Dubai World may be forced to sell overseas assets as part of its restructuring process, a top Dubai finance official conceded on Monday, but he said the government would not divest businesses to support the holding company.
Abdulrahman al-Saleh, director-general of the department of finance, said that as part of Dubai World’s $26bn debt restructuring, the holding company would sell some of its foreign investments and real estate assets, which include the QE2 cruise liner and Cirque du Soleil, the Canadian circus operator.
“There is nothing to prevent [Dubai World] selling these assets,” Mr Saleh told Al Jazeera television.
The main goal of the restructuring process is to guarantee the survival of Dubai World, which borrowed heavily to fuel an overseas expansion programme, within a new financial framework agreed with creditors.
But Mr Saleh said the government would not sell assets to support the state-owned holding company.
The department of finance, which oversees core government functions such as the Dubai Water & Electricity Authority and the Roads & Transport Authority, has previously confirmed that it would support all entities that enjoy a sovereign government guarantee.
But the government has not offered an explicit guarantee to Dubai World, which is chaired by sultan bin Sulayen, or companies within the Investment Corporation of Dubai, which include Emirates airline, Dubai Duty Free and a stake in real estate giant Emaar Properties. Dubai Holding, which groups companies owned by Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, is also not believed to have sovereign backing.
Some bankers have suggested that Dubai World’s debt problems are so severe that the government may have to look to sell assets beyond those held by Dubai World or its two real estate units Nakheel and Limitless to put the holding company back on a stable financial footing.
The Financial Times reported last week that UK banks are believed to have an aggregate debt exposure to Dubai World of about $5bn. Royal Bank of Scotland was the most exposed of the UK banks, with between $1bn and $2bn of outstanding debt, ahead of HSBC, Standard Chartered and Lloyds Banking Group.
Emirates National Bank of Dubai is the biggest single creditor with outstanding lending of about $3bn.
However, the UK banks, which are due to hold a meeting with Dubai World later on Monday, are understood to have much of their lending focused on the still-performing parts of the group.
Dubai World has suggested to lenders that it would be able to meet refinancing obligations by selling off some of its assets as markets recovered, bankers familiar with the process say.
However, the group has said it does not intend to include private equity arm Istithmar and DP World, the profitable ports operator which includes P&O, or Jebel Ali Free Zone, the operator of one of Dubai’s key economic development zones, within the restructuring process.
Istithmar has assets across the world, from New York retailer Barney’s to the V&A Waterfront, a retail and property development in South Africa.
As bondholders consider legal action to enforce payment of the $4bn Nakheel sukuk which is due on December 14, the government remains confident that they will find it hard to claim assets held within the Istithmar unit.
Dubai World, which guaranteed the sukuk, has shares in Istithmar, making it difficult for legal action to claim the underlying assets, people aware of the matter say.
Monday, 7 December 2009
Iran needs $3 bln for 2009/10 fuel imports
Iran needs an additional $3 billion to pay for imports of gasoline until March 2010, a government transport management official said in comments published on Monday.
Iran is the world's fifth-largest oil producer, but lacks sufficient refining capacity and imports large amounts of gasoline, burdening the budget and making it potentially vulnerable to any Western sanctions targeting such fuel trade.
Mohammad Rouyanian, who heads a government transportation management body, was quoted as saying by Abrar daily that Iran continued to import the fuel despite a reduction in the monthly quota of heavily subsidised gasoline available for motorists.
Iran is the world's fifth-largest oil producer, but lacks sufficient refining capacity and imports large amounts of gasoline, burdening the budget and making it potentially vulnerable to any Western sanctions targeting such fuel trade.
Mohammad Rouyanian, who heads a government transportation management body, was quoted as saying by Abrar daily that Iran continued to import the fuel despite a reduction in the monthly quota of heavily subsidised gasoline available for motorists.
Dubai Stocks Drop Most in World on Concern About Debt Problems
Dubai shares are poised for their lowest close since July, led by Emaar Properties PJSC and Emirates NBD, as investors price in the emirate’s debt burden.
Emaar, the United Arab Emirates’ biggest real-estate developer, slumped 10 percent. Union Properties PJSC is headed for the lowest close since April 2. Emirates NBD retreated to the lowest since September. The DFM General Index slid 5.5 percent, the biggest fluctuation among global benchmarks tracked by Bloomberg, to 1,750.8 at 12:02 p.m. in the emirate, heading for the lowest close since July 22.
Dubai World last week began talks with banks to restructure $26 billion of debt, including a $3.52 billion Islamic bond of property unit Nakheel PJSC, and said the remainder of its liabilities are on “a stable financial footing.” The emirate on Nov. 25 said it was seeking a “standstill” agreement on Dubai World’s debt, the holding company with $59 billion in liabilities. Dubai’s benchmark index has declined 16 percent since the announcement.
Emaar, the United Arab Emirates’ biggest real-estate developer, slumped 10 percent. Union Properties PJSC is headed for the lowest close since April 2. Emirates NBD retreated to the lowest since September. The DFM General Index slid 5.5 percent, the biggest fluctuation among global benchmarks tracked by Bloomberg, to 1,750.8 at 12:02 p.m. in the emirate, heading for the lowest close since July 22.
Dubai World last week began talks with banks to restructure $26 billion of debt, including a $3.52 billion Islamic bond of property unit Nakheel PJSC, and said the remainder of its liabilities are on “a stable financial footing.” The emirate on Nov. 25 said it was seeking a “standstill” agreement on Dubai World’s debt, the holding company with $59 billion in liabilities. Dubai’s benchmark index has declined 16 percent since the announcement.
Dubai World exposure at $281 mln -Bahrain
The financial exposure of Bahrain's banks to Dubai World amounts to about $281 million and is less than 1% of total assets, Bahrain's central bank governor said Monday.
"All of the local banks are exposed," Rasheed Al Maraj told reporters on the sidelines of a conference in Bahrain.
Al Maraj said Dubai World's planned restructure is a "normal" event and that he remains confident about the economic fundamentals of the Gulf Cooperation Council, or GCC, region.
Dubai World late last month surprised investors by asking for a debt standstill, roiling global financial markets on fears of a default.
"All of the local banks are exposed," Rasheed Al Maraj told reporters on the sidelines of a conference in Bahrain.
Al Maraj said Dubai World's planned restructure is a "normal" event and that he remains confident about the economic fundamentals of the Gulf Cooperation Council, or GCC, region.
Dubai World late last month surprised investors by asking for a debt standstill, roiling global financial markets on fears of a default.
Is China about to bail out Dubai?
Dubai convulsed capital markets around the world on November 25 as a botched announcement intended to be buried over local and US holidays unnerved investors. It also highlighted the fragile nature of global markets. Moreover, Dubai has set itself up as potential rich pickings for distressed debt market investors
However, Dubai is known for its capacity to bounce back from the brink. Is there a sovereign white knight about to ride to its rescue?.....
(Comment from myself, Rupert, the aggregator of this blog.
I disagree wholeheartedly with this article, I quote:
Oil share of Dubai GDP is around 5%, it is Abu Dhabi Emirate that has 95% of UAE oil reserves. It is not Abu Dhabi, the owner of ADIA, or UAE that faces difficulties, it is Dubai.
Also the "GLG expert contributor" appears to know very little of Sovereign pride, let alone Arabic pride!END)
However, Dubai is known for its capacity to bounce back from the brink. Is there a sovereign white knight about to ride to its rescue?.....
(Comment from myself, Rupert, the aggregator of this blog.
I disagree wholeheartedly with this article, I quote:
"Enter China flush with massive currency reserves and an almost inexhaustible demand for oil and related products."
Oil share of Dubai GDP is around 5%, it is Abu Dhabi Emirate that has 95% of UAE oil reserves. It is not Abu Dhabi, the owner of ADIA, or UAE that faces difficulties, it is Dubai.
Also the "GLG expert contributor" appears to know very little of Sovereign pride, let alone Arabic pride!END)
Big Paydays for Rescuers in the Crisis
The white knights that came to the rescue of banks during the financial crisis are going home, with their pockets full of bounty from their good deeds.
In less than two years, many of the biggest overseas government investment funds, known as sovereign wealth funds, have reaped huge gains from bailing out financial institutions, and in turn, the global financial system.
In the latest announcement, Kuwait’s sovereign wealth fund said on Sunday that it had booked a $1.1 billion profit on the stake it took in Citigroup in January 2008. That equals a 37 percent annualized return on its initial $3 billion investment. Other sovereign wealth funds — including those backed by the governments of Singapore, Qatar and Abu Dhabi — have also recently cashed out stakes in foreign banks for comparably large gains.
In less than two years, many of the biggest overseas government investment funds, known as sovereign wealth funds, have reaped huge gains from bailing out financial institutions, and in turn, the global financial system.
In the latest announcement, Kuwait’s sovereign wealth fund said on Sunday that it had booked a $1.1 billion profit on the stake it took in Citigroup in January 2008. That equals a 37 percent annualized return on its initial $3 billion investment. Other sovereign wealth funds — including those backed by the governments of Singapore, Qatar and Abu Dhabi — have also recently cashed out stakes in foreign banks for comparably large gains.
Why Kuwait is right to sell out of Citigroup (Re-post)
The Kuwait Investment Authority has dumped all its stock in Citigroup chalking up a $1.1 billion profit from the sale. The investment was originally made in preferred stocks in January 2008 for $4.1 billion.
Kuwait’s sovereign wealth fund has clearly had a rough ride as a shareholder since then. The global financial crisis crunched Citi stock to below $1, and its bounce back since then is clearly a welcome relief to shareholders.
Exit timing
But having stayed this course the obvious question is why cash in your chips now. The KIA is the ultimate in long-term shareholders and can take a view over decades not months or years. No doubt the KIA has done its analysis well.
Kuwait’s sovereign wealth fund has clearly had a rough ride as a shareholder since then. The global financial crisis crunched Citi stock to below $1, and its bounce back since then is clearly a welcome relief to shareholders.
Exit timing
But having stayed this course the obvious question is why cash in your chips now. The KIA is the ultimate in long-term shareholders and can take a view over decades not months or years. No doubt the KIA has done its analysis well.
Dubai not to sell assets: Al Saleh
Dubai will not sell any of its assets to bail out Dubai World, a top Dubai Government official said, adding that the group will be able to overcome the situation through restructuring its debts and by selling its own assets.
Abdul Rahman Al Saleh, Director-General of Dubai's Department of Finance, told Al Jazeera television channel that "part of the financing of Dubai World will be through asset sales and these are the company's assets, not the government's assets.
"The main goal of the restructuring of Dubai World is to ensure the continuation of its operation as a viable commercial entity. Liquidity or availability of cash — it's not the issue. The question is the future of the company. It is in the interests of the company to inject liquidity or restructure it to make sure it remains sustainable in the long term."
Abdul Rahman Al Saleh, Director-General of Dubai's Department of Finance, told Al Jazeera television channel that "part of the financing of Dubai World will be through asset sales and these are the company's assets, not the government's assets.
"The main goal of the restructuring of Dubai World is to ensure the continuation of its operation as a viable commercial entity. Liquidity or availability of cash — it's not the issue. The question is the future of the company. It is in the interests of the company to inject liquidity or restructure it to make sure it remains sustainable in the long term."
Dolphin Energy seeks more gas from Qatar
Dolphin Energy, the Abu Dhabi firm that imports gas from Qatar, is in talks with Qatar Petroleum to increase its gas supply by up to 15 per cent.
The Qatari national oil company said it might be able to increase the gas it supplied Dolphin under interruptible contracts to as much as 400 million cubic feet per day from about 90 million cfd currently.
“Discussions concerning any additional supply and the final amount of natural gas supplied have not been finalised. It is hoped that any agreement will be secured by the third quarter of 2010,” it said.
The Qatari national oil company said it might be able to increase the gas it supplied Dolphin under interruptible contracts to as much as 400 million cubic feet per day from about 90 million cfd currently.
“Discussions concerning any additional supply and the final amount of natural gas supplied have not been finalised. It is hoped that any agreement will be secured by the third quarter of 2010,” it said.
Dubai carrier should avoid loan fallout
Fallout from the Dubai World debt restructuring could cause Dubai Government-related entities to face higher borrowing costs, Moody’s Investors Service says.
But Dubai’s flagship carrier, Emirates Airline, is expected to be exempt due to its sound track record.
After Dubai World announced it would seek a six-month standstill agreement on a US$4 billion (Dh14.69bn) repayment of an Islamic bond due on December 14, analysts said international lenders may view Dubai state-owned companies as more risky than previously thought. They may shift their focus to other emerging markets in the Gulf, the analysts added.
But Dubai’s flagship carrier, Emirates Airline, is expected to be exempt due to its sound track record.
After Dubai World announced it would seek a six-month standstill agreement on a US$4 billion (Dh14.69bn) repayment of an Islamic bond due on December 14, analysts said international lenders may view Dubai state-owned companies as more risky than previously thought. They may shift their focus to other emerging markets in the Gulf, the analysts added.
Developer seeks theme park funds
Union Properties has hired Ernst and Young to raise finance to complete its Formula One theme park at the Motor City development in Dubai.
The move comes as investors become increasingly cautious about Dubai’s property sector after Dubai World asked creditors last week for a six-month reprieve on debts totalling US$26 billion (Dh95.49bn), the bulk of which is owed by its property units, Nakheel and Limitless.
Union Properties, Dubai’s third-largest property developer, has so far paid Dh950 million towards the theme park, which was half complete before being suspended in February, when the developer ran out of funds.
The move comes as investors become increasingly cautious about Dubai’s property sector after Dubai World asked creditors last week for a six-month reprieve on debts totalling US$26 billion (Dh95.49bn), the bulk of which is owed by its property units, Nakheel and Limitless.
Union Properties, Dubai’s third-largest property developer, has so far paid Dh950 million towards the theme park, which was half complete before being suspended in February, when the developer ran out of funds.
Is the fate of Islamic finance at risk?
How the landscape has changed for Islamic finance, a sector once viewed as an asset-rich haven for risk-averse investors.
The global reverberations of Dubai World’s decision to seek a “standstill” on its financial obligations have thrown the spotlight on the most imminent and pressing of those commitments: the US$4 billion (Dh14.69bn) bill on a sukuk payable by Dubai World’s property company, Nakheel, in just seven days.
If, as many international investors now fear, Nakheel is unable to meet that deadline, it will raise doubts about the rest of the Islamic financial industry, which is worth about $720bn globally, the London Business School says.
The global reverberations of Dubai World’s decision to seek a “standstill” on its financial obligations have thrown the spotlight on the most imminent and pressing of those commitments: the US$4 billion (Dh14.69bn) bill on a sukuk payable by Dubai World’s property company, Nakheel, in just seven days.
If, as many international investors now fear, Nakheel is unable to meet that deadline, it will raise doubts about the rest of the Islamic financial industry, which is worth about $720bn globally, the London Business School says.
Dubai: “Screw you, UK!” (Re-post)
Up until Wednesday the 25th of November, on the eve of the Eid religious festival, Britain had a mess of its own that it had to deal with. With a widening budget deficit that is expected to hit £175bn, soaring unemployment and increased taxes after the rescue of its local banks, Britain wasn’t expecting the surprise visit of Sheikh Mohammed bin Rashid Al-Maktoum with an empty wallet and a long list of demands. Everyone admired the enthusiasm of the Sheikh to transfer the desert emirate into a high growth finance hub, but with the debt contagion in the country, will it be deserted once again?
On Thursday, in response to the announced moratorium of Dubai World debt, the FTSE 100 plummeted 3%, as investors feared a default by Dubai World would cause a major hit to the already fragile financial system. According to the Bank of International Settlements, Financial institutions in the U.K had advanced $50 billion to the UAE, thus making British banks the largest foreign creditor. Of that, about $5 billion was their exposure to Dubai World, with the Royal Bank of Scotland Group Plc having the largest exposure with about $1 to $2 billion extended, followed by HSBC Holding Plc, Standard Chartered Plc, and Lloyds Banking Group Plc. Due to the scale of the exposure to Dubai’s debt crisis, consultants starting pouring into Dubai to help it deal with the steep debt mountains.
With the help of Deloitte, Rothschild, and Moelis & Company as the main consultants for the company, Dubai World laid off 10,500 employees worldwide in an effort to cutting costs. Abu Dhabi, which had previously provided a cushion of support to Dubai, said in a statement “We will look at Dubai’s commitments and approach them on a case-by-case basis.” While Dubai World’s debt are not guaranteed by the government, there is no question that Dubai will use all of its cards to help the investment vehicle.
Whether the emirate would be forced to liquidate some of its trophy assets due to the cash crisis and settle its obligations is not clear at the moment. Istithmar recently sold two properties in the capital last month for £10m and a share of future profits to Great Portland Estates and with Dubai’s-London property assets valued at £400m, what implications would selling off those assets have on the U.K property recovery? And would that cause an infringement to international relations after the Sheikh’s recent reassurance to the Queen and Gordon Brown that the U.K will not be impacted. Moreover, will the debt crisis affect the company’s plan to build a new container port, London Gateway, which is designed to handle more than 3.5m containers a year and create more than 12,000 jobs? Not to mention the statistic by the Association for Consultancy and Engineering (Ace), which states that U.K engineers and consultants in Dubai are, owed at least £250m.
Dubai World managed companies include: DP World (3rd largest port operator in the world), Economic Zones World, Nakheel (developer of Palms Islands, Dubai Waterfronts, The World and The Universe Islands), Dubai Drydocks, Dubai Maritime City, Dubai Multi Commodities Centre, Istithmar World, Infinity World Development (part owner of CityCenter), Island Global Yachting, Limitless, Leisurecorp, Inchcape Shipping Services, Tejari, TechnoPark, P&O Maritime, Discovery Gardens, and Tamweel.
Below is a list of Dubai World and its subsidiaries direct and indirect investments in the U.K alone. The portfolio consists of, and is not limited to:
Luxury cruise liner the QE2 (£50m)
Tilbury and Southampton container terminals
Turnberry golf course in South Ayrshire
Borse Dubai’s 22% holding in the London Stock Exchange (valued at £462m)
DIC’s ownership of Tussauds Group, Doncasters engineering firm, and Travelodge
London properties include Adelphi on the Strand and the Grand Buildings in Trafalgar Square.
London Gateway
Ownership in Standard Chartered bank
Dubai Is Just A Bit Misunderstood, That's All
We are likely to see quite a lot of mileage out of this particular bit of clip art. True, we have managed to relegate the "Dubai crash" to the dustbin of over hyped crises, but Dubai does not seem particularly disposed to accept that as her ultimate destiny. The Nakheel bond is but a pair of weeks from default and creditors show no sign whatsoever of entertaining any sort of negotiated restructure, much less the suggestion of a moratorium to which creditors could only be heard to cackle loudly. We are certain all will, however, work out for the best. ("Nothing to see here. Please disperse.") Ah, would that it were so easy:
Fears are growing among western banks that Dubai Holding, the personal investment vehicle of the emirate's ruler, Sheikh Mohammed bin Rashid al-Maktoum, will be the next state-owned Dubai company to default.
The conglomerate went on a debt-fuelled spending spree in the past decade, borrowing $12 billion (£7.3 billion) to fund ambitious projects in Dubai and to create a private equity arm that bought stakes in Tussauds and the budget hotel chain Travelodge.
Fears are growing among western banks that Dubai Holding, the personal investment vehicle of the emirate's ruler, Sheikh Mohammed bin Rashid al-Maktoum, will be the next state-owned Dubai company to default.
The conglomerate went on a debt-fuelled spending spree in the past decade, borrowing $12 billion (£7.3 billion) to fund ambitious projects in Dubai and to create a private equity arm that bought stakes in Tussauds and the budget hotel chain Travelodge.
Why Dubai defaulted and what we should learn from it
Late last month Dubai World quasi-defaulted — and took the United Arab Emirates' credibility down with it. Will Dubai meet its obligations? As usual, it's the wrong question.
Dubai was a mini-U.S. — finance and real estate made up most of the economy. Both Dubai and the U.S. are discovering that the product of such economies is growth that's not only bubble-driven and prone to crashing, but also fails to create an authentically shared prosperity.
How can a country — or a company — seek a smarter kind of growth? Let's imagine a fictional counterpart to Dubai, one that has invested in smart growth. Here's what this Counter-Dubai might have focused on:
Ethics, not exploitation. Dubai's dark side was an invisible labor force that was, by many accounts, mercilessly exploited. Counter-Dubai would have been a haven for investment in people, bidding heavily for high-value skills, instead of importing low-skill workers.
Tomorrow, not today. Dubai invested heavily in building industrial parks for 20th-century businesses. What would have happened if Dubai had taxed industrial-era businesses and instead offered tax breaks and industrial parks for tomorrow's companies? It might have become Silicon Valley 2.0.
Governance, not corporatization. Dubai set up state-sponsored companies that were de facto instruments of the monarch. Counter-Dubai would have created better governance than in the U.S. or Europe.
Dubai was a mini-U.S. — finance and real estate made up most of the economy. Both Dubai and the U.S. are discovering that the product of such economies is growth that's not only bubble-driven and prone to crashing, but also fails to create an authentically shared prosperity.
How can a country — or a company — seek a smarter kind of growth? Let's imagine a fictional counterpart to Dubai, one that has invested in smart growth. Here's what this Counter-Dubai might have focused on:
Ethics, not exploitation. Dubai's dark side was an invisible labor force that was, by many accounts, mercilessly exploited. Counter-Dubai would have been a haven for investment in people, bidding heavily for high-value skills, instead of importing low-skill workers.
Tomorrow, not today. Dubai invested heavily in building industrial parks for 20th-century businesses. What would have happened if Dubai had taxed industrial-era businesses and instead offered tax breaks and industrial parks for tomorrow's companies? It might have become Silicon Valley 2.0.
Governance, not corporatization. Dubai set up state-sponsored companies that were de facto instruments of the monarch. Counter-Dubai would have created better governance than in the U.S. or Europe.
Dubai Crisis Snags American (Full article)
The Dubai debt crisis is billed as a distinctly Middle Eastern affair. But it turns out there is an American in the middle of the action: 43-year-old deal maker David Jackson
Mr. Jackson is chief executive officer of Istithmar World Capital, the private-equity arm of Dubai World, the government-owned fund whose debt woes have caught the attention of investors worldwide. A former Saks Fifth Avenue assistant buyer who is friendly with fashion designer Diane von Furstenberg, Mr. Jackson has acquired a number of high-end properties: upscale retailer Barneys New York, Manhattan's chic Mandarin Oriental Hotel and the landmark Fontainebleau Hotel in Miami, site of the James Bond "Goldfinger" film.
"If it wasn't a high quality asset in a major market, you shouldn't even bother calling him about it," says Anthony Orso, a real estate banker who helped Mr. Jackson acquire several New York properties. Mr. Jackson declined requests for comment.
In all, Istithmar has laid out nearly $20 billion in a variety of investments, using less than $3 billion in cash and the rest in borrowed capital, according to estimates from Roubini Global Economics. Much of it was spent at the market peak in 2006 and 2007. His roster of deals includes New York boutique investment bank Perella Weinberg Partners and Cirque du Soleil, the Montreal-based entertainment company.
Reuters
David Jackson, CEO of Istithmar World Capital, speaks at a private-equity forum last year.
Istithmar is segregated from Dubai World's debt restructuring process, which is focused on the parent company and two other subsidiaries, primarily property developer Nakheel. But Mr. Jackson's high-profile portfolio has become a symbol of Dubai's once-grand—and now flagging —ambitions.
For instance, Standard & Poor's recently gave its designer apparel discounter Loehmann's Loehmann's Holdings Inc. a low junk-bond rating, indicating it is "highly vulnerable" to default. Valued at about $300 million when Istithmar assumed majority control of the retailer in 2006, it is worth about $100 million today, retail industry bankers say.
Istithmar invested $42 million in Grand Ave.–a corridor of shops, parks and a luxury hotel billed as the Champs-Elysees of Los Angeles–which has postponed the start of construction several times.
Meanwhile, the Mandarin Oriental was valued at $340 million when Istithmar bought a 73% stake in 2007. Since then, with occupancy rates falling, its annual cash flow plunged to $3.6 million from $21.6 million, according to Realpoint LLC, a credit rating company that says the hotel is now worth $123 million–less than its outstanding debt. Another Manhattan property, the W Hotel Union Square, is the target of foreclosure hearings by one of its lenders.
The results are a comedown for Mr. Jackson, who was beginning to cut an outsized figure in finance circles. Mr. Jackson was picked in 2008 by the New York Observer as one of the most powerful people in New York real estate.
Mr. Jackson was born in Boston and educated at Princeton and Yale, where he got a masters in business.
After his MBA, he worked for Lehman Brothers in the merger and acquisitions and private equity departments. He later joined New York-based Marco Polo Partners, a firm focused on emerging markets. There Mr. Jackson advised Dubai on entering the private equity business, a person familiar with the matter says. Dubai officials asked Mr. Jackson to help in their search for the first CIO of Istithmar, and in in 2003, Dubai picked him for the job. Three years later, he was named CEO, reporting to the board of directors of Istithmar World, where Sultan Ahmed bin Sulayem is chairman.
"He's not your typical financial person," says Ms. von Furstenberg, who met Mr. Jackson years ago at a conference and has dined with him in Dubai. "He's very flamboyant, nice, very talkative."
In a talk at Yale's School of Management in 2007, Mr. Jackson said the unfolding subprime real estate crisis "has caused some anxiety for your standard private equity firm, not necessarily us. Thanks to all of you, oil goes to $80. I don't really worry where I am going to get the money for my next deal. So keep buying your SUVs and keep going to the gas pumps," he said.
"We are not battening down the hatches. We are putting more money to work, because we see more value than we did six months ago," he said.
Mr. Jackson has had some winners. Istithmar bought New York's Helmsley Building for $705 million in 2005 and sold it two years later for $1.15 billion. And some bankers say Mr. Jackson's preference for iconic names may protect him over time. "While values have declined over the last few years, theirs have probably declined less because they stuck with high-quality assets," says Mr. Orso.
Yet as Istithmar's losses have mounted, Mr. Jackson's staff has been shaken up. His co-chief investment officers, both private equity bankers he knew from Lehman Brothers, recently left the firm to pursue other opportunities, according to people familiar with the matter.
Mr. Jackson's control over some Istithmar companies appears to be in flux, too, say people knowledgeable about the firm. Late last year, Dubai World removed Mr. Jackson from managing Barneys and replaced him with a top executive from Nakheel Retail, another unit of Dubai World, these people say. A couple months later, Mr. Jackson resumed his role at Barneys.
The American chief also has had a tough time filling the year-and-a-half vacancy at Barneys CEO spot. That's left the company without a CEO while Istithmar explores a possible restructuring of the 42-store high-fashion chain. Industry bankers now value the company around one-third the $942 million price paid in June 2007.
One of Mr. Jackson's acquaintances, Washington D.C.-based investor Teresa Barger, met with him in Dubai last January. There, she says, Mr. Jackson extolled Dubai's infrastructure. He said he wasn't concerned about Dubai's falling property prices and slumping markets, she says. "He seemed unusually optimistic about the markets when others were articulating concerns," Ms. Barger recalls.
Mr. Jackson is chief executive officer of Istithmar World Capital, the private-equity arm of Dubai World, the government-owned fund whose debt woes have caught the attention of investors worldwide. A former Saks Fifth Avenue assistant buyer who is friendly with fashion designer Diane von Furstenberg, Mr. Jackson has acquired a number of high-end properties: upscale retailer Barneys New York, Manhattan's chic Mandarin Oriental Hotel and the landmark Fontainebleau Hotel in Miami, site of the James Bond "Goldfinger" film.
"If it wasn't a high quality asset in a major market, you shouldn't even bother calling him about it," says Anthony Orso, a real estate banker who helped Mr. Jackson acquire several New York properties. Mr. Jackson declined requests for comment.
In all, Istithmar has laid out nearly $20 billion in a variety of investments, using less than $3 billion in cash and the rest in borrowed capital, according to estimates from Roubini Global Economics. Much of it was spent at the market peak in 2006 and 2007. His roster of deals includes New York boutique investment bank Perella Weinberg Partners and Cirque du Soleil, the Montreal-based entertainment company.
David Jackson, CEO of Istithmar World Capital, speaks at a private-equity forum last year.
Istithmar is segregated from Dubai World's debt restructuring process, which is focused on the parent company and two other subsidiaries, primarily property developer Nakheel. But Mr. Jackson's high-profile portfolio has become a symbol of Dubai's once-grand—and now flagging —ambitions.
For instance, Standard & Poor's recently gave its designer apparel discounter Loehmann's Loehmann's Holdings Inc. a low junk-bond rating, indicating it is "highly vulnerable" to default. Valued at about $300 million when Istithmar assumed majority control of the retailer in 2006, it is worth about $100 million today, retail industry bankers say.
Istithmar invested $42 million in Grand Ave.–a corridor of shops, parks and a luxury hotel billed as the Champs-Elysees of Los Angeles–which has postponed the start of construction several times.
Meanwhile, the Mandarin Oriental was valued at $340 million when Istithmar bought a 73% stake in 2007. Since then, with occupancy rates falling, its annual cash flow plunged to $3.6 million from $21.6 million, according to Realpoint LLC, a credit rating company that says the hotel is now worth $123 million–less than its outstanding debt. Another Manhattan property, the W Hotel Union Square, is the target of foreclosure hearings by one of its lenders.
The results are a comedown for Mr. Jackson, who was beginning to cut an outsized figure in finance circles. Mr. Jackson was picked in 2008 by the New York Observer as one of the most powerful people in New York real estate.
Mr. Jackson was born in Boston and educated at Princeton and Yale, where he got a masters in business.
After his MBA, he worked for Lehman Brothers in the merger and acquisitions and private equity departments. He later joined New York-based Marco Polo Partners, a firm focused on emerging markets. There Mr. Jackson advised Dubai on entering the private equity business, a person familiar with the matter says. Dubai officials asked Mr. Jackson to help in their search for the first CIO of Istithmar, and in in 2003, Dubai picked him for the job. Three years later, he was named CEO, reporting to the board of directors of Istithmar World, where Sultan Ahmed bin Sulayem is chairman.
"He's not your typical financial person," says Ms. von Furstenberg, who met Mr. Jackson years ago at a conference and has dined with him in Dubai. "He's very flamboyant, nice, very talkative."
In a talk at Yale's School of Management in 2007, Mr. Jackson said the unfolding subprime real estate crisis "has caused some anxiety for your standard private equity firm, not necessarily us. Thanks to all of you, oil goes to $80. I don't really worry where I am going to get the money for my next deal. So keep buying your SUVs and keep going to the gas pumps," he said.
"We are not battening down the hatches. We are putting more money to work, because we see more value than we did six months ago," he said.
Mr. Jackson has had some winners. Istithmar bought New York's Helmsley Building for $705 million in 2005 and sold it two years later for $1.15 billion. And some bankers say Mr. Jackson's preference for iconic names may protect him over time. "While values have declined over the last few years, theirs have probably declined less because they stuck with high-quality assets," says Mr. Orso.
Yet as Istithmar's losses have mounted, Mr. Jackson's staff has been shaken up. His co-chief investment officers, both private equity bankers he knew from Lehman Brothers, recently left the firm to pursue other opportunities, according to people familiar with the matter.
Mr. Jackson's control over some Istithmar companies appears to be in flux, too, say people knowledgeable about the firm. Late last year, Dubai World removed Mr. Jackson from managing Barneys and replaced him with a top executive from Nakheel Retail, another unit of Dubai World, these people say. A couple months later, Mr. Jackson resumed his role at Barneys.
The American chief also has had a tough time filling the year-and-a-half vacancy at Barneys CEO spot. That's left the company without a CEO while Istithmar explores a possible restructuring of the 42-store high-fashion chain. Industry bankers now value the company around one-third the $942 million price paid in June 2007.
One of Mr. Jackson's acquaintances, Washington D.C.-based investor Teresa Barger, met with him in Dubai last January. There, she says, Mr. Jackson extolled Dubai's infrastructure. He said he wasn't concerned about Dubai's falling property prices and slumping markets, she says. "He seemed unusually optimistic about the markets when others were articulating concerns," Ms. Barger recalls.
Trade minister flies to Saudi Arabia to persuade defaulters to treat creditors equally
Lord Davies of Abersoch, the Trade Minister, flew to Saudi Arabia last night to try to defuse a growing dispute that bankers say could do as much damage to the Gulf’s bruised financial reputation as the Dubai shock of ten days ago.
Bankers are furious that two defaulting Saudi conglomerates that owe $20 billion (£12.2 billion) appear to be favouring local banks over foreign creditors. State-owned Royal Bank of Scotland, HSBC and Standard Chartered are all understood to have exposure to Saad Group and Ahmad Hamad Algosaibi & Bros (Ahab). Dozens of other Western banks are also owed money, including Citigroup and BHP Paribas.
Bankers suspect that the two family-owned businesses, which defaulted over the summer, have privately reached agreement with local Saudi banks over restructuring their loans while leaving foreign banks in the cold. One senior banker told The Times yesterday: “Local banks appear to have been given preference.”
Bankers are furious that two defaulting Saudi conglomerates that owe $20 billion (£12.2 billion) appear to be favouring local banks over foreign creditors. State-owned Royal Bank of Scotland, HSBC and Standard Chartered are all understood to have exposure to Saad Group and Ahmad Hamad Algosaibi & Bros (Ahab). Dozens of other Western banks are also owed money, including Citigroup and BHP Paribas.
Bankers suspect that the two family-owned businesses, which defaulted over the summer, have privately reached agreement with local Saudi banks over restructuring their loans while leaving foreign banks in the cold. One senior banker told The Times yesterday: “Local banks appear to have been given preference.”
When Saudi Oil Minister Calls Oil Prices 'Perfect,' Ladies Better Secure Their Handbags
There he goes again. Our clairvoyant and sage Saudi oil minister Ali al-Naimi proclaiming for all to hear that "the price is perfect," referring to the current price of oil ahead of OPEC's scheduled meeting later this month. Then, in chorus-like lockstep, other similarly inclined oil ministers of various OPEC persuasions lend their voice to Saudi Arabia's lead as Libya's oil minister "...we don't expect any change in the quota." All this from members of a cartel that has managed to cut more than 4 million barrels production a day from the world's oil supply.
Indeed Mr. Ali al-Naimi and his OPEC cartel brethren should be very pleased. Since December of last year, they have been able to manipulate the price of oil by 258%, from $31/bbl last December to $80/bbl a few days ago (last at $75+/bbl). By contrast over the same time frame the price of gold has increased some 45% in value while the dollar has retreated some 15%. Correlation? Yes, but minimal at best, and certainly not the driving force behind oil's price increase as presented by endless talking heads.
OPEC, in conspiring to hold back over 4 million barrels of oil a day from the market, is thereby clearly colluding to impact oil's price. It is a willful policy seemingly tolerated by governments as they are not willing to confront this egregious exercise in market manipulation.
Indeed Mr. Ali al-Naimi and his OPEC cartel brethren should be very pleased. Since December of last year, they have been able to manipulate the price of oil by 258%, from $31/bbl last December to $80/bbl a few days ago (last at $75+/bbl). By contrast over the same time frame the price of gold has increased some 45% in value while the dollar has retreated some 15%. Correlation? Yes, but minimal at best, and certainly not the driving force behind oil's price increase as presented by endless talking heads.
OPEC, in conspiring to hold back over 4 million barrels of oil a day from the market, is thereby clearly colluding to impact oil's price. It is a willful policy seemingly tolerated by governments as they are not willing to confront this egregious exercise in market manipulation.
Rethink emerging markets after Dubai
In September 2008, at the height of the financial firestorm sweeping the planet, the US government stepped in to bail out Fannie Mae and Freddie Mac, two pillars of its mortgage market.
Although Fannie and Freddie were “government-sponsored entities”, Washington faced no legal obligation to absorb their losses.
The chief beneficiaries of its largesse were the sovereign wealth funds of China, Japan, South Korea and Taiwan, which between them held about $720bn (€480bn, £430bn) of such “agency debt”.
The chief beneficiaries of its largesse were the sovereign wealth funds of China, Japan, South Korea and Taiwan, which between them held about $720bn (€480bn, £430bn) of such “agency debt”.
Kuwait fund sells $4bn Citi stake
Kuwait’s sovereign wealth fund has made a $1bn profit after selling its stake in Citigroup for $4.1bn less than two years after acquiring preferred shares the US’s largest bank during the financial crisis.
The Kuwait Investment Authority said on Sunday it had sold its entire stake in the US bank, earning the sovereign wealth fund a 37 per cent return on its investment.
The KIA sale comes as Citigroup is set to intensify efforts to break free from the US government’s emergency bank funding programme.
The Kuwait Investment Authority said on Sunday it had sold its entire stake in the US bank, earning the sovereign wealth fund a 37 per cent return on its investment.
The KIA sale comes as Citigroup is set to intensify efforts to break free from the US government’s emergency bank funding programme.
Sovereign funds pressured to invest locally
As the oil-rich Arab Gulf seeks to recover from the global economic crisis, some sovereign wealth funds are concerned they could be required to do more “national service” to support local ailing institutions and companies.
Even before the news that Dubai World intends to suspend debt payments dented confidence in the Gulf, executives at these large pools of capital from Beijing to the Middle East were being asked to do more to stabilise their own economies. That is a departure from their original mission, which was to diversify out of their own markets.
“The sovereign wealth funds are being repoliticised,” says the vice-chairman of one big international bank in Dubai.
Even before the news that Dubai World intends to suspend debt payments dented confidence in the Gulf, executives at these large pools of capital from Beijing to the Middle East were being asked to do more to stabilise their own economies. That is a departure from their original mission, which was to diversify out of their own markets.
“The sovereign wealth funds are being repoliticised,” says the vice-chairman of one big international bank in Dubai.
Nakheel creditors ponder bare cupboard
The property developer Nakheel once epitomised Dubai’s rise, turning elaborately arranged man-made islands into some of the most sought-after properties in the emirate and launching a bold bid to build the world’s tallest tower.
But as creditors investigate how to respond to parent company Dubai World’s decision last month to delay the December 14 repayment of Nakheel’s $4bn (€2.65bn, £2.4bn) sukuk, or Islamic bond, they are likely to discover that the once high-flying company may have few assets that they can get their hands on.
Nakheel is groaning under an $8bn debt mountain and has been forced to slash projects and staff amid a calamitous real estate crash. The company has referred all questions about its condition to Dubai World, which in turn has declined to comment. Government-owned Dubai World has said it is seeking to restructure $26bn in debt, including Nakheel’s obligations.
But as creditors investigate how to respond to parent company Dubai World’s decision last month to delay the December 14 repayment of Nakheel’s $4bn (€2.65bn, £2.4bn) sukuk, or Islamic bond, they are likely to discover that the once high-flying company may have few assets that they can get their hands on.
Nakheel is groaning under an $8bn debt mountain and has been forced to slash projects and staff amid a calamitous real estate crash. The company has referred all questions about its condition to Dubai World, which in turn has declined to comment. Government-owned Dubai World has said it is seeking to restructure $26bn in debt, including Nakheel’s obligations.
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