total debt estimated to exceed $80 billion. The term liability refers to a company's legal debts or obligations arising from its business operations.
Dubai World's Nakheel unit, which is building the emirate's iconic palm-tree-shaped archipelagos, has been particularly hit hard by a near 50% slump in property values in the emirate.
It's also at the center of concerns over the emirate's ability to repay billions of dollars in debt, with its bond due in December seen as litmus test for the market. Whether the bond is refinanced or paid off, is weighing heavily on the minds of analysts rating Dubai's government-owned companies.
Earlier this week, media reports said Nakheel had repaid a AED4.4 billion securitized bond issued in January, one month ahead of schedule.
In May, Nakheel said it received funds from the $10 billion that Dubai borrowed from the Abu Dhabi-based central bank. The company declined to say how much funding it got, but analysts at the time put the figure at AED2 billion.END
Dubai Index Leads Drop in Gulf Markets on Economy, Earnings
Dubai shares dropped to the lowest in two weeks, leading a decline among Gulf markets, on concern that the region’s economic recovery may not be sustainable and as companies in Saudi Arabia reported lower earnings.
Emaar Properties PJSC, the biggest listed company in Dubai, fell to the lowest in a week. Rabigh Refining and Petrochemicals Co. lost the most since July after reporting a wider loss. Kingdom Holding Co., the investment company owned by Saudi Prince Alwaleed bin Talal, and Saudi Cable Co. dropped after saying third-quarter profit declined. Dubai’s benchmark index retreated 1.6 percent and Saudi Arabia’s Tadawul declined 1.1 percent to 6,472.97 at 1:34 p.m. in Riyadh.
“There is a bit of nervousness about the sustainability” of the economic recovery, said Robert McKinnon, managing director of Dubai-based investment bank Al Mal Capital PSC. Investors “need to see evidence that the economic recovery is lasting, so we’ll go through a correction, profit taking, wait-and-see stage.”
Emaar Properties PJSC, the biggest listed company in Dubai, fell to the lowest in a week. Rabigh Refining and Petrochemicals Co. lost the most since July after reporting a wider loss. Kingdom Holding Co., the investment company owned by Saudi Prince Alwaleed bin Talal, and Saudi Cable Co. dropped after saying third-quarter profit declined. Dubai’s benchmark index retreated 1.6 percent and Saudi Arabia’s Tadawul declined 1.1 percent to 6,472.97 at 1:34 p.m. in Riyadh.
“There is a bit of nervousness about the sustainability” of the economic recovery, said Robert McKinnon, managing director of Dubai-based investment bank Al Mal Capital PSC. Investors “need to see evidence that the economic recovery is lasting, so we’ll go through a correction, profit taking, wait-and-see stage.”
Dubai Still To Decide On Rating As $10B Bond Looms-Official
Dubai's government is yet to decided whether to seek a sovereign rating after announcing plans to speak with agencies late last year.
"No decision has been taken on a sovereign rating," a Dubai Department of Finance spokesman told Zawya Dow Jones Wednesday. The spokesman declined to comment further on the matter.
Indecision on seeking a sovereign rating could be a sign that Dubai will turn to regional investors, such as banks or sovereign wealth funds, to buy its next $10 billion bond to help struggling government companies, bankers and analysts say.
"No decision has been taken on a sovereign rating," a Dubai Department of Finance spokesman told Zawya Dow Jones Wednesday. The spokesman declined to comment further on the matter.
Indecision on seeking a sovereign rating could be a sign that Dubai will turn to regional investors, such as banks or sovereign wealth funds, to buy its next $10 billion bond to help struggling government companies, bankers and analysts say.
IFC To List $100M Islamic Bond On Dubai, Bahrain Exchanges
The International Finance Corp. said Wednesday it will list a $100 million, five-year Islamic bond with the Nasdaq Dubai and Bahrain stock exchanges.
The private-sector financing arm of the World Bank plans to become the first non-Islamic financial institution to issue a so-called sukuk for term funding in the Gulf Cooperation Council. The bonds comply with Islamic law, known as Shariah, by not charging interest. Instead, sukuk make payouts derived from underlying assets sold to a special purpose vehicle that is the issuer of the paper.
"The sukuk is an innovative way for IFC to create opportunities for Islamic investors who want to make a positive social impact," said Lars Thunell, the IFC chief executive and executive vice president, in a statement.
"It also supports the World Bank Group's goals to integrate the Arab world into the global economy and offer greater opportunities for its people," he said.
The bond will be used to fund various Islamic finance projects in sectors such as health, education and infrastructure.END
The private-sector financing arm of the World Bank plans to become the first non-Islamic financial institution to issue a so-called sukuk for term funding in the Gulf Cooperation Council. The bonds comply with Islamic law, known as Shariah, by not charging interest. Instead, sukuk make payouts derived from underlying assets sold to a special purpose vehicle that is the issuer of the paper.
"The sukuk is an innovative way for IFC to create opportunities for Islamic investors who want to make a positive social impact," said Lars Thunell, the IFC chief executive and executive vice president, in a statement.
"It also supports the World Bank Group's goals to integrate the Arab world into the global economy and offer greater opportunities for its people," he said.
The bond will be used to fund various Islamic finance projects in sectors such as health, education and infrastructure.END
Taqa-Led Group to Invest 800 Million Euros in Bergermeer Project
Abu Dhabi National Energy Co., the state-controlled energy producer known as Taqa, said it will lead a group to invest 800 million euros in the Bergermeer gas storage project in the Netherlands, according to company a statement to the Abu Dhabi bourse today.
The project will start commercial operations in 2013 and a unit of Gazprom OAO will provide cushion gas, it said.END
The project will start commercial operations in 2013 and a unit of Gazprom OAO will provide cushion gas, it said.END
Dubai World May Sell Bonds to Repay Maturing Sukuk, Bankers Say
Dubai World, the state-owned holding company grappling with $40 billion of debt, may be able to sell bonds to repay loans, including a $3.5 billion Islamic bond due at year-end, two bankers familiar with the group’s plans said.
Some of the money needed to settle the Islamic bond, or sukuk, of Dubai World’s real-estate unit Nakheel PJSC may be raised from a bond sale and the rest from local lenders, said the bankers, who declined to be identified because nothing has been decided yet. Some of Nakheel’s Middle Eastern bondholders may accept an offer to extend the bond’s maturity, they said.
“Market sentiment has improved a lot,” said Abdul Kadir Hussain, chief executive officer of Mashreq Capital (DIFC) Ltd., a Dubai-based fund management firm. Dubai will still “not only have to be pretty transparent about how the sukuk will be refinanced, but also what their strategy is to tackle the emirate’s entire debt situation,” he said.
Some of the money needed to settle the Islamic bond, or sukuk, of Dubai World’s real-estate unit Nakheel PJSC may be raised from a bond sale and the rest from local lenders, said the bankers, who declined to be identified because nothing has been decided yet. Some of Nakheel’s Middle Eastern bondholders may accept an offer to extend the bond’s maturity, they said.
“Market sentiment has improved a lot,” said Abdul Kadir Hussain, chief executive officer of Mashreq Capital (DIFC) Ltd., a Dubai-based fund management firm. Dubai will still “not only have to be pretty transparent about how the sukuk will be refinanced, but also what their strategy is to tackle the emirate’s entire debt situation,” he said.
Concerns that existed some months ago have dissipated (Interview)
Rising defaults, access to credit and the need for companies to review their business models remain major concerns despite talk of emerging positive sentiment in the economy. Michael van Uffelen, Executive Director of Arqaam Capital, expects to see more corporate defaults and the emergence of fresh fund-raising trends. The news that commercial banks have started to increase provisions for non-performing loans (NPLs) "probably is the best indicator of what is going to happen in the region", he told Emirates Business. "As banks start provisioning, it is very likely that we are going to see some corporate defaults occurring." He said that sentiment was more positive but was reluctant to describe the current situation as a recovery.
Not much has been heard about corporate defaults even though NPLs, which are at quite a high level, are expected to peak by 2010. What is the situation on the corporate front?
In the corporate sector, we have not seen a very high level of defaults, or they are not much publicised. This is partly because the way private business is transacted in the region is not as transparent as in other parts of the world. A lot has yet to come through. If we look at commercial banks, they have started to increase provisions for NPLs. That is probably the best indicator of what is going to happen in the region. As banks start provisioning it is very likely that we are going to see some corporate defaults occurring. We are in discussions with a lot of companies over restructuring, they have not defaulted but they are taking preemptive measures to make sure they do not default.
Not much has been heard about corporate defaults even though NPLs, which are at quite a high level, are expected to peak by 2010. What is the situation on the corporate front?
In the corporate sector, we have not seen a very high level of defaults, or they are not much publicised. This is partly because the way private business is transacted in the region is not as transparent as in other parts of the world. A lot has yet to come through. If we look at commercial banks, they have started to increase provisions for NPLs. That is probably the best indicator of what is going to happen in the region. As banks start provisioning it is very likely that we are going to see some corporate defaults occurring. We are in discussions with a lot of companies over restructuring, they have not defaulted but they are taking preemptive measures to make sure they do not default.
Dubai on sound footing and its debt claims exaggerated, says DIB
Even as some international players contend Dubai has insufficient resources to cover its debt, a leading bank in the country says much of these claims are not based on truth.
"There has been a lot of exaggeration about what's going on in Dubai and much of it is not based on truth. What matters is what the leaders and appropriate authorities in Dubai say," Dr Adnan Chilwan, Executive Vice-President and Chief of Retail Banking at Dubai Islamic Bank (DIB), told Emirates Business.
"Recently, there have been statements which indicate Dubai will be able to settle or refinance its debts. This has been received very positively within the market and has put to rest a lot of speculation," he said.
"There has been a lot of exaggeration about what's going on in Dubai and much of it is not based on truth. What matters is what the leaders and appropriate authorities in Dubai say," Dr Adnan Chilwan, Executive Vice-President and Chief of Retail Banking at Dubai Islamic Bank (DIB), told Emirates Business.
"Recently, there have been statements which indicate Dubai will be able to settle or refinance its debts. This has been received very positively within the market and has put to rest a lot of speculation," he said.
Investcorp shifts its fund focus
Investcorp, a Bahrain-based asset manager, has cut its hedge fund investments by more than half as it refocuses its business to take advantage of a recent recovery in global markets.
The firm reduced such investments from US$2 billion (Dh7.34bn) to $800 million and made changes in management to streamline operations, said Nemir Kirdar, the chief executive. His comments came ahead of a board meeting in Abu Dhabi yesterday.
Investcorp, the largest alternative asset manager in the Gulf with about $9bn under management, had a balance sheet with ample liquidity to tide it through the crisis, Mr Kirdar said. In addition to its hedge fund investment, the company also targets private equity, technology, property and start-up capital.
The firm reduced such investments from US$2 billion (Dh7.34bn) to $800 million and made changes in management to streamline operations, said Nemir Kirdar, the chief executive. His comments came ahead of a board meeting in Abu Dhabi yesterday.
Investcorp, the largest alternative asset manager in the Gulf with about $9bn under management, had a balance sheet with ample liquidity to tide it through the crisis, Mr Kirdar said. In addition to its hedge fund investment, the company also targets private equity, technology, property and start-up capital.
Abu Dhabi business shines at London investment showcase
Some of Abu Dhabi’s largest publicly traded companies met with investors in London as the emirate’s business sector looks to boost investment from Europe.
National Bank of Abu Dhabi, Al Waha Capital, RAK Properties, Aldar Properties, Dana Gas, Agthia Group, Abu Dhabi National Hotels and Sorouh Real Estate held private one-to-one meetings with analysts and potential investors in the hopes of raising their international profiles.
“Experience shows that London is easily the most important place to attract foreign investment, as the world’s banks are there,” said Tom Healy, the chief executive of the Abu Dhabi Securities Exchange (ADX).
National Bank of Abu Dhabi, Al Waha Capital, RAK Properties, Aldar Properties, Dana Gas, Agthia Group, Abu Dhabi National Hotels and Sorouh Real Estate held private one-to-one meetings with analysts and potential investors in the hopes of raising their international profiles.
“Experience shows that London is easily the most important place to attract foreign investment, as the world’s banks are there,” said Tom Healy, the chief executive of the Abu Dhabi Securities Exchange (ADX).
Bad loans expected to keep rising
Banks will see the number of non-performing loans (NPL) rise into next year as the financial system continues to write down losses related to the troubled Saad and Al Gosaibi groups, according to the UAE’s largest lender.
But sufficient provisions have been taken by banks to probably account for the build-up of bad debt, Michael Tomalin, the chief executive of National Bank of Abu Dhabi (NBAD), said on the sidelines of a conference in London.
“NPLs could peak in 2010,” he said. “There’s a lag effect, and Saad and Al Gosaibi have affected some banks but not us. I think (NPL) have a little way to go, but I’m sure banks have provided well for them already.”
But sufficient provisions have been taken by banks to probably account for the build-up of bad debt, Michael Tomalin, the chief executive of National Bank of Abu Dhabi (NBAD), said on the sidelines of a conference in London.
“NPLs could peak in 2010,” he said. “There’s a lag effect, and Saad and Al Gosaibi have affected some banks but not us. I think (NPL) have a little way to go, but I’m sure banks have provided well for them already.”
The party is over, now it is time for Gulf to pay the bill
As the worst effects of the credit crisis seem to be unwinding in the global financial system, many Gulf companies are left with a problem: how to meet the bills they were obliged to put on hold during the height of the financial troubles.
It is a problem with direct financial consequences for the region’s economies and prospects of recovery. If companies pay up in full and immediately, they risk draining the liquidity that has been slowly building up again in corporate coffers. If they continue to stall on financial obligations, the threat is that their international partners resort to expensive and distracting legal action to recover their dues.
The broader reputational risk is that Gulf companies are branded with a “can’t pay, won’t pay” image that will handicap them moving into recovery.
It is a problem with direct financial consequences for the region’s economies and prospects of recovery. If companies pay up in full and immediately, they risk draining the liquidity that has been slowly building up again in corporate coffers. If they continue to stall on financial obligations, the threat is that their international partners resort to expensive and distracting legal action to recover their dues.
The broader reputational risk is that Gulf companies are branded with a “can’t pay, won’t pay” image that will handicap them moving into recovery.
Dubai judge grants bail to Nakheel executives
After nine months in custody, two Nakheel executives at the centre of the Waterfront fraud trial were granted bail yesterday and will be released after posting bonds of Dh1 million (US$272,000) each.
MJ, the chief executive of the Dubai Waterfront project, and ML, his deputy, had been in custody since January 25. They were accused of defrauding the Australian development company Sunland Group, obtaining Dh44 million in illegal profits and giving false information about the ownership and value of a plot of land.
Judge El Saeed Bargouth granted bail after lawyers for the two Australians argued in Dubai Criminal Courts yesterday that they had been in custody long enough and there was not enough evidence to detain them further.
MJ, the chief executive of the Dubai Waterfront project, and ML, his deputy, had been in custody since January 25. They were accused of defrauding the Australian development company Sunland Group, obtaining Dh44 million in illegal profits and giving false information about the ownership and value of a plot of land.
Judge El Saeed Bargouth granted bail after lawyers for the two Australians argued in Dubai Criminal Courts yesterday that they had been in custody long enough and there was not enough evidence to detain them further.
Al Rajhi is largest individual Saudi investor ahead of Prince Alwaleed, reveals new Falcom investment watch
Saudi-based Falcom Financial Services, a Shariah compliant investment bank that promises intelligent investment ideas, has launched the first 'wealthy investors watch'.
The report presents a rich insight into the habits and practices of wealthy Saudi investors and the investment choices they made at certain points in time. The report looks into their stock picks as well as their portfolios .
The investement watch is a "novel approach by the Falcom research team to understand what fuels their investment spirit and to read in to the decision making das boards of these bold captains of wealth management and see how they charted their investment destiny,” the bank said in a statement.
The report presents a rich insight into the habits and practices of wealthy Saudi investors and the investment choices they made at certain points in time. The report looks into their stock picks as well as their portfolios .
The investement watch is a "novel approach by the Falcom research team to understand what fuels their investment spirit and to read in to the decision making das boards of these bold captains of wealth management and see how they charted their investment destiny,” the bank said in a statement.
DP World hunts London Gateway loan
Port operator DP World is sounding out banks for a loan backing the construction of the London Gateway, a project combining a deep sea container port with a logistics park on the Thames east of London, bankers said on Tuesday.
Initial talks are based on debt of approximately 1 billion pounds ($1.6 billion), split roughly into a 500 million syndicated loan with the rest to be covered by multilateral facilities, two bankers said.
Discussions are however at a very early stage, both sources added, noting most banks have not submitted proposals to credit committees and the structure is therefore subject to changes.
Initial talks are based on debt of approximately 1 billion pounds ($1.6 billion), split roughly into a 500 million syndicated loan with the rest to be covered by multilateral facilities, two bankers said.
Discussions are however at a very early stage, both sources added, noting most banks have not submitted proposals to credit committees and the structure is therefore subject to changes.
UAE's Invest AD plans IPO in 3-5 years
State-owned Abu Dhabi Invest AD is planning an initial public offering in the next three to five years, to float at least 25 percent of the company, its chief executive said on Tuesday.
The state investment fund has already developed a fund management arm, raising money from third party investors for investment in the Middle East and Africa, and is looking to reduce its dependence on government shareholdings, Nazem Fawwaz Al Kudsi told Reuters in an interview.
"The IPO would help our shareholders realise some value -- we don't want them all out, we would like them to benefit," Al Kudsi said.
The state investment fund has already developed a fund management arm, raising money from third party investors for investment in the Middle East and Africa, and is looking to reduce its dependence on government shareholdings, Nazem Fawwaz Al Kudsi told Reuters in an interview.
"The IPO would help our shareholders realise some value -- we don't want them all out, we would like them to benefit," Al Kudsi said.
Dubai Inc. Is in Need of Change at the Top
Dubai risks retreating into its past rather than facing its new reality. The Gulf emirate needs to overhaul its state-controlled companies if it is to overcome its $80 billion debt mountain. Yet rather than seize the opportunity for reform, the people whose poor judgment led Dubai to the brink have kept their jobs. For Western lenders, that is troubling.
Take Dubai World, the conglomerate that has just been radically restructured after running up almost $60 billion of liabilities on ill-judged acquisitions like struggling Madison Avenue retailer Barneys and the Queen Elizabeth II liner, which has since largely languished in a Dubai dry dock.
Surprisingly, senior management remains in place, including Sultan bin Sulayem, the chairman who masterminded the expansion. Holding senior Emirati officials responsible will be tricky. The Sulayem family's ties to Dubai's ruling Maktoums run deep. Mr. Sulayem's father was a key adviser to the family. The same is true of many other of the emirate's business leaders with reputations damaged by the crisis.
Western lenders would rather see experienced executives running Dubai's companies, held accountable by independent boards and creditors. Yet Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum, appears to be heading in the opposite direction, possibly handing more power to his sons. This could mean a bigger role in Dubai's corporate affairs for the popular but inexperienced 26-year-old Crown Prince Hamdan. The scale of Dubai's financial woes, however, means painful change can't be resisted forever. Easy credit allowed officials like Mr. Sulayem to build Dubai World into a truly international company. In the future, banks will demand greater transparency in return for capital.
Write to Andrew Critchlow at andrew.critchlow@dowjones.com
Take Dubai World, the conglomerate that has just been radically restructured after running up almost $60 billion of liabilities on ill-judged acquisitions like struggling Madison Avenue retailer Barneys and the Queen Elizabeth II liner, which has since largely languished in a Dubai dry dock.
Surprisingly, senior management remains in place, including Sultan bin Sulayem, the chairman who masterminded the expansion. Holding senior Emirati officials responsible will be tricky. The Sulayem family's ties to Dubai's ruling Maktoums run deep. Mr. Sulayem's father was a key adviser to the family. The same is true of many other of the emirate's business leaders with reputations damaged by the crisis.
Western lenders would rather see experienced executives running Dubai's companies, held accountable by independent boards and creditors. Yet Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum, appears to be heading in the opposite direction, possibly handing more power to his sons. This could mean a bigger role in Dubai's corporate affairs for the popular but inexperienced 26-year-old Crown Prince Hamdan. The scale of Dubai's financial woes, however, means painful change can't be resisted forever. Easy credit allowed officials like Mr. Sulayem to build Dubai World into a truly international company. In the future, banks will demand greater transparency in return for capital.
Write to Andrew Critchlow at andrew.critchlow@dowjones.com
Qatari's sell GBP1.3bn Barclays stake (Video)
Patrick Jenkins on the timing and the implications of the sale.
(Click headline to view video)
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