Wednesday, 31 March 2010
RBS CEO positive on Dubai plan
Dubai World's DBWLD.UL debt restructuring plan is a positive development and sends the right signal, the chief executive of Royal Bank of Scotland (RBS.L) told a local newspaper on Wednesday.
Stephen Hester's comments followed remarks by other major Dubai World creditors, who expressed support for Dubai's $9.5 billion (6.3 billion pound) support plan for the conglomerate.
"As one of the lenders to Dubai World, we view the recent debt restructuring offer as a positive development," Hester told Gulf News. "In the overall context of Dubai's global credit standing, the move has sent out the right signals."
UBS, Abu Dhabi Invest AD cancel $250 fund
UBS Global Asset Management and Abu Dhabi's Invest AD liquidated a $250 million fund targeting Middle East infrastructure due to weak investor appetite, people familiar with the matter said.
"It's not going ahead, there are no assets in the fund, the commitments made by investors are being returned," one person familiar with the matter told Zawya Dow Jones. "It's not a great fundraising environment for that kind of illiquid infrastructure fund. Now investors are looking for something more liquid."
Invest AD, formerly known as Abu Dhabi Investment Co., and UBS raised $250 million for the fund in a first close in April 2009. However, the people said the fund's timing was ill-judged and had it been launched before the economic downturn it may have succeeded.
Indonesia Bakrieland says debt talks with Dubai firm delayed
Indonesia's PT Bakrieland Development (ELTY.JK), the Bakrie Group's property arm, said on Wednesday that talks with a Dubai property firm over a $110 million strategic investment have been postponed again.
Bakrieland in 2008 agreed to sell a 30 percent stake in its subsidiary, PT Bakrie Swasakti Utama, to Dubai World's property arm, Limitless Holding, for $110 million but so far, the Dubai company has only paid $37 million.
At the time of the deal, which took place at the height of the global financial crisis, the Bakrie Group faced financial difficulties.
How Sheikh Ahmed championed transparency at ADIA
One of Sheikh Ahmed bin Zayed’s most visible accomplishments in 13 years as managing director of the Abu Dhabi Investment Authority (ADIA) was holding the fund’s management up to greater public scrutiny.
Sheikh Ahmed started as a stock analyst at the fund in 1991 and became its managing director in 1997, according to a BusinessWeek profile. When he took over, ADIA was largely closed off from public view, but people also paid little attention to it.
It was only in the middle of the past decade that politicians and investors began to recognise the power wielded by sovereign wealth funds, leading to a drive for more openness.
Dubai Opens Its Shariah Hedge Fund to Investors
Dubai is opening up its inaugural hedge fund to investors after an index-beating debut.
The Middle East emirate's first fund of funds, which was launched at the beginning of 2009, beat comparable indexes by posting a 41% return last year. The fund, up slightly more than 1% through March 28, is still outperforming benchmarks this year.
Fund operator Dubai Shariah Asset Management, or DSAM, sees this as proof that a hedge fund based on Islamic law, or shariah, can provide similar or better returns than conventional hedge funds.
BP Begins Big Push to Revive Iraq's Oil
BP PLC Tuesday awarded $500 million in contracts to drill wells in Iraq's giant Rumaila oil field, the first step in a mammoth initiative by foreign oil companies to revive the country's energy industry.
Associated Press
Iraqi workers are seen at the Rumaila oil refinery in December of 2009.
If successful, the effort at Rumaila and several other fields near Basra could be one of the largest expansions of crude-oil production ever achieved anywhere. Increased Iraq production could be the difference between a well-supplied global market with oil steadily trading below today's $82 a barrel and a tight oil market with triple-digit prices, struggling to meet rising Asian demand.
"It could change the map of oil," says Paolo Scaroni, chief executive of Italy's Eni SpA, which is preparing to begin work on the giant Zubair field.
Any surge in Iraqi oil production must still overcome tremendous obstacles, including fractious politics and security concerns. Iraq oil production was forecast to rebound quickly after the U.S.-led invasion in 2003. But it took six years to get back to 2.5 million barrels a day, the level Iraq was producing in 2001.
The new drilling contracts are the beginning of a long effort by a dozen of the world's largest oil companies to revive Iraq's decrepit oil infrastructure and turn it into a rival of Saudi Arabia for world's biggest crude exporter, industry officials say.
![[IRAQOIL]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tKcyqN0kA7loTnxYpZEK0OtV1puZKkd_R86VI_YzyQjP3GQQVsyZAjDUxA4rUvpqAbth7rzQmtjR6aUt8x4XBZLu3cr3YdV4LoA1TSlv4ywG_tcXbmCxIqWCIaeGkZpw4BMPQjgNOlDxOR0MnYoxX6V-w=s0-d)
Iraq sits atop the world's third-largest supply of oil, after Saudi Arabia and Iran. But two decades of war, sanctions and neglect have left it in disrepair. Oil fields are in desperate need of investment. New wells need to be drilled. Massive amounts of water need to be pumped underground to restore pressure and revitalize reservoirs.
Iraqi officials say they plan to add 10 million barrels a day of oil production capacity by 2017. Most observers say that is too optimistic. However, they say that adding three to four million barrels is possible. Even that lower number would be a historic feat, lagging only Saudi Arabia's massive expansion in the 1970s.
Iraq has an estimated 115 billion barrels of crude-oil reserves. At current prices, that is valued at $9.5 trillion.
Numerous political and security concerns remain before this oil can be extracted. Ayad Allawi's Iraqiya bloc, which won the most seats in the recent parliamentary election, said it would like to review oil contracts signed with foreign companies. That raised concerns there could be further delays in starting work.
However, as the nation's leading parties engage in negotiations to form a new coalition government, there has been no talk thus far of renegotiating the oil contracts.
"The security situation will continue to be a challenge for some period of time," ExxonMobil Corp. Chairman and Chief Executive Rex Tillerson said earlier this month. "I think we're all hopeful that once the postelection forming of the new government moves forward and begins to reach its conclusion that some of that will subside."
The bottom line is that the lure of working in Iraq—with its plentiful oil—is too great for most big oil companies to ignore. "It makes commercial sense for us to increase production as quickly as we can," said Toby Odone, a BP spokesman.
BP and the South Oil Co. let contracts to drill 49 wells to Weatherford International Ltd.; a partnership between Schlumberger Ltd. and the state-run Iraqi Drilling Co.; and China's Daqing Oil Field Company Ltd., said Abdul Mahdy al-Ameedi, a senior official in the oil ministry. He said BP plans to increase production at Rumaila from 1.07 million barrels a day to 1.23 million barrels within 12 months.
These contracts are the first of what is expected to be a wave of oil-field-service related work let by BP, Exxon, Royal Dutch Shell PLC, Eni, Lukoil OAO and China National Petroleum Corp. over the next few months. The companies have been awarded contracts to increase production at separate fields.
Energy analysts at Sanford C. Bernstein recently wrote that developing seven major Iraq fields, including Rumaila and Zubair, would require $102 billion in investment. But they said they were "skeptical" all of the plans would be carried out.
The development of so many enormous projects—most clustered within 50 miles of each other—will create an enormous demand for workers, engineers and drilling rigs. It will also require the construction of a giant infrastructure build out, including roads, ports, oil export facilities and water plants.
Raising oil production so quickly in such a small area may prove too demanding. Recently, it took Saudi Arabia nearly five years to increase its crude oil production capacity by two million barrels a day—without overriding concerns about political stability or security, notes energy consultants IHS CERA. A new analysis by the consultants say Iraq's plan to increase production is "extraordinarily ambitious" and predicted an increase of just less than two million barrels of oil a day by 2015. "It will be incredibly complicated to pull this off," says Matt Simmons, a Houston investment banker.
Nonetheless, even a few million barrels a day of crude oil production capacity could have an enormous impact. The growth of Iraqi oil production and exports will play a "decisive role in shaping global oil markets," says Fatih Birol, chief economist of the Paris-based International Energy Agency, a watchdog for industrialized nations.
Without the boost in Iraqi production, Mr. Birol worries that global oil production over the next five years will have trouble pumping out enough barrels to match expected demand from China, India and the Middle East. Tight supplies amid growing Chinese demand sent oil prices soaring close to $150 a barrel in 2008.
Zain & Bharti SIGN $10.7B Deal
The adage “A picture is worth a thousand words” applies perfectly to the Zain deal signature picture above. Many people doubted the deal would go through even though there was a legitimate buyer, credit was available, and Zain desperately wanted to sell. Doubters had their reasons as Zain has failed to close several announced deals in the past. Moreover, Bharti had their share of failed takeover attempts as they recently failed to close the MTN Africa deal on two occassions. The picture above sets the record straight: Mr. Naser Al-Kharafi signing the Zain Africa sale with Mr. Sunil Bharti Mittal next to him and Mr. Assad Al-Banwan, Chairman of Zain, appearing too.
The final transaction implies an enterprise value of $10.7B with $9 billion equity and $1.7 billion assumed debt by Bharti. Payment will be in cash with $8.3 billion paid upon closing and US$0.7 billion paid after one year. Mr Asaad Al-Banwan commented on the transaction by stating: “This transaction crystallises the significant value we have created for our shareholders over the last 5 years.” Mr. Nabil Bin Salamah, CEO of Zain, shared his vision of Zain after the Africa sale by asserting: “The transaction allows Zain to focus on its highly cash generative operations in the Middle East and to substantially improve its balance sheet. We are excited about the growth prospects of the Middle East and we believe Zain is well positioned to capture this opportunity.” Mr. Sunil Bharti Mittal, Chairman and Managing Director, Bharti Airtel declared: “This agreement is a landmark for global telecom industry and game changer for Bharti Airtel. With this acquisition, Bharti Airtel will be transformed into a truly global telecom company with operations across 18 countries fulfilling our vision of building a world-class multinational.” This specific part reminded me of Saad Al-Barak’s (Zain’s previous CEO) thoughts of Zain’s prospects when Zain initially bought Celtel Africa.
So, now what? It is imperative to acknowledge that yesterday’s Zain is a completely different animal from the one we have today. With this sale, Zain has transformed from a growth company to a value company. This entails various things such as a lower assigned multiple (EV/EBITDA) and lower stock appreciation. On the other hand, you would be owning a more stable company with a lower beta for its dividends. Anywanys, I want to hear what you guys think of this deal and what it means for Zain, shareholders of Zain, banks, and Kuwait.
Banker contends sands of time will heal Dubai
KARL MOORE: This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am speaking to Dr. Henry Azzam, who is the CEO forDeutsche Bank
in the Middle East and North Africa. We are here in Dubai at the Dubai [International] Financial Centre. Good afternoon.
HENRY AZZAM: Good afternoon.
KM: The world has been absolutely agog with Dubai over the last few months. When is Dubai going to turn around? Is it going to come around in the next few years?
HA: Dubai is like those other countries where you have a sovereign debtissue ; they have a sizable debt outstanding that they need to work out. They have started the process of restructuring their debt, estimated at around $22-billion [U.S.], in the next few years. The process has started. I would imagine that they should come to an agreement with their banks in the coming few weeks. Once that is settled, then it becomes easier for Dubai to tap the market again, especially if they do get a government guarantee for the new loans and/or if Abu Dhabi gives them more support.
ADCB's CEO says Dubai World debt plan very positive
Abu Dhabi Commercial Bank ADCB.AD, one of the region's most exposed lenders to indebted Dubai World [DBWLD.UL], said on Tuesday Dubai's $9.5 billion rescue plan for the conglomerate is "extremely positive".
FINANCIALS
"The offer demonstrates the support of the Dubai government, it is extremely positive," chief executive Ala'a Eraiqat told reporters on the sidelines of the bank's annual general meeting.
HSBC (HSBA.L), also one of the largest creditors to Dubai World, said earlier on Tuesday it backed the Dubai World restructuring plan, and that it expected positive results soon.END
Tea Trumps Towers as Dubai Maps Way Back to Future as Trade Hub
At Unilever’s Lipton Tea factory near Dubai’s main port, rows of machines convert leaves from Kenya and India into a million tea bags an hour destined for breakfast tables from South Africa to Canada.
“By bringing in tea here, we are close to the market, so we blend it fast, pack it fast,” said Sanjiv Mehta, Unilever’s chairman for North Africa and Middle East, in an interview at the factory, the world’s second-biggest. “And because of the logistics here being very efficient, we’re able to quickly move it to the consumer markets.”
Dubai is spending $13 billion on building a new international airport and expanding existing air and shipping terminals. The ruling Al Maktoum family is focusing on the emirate’s traditional strength as a trade hub, after borrowing $109 billion to build record skyscrapers and man-made islands led to the world’s worst property crash last year.
Tuesday, 30 March 2010
Shuaa Capital Seeks Exit From Proprietary Investments
Shuaa Capital PSC is looking to exit from proprietary investments as the biggest investment bank in the United Arab Emirates focuses on fee-generating business to achieve profit, its chief executive officer said.
Shuaa plans to sell stakes in Kuwait’s Alkout Industrial Projects Co., Qatar’s Amwal, and U.A.E.-based Septech Holdings Ltd. in the next 12 to 18 months, Sameer Al-Ansari said today in Dubai. Shuaa had 1.2 billion dirhams ($326.7 million) worth of investments at the end of last year, down from 2.4 billion dirhams the previous year after exits and provisions, he said.
“I don’t have sleepless nights for what’s left from these investments,” he said at a press conference. “We are in negotiations to sell some of these investments.”
Nakheel replaces chairman, names new board
Dubai Tuesday replaced Sultan Ahmed bin Sulayem as chairman of struggling property developer Nakheel as it tries to manage the $10.5 billion debt pile made under his leadership.
The government appointed a new board and named Ali Rashid Ahmed Lootah as the new chairman, replacing bin Sulayem, who is also chairman of government-owned conglomerate Dubai World.
"The new board will work on strengthening Nakheel's capabilities in line with the proposed restructuring plan that was announced," a statement from the media office of Dubai's ruler said.
Saudi cenbank head named new Gulf monetary chief
Muhammad Al-Jasser of the Saudi Arabian Monetary Agency will be the first chairman of the Gulf monetary council, expected to be the precursor to a common central bank, Jasser said on Tuesday.
CURRENCIES | BONDS | GLOBAL MARKETS
The deputy will be Rasheed al-Maraj, the central bank governor of Bahrain, according to a statement read out by Jasser at a meeting of the four Gulf states taking part in the common currency project, Saudi Arabia, Bahrain, Qatar and Kuwait.
Central bankers from four Gulf oil producing states launched on Tuesday the joint monetary council, which is expected to lay the foundations for a regional central bank and prepare the launch of a single currency in a nearly decade-old plan.END
Emirates NBD Interested in RBS’ U.A.E. Retail Assets, CFO Says
Emirates NBD PJSC, the United Arab Emirates biggest lender by assets, is considering plans to buy the retail banking assets of Royal Bank of Scotland Group Plc in the country, Chief Financial Officer Sanjay Uppal said.
RBS branches, its automated teller machine network and wealth management clients complement Emirates NBD’s retail banking system, Uppal said in a phone interview in Dubai today. “We are interested in looking at that asset,” he said.
RBS, the U.K.’s largest government-owned lender, expects to announce a buyer for its consumer banking unit in the U.A.E. by April or May, Simon Penney, chief executive officer for the Middle East and Africa, said March 4. The Edinburgh-based lender is selling assets as part of a global plan announced in February last year to exit some businesses including in Asia.
UAE exchanges should consolidate - DFM head
Bourses within the United Arab Emirates should consolidate, the head of Dubai Financial Market (DFM.DU) said on Tuesday, adding DFM's planned takeover of Nasdaq Dubai will be completed within two weeks.
"It is in the interest of everybody to consolidate. There have been discussions at the top level, meaning the owners of the exchanges," executive chairman Essa Kazim told reporters.
Dubai's two exchanges are already moving towards a single trading platform and synchronized trading hours. In December, Borse Dubai, the majority owner of the DFM and Nasdaq Dubai, agreed to buy Nasdaq OMX's (NDAQ.O) remaining stake in Nasdaq Dubai. [ID:nLDE5BL01C]
Profit at DFM, Dubai's top stock exchange which is itself listed, fell by almost half in 2009 as trading commissions slumped. [ID:nLDE62123W]
Pressure on the United Arab Emirate's three stock exchanges, which include the Abu Dhabi exchange ADX, to consolidate, has increased in the wake of the financial crisis and speculation has centered on Dubai's two competing markets.END
Dubai and creditors exchange blows - The Majlis
Dubai and creditors exchange blows - The Majlis
When Dubai World, the huge emirate-owned investment company, announced a plan to restructure some $26 billion in debt on Wednesday, markets welcomed the news.
Now, less than a week later, disagreements between Dubai World and some of its 97 creditor banks are becoming public. A handful of banks on the committee that's coordinating Dubai World's debt restructuring are angry that other creditors look set to receive preferential repayment.
Some of the biggest lenders to Dubai World believe that they are going to be given a worse deal than creditors for Nakheel, a real-estate development subsidiary of the company that is responsible for most of Dubai World's losses.
When Dubai World, the huge emirate-owned investment company, announced a plan to restructure some $26 billion in debt on Wednesday, markets welcomed the news.
Now, less than a week later, disagreements between Dubai World and some of its 97 creditor banks are becoming public. A handful of banks on the committee that's coordinating Dubai World's debt restructuring are angry that other creditors look set to receive preferential repayment.
Some of the biggest lenders to Dubai World believe that they are going to be given a worse deal than creditors for Nakheel, a real-estate development subsidiary of the company that is responsible for most of Dubai World's losses.
Profit-taking trims Dubai shares
Shares in Dubai posted the steepest losses among the regional markets, as investors in the emirate yesterday booked profits from the rally triggered by Dubai World’s restructuring news last week.
The Dubai Financial Market General Index retreated 2.5 per cent to 1,832.94 after rising by 19 per cent since the beginning of this month.
The index heavyweight Emaar Properties led the slide with a loss of 3.6 per cent, while the shares of the Dubai bourse, traded as DFM, lost 4.6 per cent. Emirates NBD dropped 3.8 per cent.
Saudi Arabia’s Al-Naimi Awaits Recovery Before Boosting Output
Saudi Arabian oil Minister Ali Al- Naimi said the nation could boost output by as much as 4.5 million barrels-a day once demand recovers from recession.
The world’s largest oil producer is “waiting” for usage to rise after increasing capacity to 12 million barrels a day, Al-Naimi told reporters today in Cancun, Mexico, where he’s attending an oil conference. Prices in the $70-a-barrel to $80- a-barrel range are “as close to perfect as possible,” he said.
Oil surged last year as the Organization of Petroleum Exporting Countries implemented cuts to production quotas of 4.2 million barrels a day and the global economy emerged from its worst slump since World War II.
Gulf Central Banks Hold First Monetary Council Meet in Riyadh
Saudi Arabia, Kuwait, Qatar and Bahrain will take a step toward setting up a single currency today when their central bank governors hold the first meeting of the Monetary Council, a precursor to a united central bank.
The inaugural session in the Saudi capital, Riyadh, marks the first official meeting of the four governors without their colleagues from Oman and the United Arab Emirates since the U.A.E. pulled out of the planned currency in May. The council is scheduled to work on a road-map for a plan that Kuwait says will take a decade to complete.
Gulf countries agreed on the currency in 2001, saying it would help integrate their economies, and the original timetable would have seen the new monetary unit in place this year. The deadline was missed after the U.A.E. and Oman pulled out. Saudi Arabia, the Arab world’s largest economy, has indicated that the participants may avoid setting a new deadline.
Abu Dhabi learns from neighbour
Abu Dhabi has established a new committee to provide greater oversight of its state-owned companies in a move that appears partly designed to avoid some of the mistakes made by neighbouring Dubai.
The body will be charged with ensuring that the companies have a uniform financial reporting culture and produce acceptable returns. It will examine how board directors are appointed and how the government exercises control.
It is understood the committee, due to be headed by Hamad al-Hurr al-Suwaidi, a senior official at the emirate’s finance department, will not affect Abu Dhabi’s sovereign investment vehicles. Instead, it will focus on companies such as Etihad Airways, the General Holding Corporation, an industrial conglomerate, and the Tourism Development and Investment Company , responsible for projects such as the $29bn (€21.5bn, £19.3bn) development of Saadiyat Island.
SABB sees brighter outlook on lending
SABB, HSBC’s Saudi Arabian affiliate previously known as Saudi British Bank, has had an uneasy time of it of late. Last year the bank reported net profits of SR2.2bn ($585m), its lowest in five years.
And, in the fourth quarter of last year, the lender’s profits nearly halved after booking increased provisions and lending slowed.
This year, the bank says, is likely to be substantially better as a result of stronger fundamentals in the Saudi economy.
Nakheel plan for relaunch takes shape
The somewhat clunky advertising slogan that used to accompany Nakheel’s marketing read: “Where the vision of Dubai gets built”.
The property developer’s Palm Jumeirah project certainly captured the global imagination as celebrity residents burnished the emirate’s allure through the years of stellar growth.
But the projects became increasingly outlandish: reclaimed islands depicting the universe alongside others created to depict the Earth, two extra Palms and a reclaimed city twice the size of Hong Kong island. The height of the hubris came at the end of 2008 – just as the global economy was sliding into recession – when Nakheel unveiled plans for the world’s tallest tower.
Comment: Dubai restructuring just a start
When a significant announcement is made, a phrase often leaps to the fore that embodies a consensus response to what has been said.
After Dubai World unveiled its much anticipated restructuring proposal for its debts last week, the overwhelming reaction seemed to be that of “a step in the right direction”. Yet the phrase was swiftly followed by a “but”.
Some of the caution is linked to details that have still to be thrashed out – significantly, whether bank creditors of Dubai World will receive interest and, if so, at what level. That will help decide just how much pain the creditors will be asked to endure. But the other reason for some caution is more symptomatic of the hammering Dubai’s credibility has suffered.
Monday, 29 March 2010
Big funds sit out UAE rally, wary on Dubai rescue
Institutional investors are sitting out the recovery on UAE stock markets, wary about Dubai's debt rescue proposal and hesitant about prospects longer term, analysts say.
Broader issues like liquidity and market breadth may prevent foreign institutions from coming back to UAE exchanges, which are dominated by property and banking stocks that are closely linked and which lack defensive counters.
In addition, UAE is not included on the MSCI Emerging Markets Index .MSCIEF against which large institutional funds benchmark their performance, meaning many fund managers cannot buy UAE stocks regardless of how attractive valuations are.
Carlyle enters Saudi with lighting firm stake
Private equity firm The Carlyle Group on Monday said it had acquired a 30 percent stake in Saudi Arabia's General Lighting Company, the kingdom's largest lighting fixture manufacturer.
Carlyle did not provide financial details for the transaction, which closed on Monday and marks the fund's first investment in Saudi Arabia, the largest economy in the Middle East.
Equity for this investment, Carlyle's third in the MENA region, will come from Carlyle MENA Partners, a growth capital and buyout fund that closed in March 2009. Carlyle, which worldwide has nearly $90 billion of assets under management, established its Middle Eastern presence in 2007 and has now regional offices in Cairo, Dubai and Istanbul.END
Dubai World guarantees revealed
Dubai has offered Dubai World creditors some guarantees on rescheduled loan repayments in an additional concession that the government says illustrates the generosity of last week’s proposal to inject $9.5bn to help restructure the ailing conglomerate.
Since the tabling of the $24.8bn restructuring proposal, some creditors
to the state-owned conglomerate have complained about sub-commercial interest payments and preferential treatment for bondholders and financial creditors of Dubai World’s development arm Nakheel, which forms the lion’s share of the restructuring.
A person close to the government rejected these complaints, arguing that Dubai World’s unsecured creditors, which are owed as much as $14.2bn, received the best deal they could expect given others made loans on a secured basis.
DIFC loses its appetite for the lavish gathering
The Dubai International Financial Centre (DIFC) is scaling back its annual conference this year because of a dwindling appetite for lengthy, lavish gatherings.
The DIFC Week, which in past years brought to Dubai the likes of Il Divo, the singing group, Maria Bartiromo, the CNBC television anchor, and Steven Levitt, the co-author of two Freakonomics best-sellers, was delayed from last year to the first quarter of this year.
With markets still in a state of uncertainty, however, organisers decided to push the gathering back to May and shorten it from a week-long investment fest to a two-day get-together called the MENASA Forum.
Nakheel to distribute $1.5bn before deal
Nakheel Properties has pledged to spend US$1.5 billion (Dh5.51bn) to finish stalled developments even before creditors agree to a debt restructuring plan presented last week by its parent, Dubai World.
The proposals are contained in a letter seen by The National that was sent to thousands of investors in stalled Nakheel projects the day after a $23.5bn debt restructuring plan was presented to creditor banks of the Dubai World conglomerate.
The plan includes $8bn of fresh funds for Nakheel, the developer of Dubai’s Palm islands.
Tadawul’s First ETF
Saudi Arabia’s Tadawul has successfully launched their first ETF (exchange traded fund), Falcom Saudi Equity ETF (Falcom 30). As per Tadawul’s description, FALCOM Saudi Equity ETF aims to provide investors with long-term capital appreciation and growth. The Fund passively invests in the listed Saudi equities in order to achieve the results that correspond to the performance, before fees and expenses, of the Benchmark Index.
The funded has ended its first trading day with 12.8 million shares traded at a value of SAR271.3 million. The NAV increased by 4.5% while the Tadawul index was down 0.09%. At first I thought that the ETF should mirror the Tadawul index, then I found out that it has its own index which 30 stocks that have the following criteria:
- – Sharia compliant as per Falcom’s Sharia screening.
- – For each stock to be eligible, non-trading days in the Saudi Stock Exchange (Tadawul) must not exceed 7 trading days during the past quarter.
- – Top 30 floating market capitalization stocks. The stocks should also be member of Tadawul public indices.
The following tables shows the current index composition:
| Tadawul Symbol | ISIN | Company Name | Trading Name |
| 1020 | SA0007879055 | Bank AlJazira | BJAZ |
| 1120 | SA0007879113 | Al Rajhi Bank | Al Rajhi |
| 1140 | SA000A0D9HK3 | BANK Albilad | AL Bilad |
| 2350 | SA000A0MQCJ2 | Saudi Kayan Petrochemical Company | Saudi Kayan |
| 2060 | SA0007879170 | National Industrialization Co | Industrialization |
| 2250 | SA000A0B89Q3 | Saudi Industrial Investment Group | SIIG |
| 2290 | SA000A0HNF36 | Yanbu National Petrochemical Company | YANSAB |
| 1211 | SA123GA0ITH7 | Saudi Arabian Mining Company | MA’ADEN |
| 2380 | SA120GAH5617 | Rabigh Refining and Petrochemical Co | Petro Rabigh |
| 1150 | SA122050HV19 | Alinma Bank | Alinma |
| 2010 | SA0007879121 | Saudi Basic Industries Corp | SABIC |
| 2020 | SA0007879139 | Saudi Arabia Fertilizers Co | SAFCO |
| 2260 | SA000A0B63Y2 | Sahara Petrochemical Co | Sahara Petrochemical |
| 2310 | SA000A0KFKK0 | Saudi International Petrochemical Co | Sipchem |
| 2330 | SA000A0LE310 | Advanced Polypropylene Company | APPC |
| 3020 | SA0007879451 | Yamamah Saudi Cement Co. Ltd | Yamamah Cement |
| 3030 | SA0007879469 | Saudi Cement Company | Saudi Cement |
| 3040 | SA0007879493 | The Qassim Cement Co | Qassim Cement |
| 3050 | SA0007879501 | Southern Province Cement Co | Southern Cement |
| 4190 | SA000A0BLA62 | Jarir Marketing Co | Jarir |
| 5110 | SA0007879550 | Saudi Electricity Company | Saudi Electricity |
| 2050 | SA0007879162 | JSavola Group | SAVOLA Group |
| 2280 | SA000A0ETHT1 | Almarai Company | Almarai |
| 7010 | SA0007879543 | Saudi TeleCom | STC |
| 7020 | SA000A0DM9P2 | Etihad Etisalat Co | Etihad Etisalat |
| 7030 | SA121053DR18 | Mobile Telecommunications Company Saudi Arabia | Zain KSA |
| 4100 | SA0007879659 | Makkah Construction & Development Co | Makkah |
| 4250 | SA000A0MR864 | Jabal Omar Development Company | Jabal Omar |
| 4300 | SA11U0S23612 | Dar Alarkan Real Estate Development Company | Dar Al Arkan |
| 4030 | SA0007870054 | The National Shipping Co. of Saudi Arabia | Shipping |
What is an ETF?
“ETFs are investment funds divided into equal units traded on the exchange during trading time, similar to stocks. ETFs enjoy advantages of both mutual funds and stocks.
Like other investment funds ETFs are composed of a basket of assets (listed companies shares), however unlike mutual funds ETFs are traded on the exchange. ETFs are more transparent since they track the movement of the underlying assets index and investing in the index by the same proportions. It is easier for investor to measure the performance of the ETF by tracking the movement of the underlying assets index. ETF units are traded by Bids and Asks during trading time.” (Tadawul.com.sa)Difference between ETFs, mutual funds and stocks:
| Category | ETFs | Mutual Funds | Stocks |
| Transparency | More | Less | More |
| Flexibility | More | Less | More |
| Cost | Less | More | Less |
| Diversification | More | More | Less |
Dubai Holding eyes debt options
Dubai Holding, a conglomerate owned by the emirate’s ruler, is looking at options that could include restructuring to deal with as much as $20bn in debts as the Gulf commercial hub looks to grapple with broader debt issues.
The group, which spans financial investments, hospitality and real estate, could become the second large entity in Dubai to restructure debts after government-owned Dubai World tabled a restructuring proposal last week, including a $9.5bn injection of new money to help restructure $24.8bn in debts.
Talks between creditors and advisers had picked up in the weeks before Dubai World’s announcement, which was broadly welcomed as it pledged to repay creditors in full over time but with question marks over interest rates.
The Calculus Behind Dubai's Nakheel Repayment
The Dubai government's decision to pay the equivalent of $1.7 billion to redeem in full the sukuk instruments issued by crisis-hit property developer Nakheel was a painful one. But people familiar with the decision-making said the alternative would have been much worse, a possible showdown with hedge funds and distressed debt investors that could leave Nakheel with unfinished property projects and knocking confidence in the wider economy.
In addition, the emirate was concerned that failing to pay the sukuks, structured instruments that behave like bonds but which conform to the rules in Koran that prohibit the payment of interest, would hit the fledgling market for Islamic finance.
Nakheel is the property arm of Dubai World, Dubai's flagship conglomerate, famed both for its palm-shaped development off the emirate's coast and its towering debts which helped put its parent company in deep trouble. At the height of Nakheel's woes last December Nakheel's 3.6 billion United Arab Emirates dirham (about $980 million) 2010 and $750 million 2011 sukuks were trading at around 38% of face value. Repayment in full means hedge funds and distressed debt investors who bought then have made a mint.
Bloomberg News
Buildings under construction at Nakheel's International City project in Dubai, which has decided to redeem in full $1.7 billion of Nakheel debt.
The repayment, and hedge-fund profits, is only possible because Dubai will pump $8 billion into Nakheel and convert to equity some $1.2 billion in debt owed to the government. However, the people familiar with the plan said the emirate's hand was forced because Nakheel urgently needs to repay trade creditors to finish projects it has underway.
Under the restructuring plan the trade creditors will be repaid and work continue. But before this can happen, Nakheel's restructuring proposal must be approved by all creditor classes, including the sukuk holders.
One of the people familiar with the matter said an extensive cost-benefit analysis was done on whether the sukuks should be restructured instead of being paid in full. Proposals considered during the painstaking negotiations that have ensued since Nakheel's parent company Dubai World shocked international markets last November by asking for a debt standstill, have included creditors taking haircuts of up to 40%.
According to estimates from UBS AG analysts, half Nakheel's $22 billion of liabilities are related to trade creditors.
However, the person said it was decided the sukuks should be paid in full and on time because the economic cost to do otherwise would be too high as it would leave the restructuring process open to being blocked by a single class of creditors. The risk: distressed debt investors could hold enough of one class of credit to effectively veto the complete deal. It is a pattern common in other restructurings: distressed debt investors will negotiate hard for the most favorable deal for them, as they have far less to lose than the original debt investors, having bought when the debt had already tumbled in value. These aggressive tactics can stall restructurings for many months.
A spokeswoman for the Dubai government said a significant part of the rationale behind repaying the sukuks was to get the "Nakheel engine running again". "We looked at the cost of restructuring against paying them as they fell due and the conclusion was it would make more economic sense to pay them as they fell due," she said.
One person familiar with the matter said those involved with the negotiations were also mindful that they did not want to damage the sukuk market. Investor confidence in the sukuk market, which in 2009 was worth $31 billion globally according to Bank of America Merrill Lynch, has been shaken following defaults in the past year from Investment Dar of Kuwait and Saudi Arabia's Saad Group.
"The decision to pay-down Nakheel's sukuk should be perceived pretty positively by the sukuk market overall," said Okan Akin, a credit strategist at Royal Bank of Scotland in London. The person familiar with the matter said protecting of the sukuk market was also of particular importance because Nakheel's restructuring plan includes paying 60% of the amount owed to trade creditors via the issuance of new sukuks.
Under the plan, Nakheel and the Dubai government will negotiate with banks to provide a liquid market for the new sukuk, by acting as market-makers. This will allow trade creditors to cash-in the sukuks if they wish. If confidence in the sukuk market is hit, trade creditors could find their new sukuks worth less than expected, and the ultimate goal of getting Nakheel back on its feet would be defeated.
Sunday, 28 March 2010
Limitless seeks extension on $1.2 bln loan
Dubai World property unit, Limitless, wants creditors to agree to a 90-day extension on a $1.2 billion loan due March 30, two bankers familiar with the matter said Sunday.
"During this time, a comprehensive proposal to restructure Limitless' debt will be decided," one of the bankers told Zawya Dow Jones.
A spokesperson for Dubai World declined to comment on the details of the Limitless debt negotiations.
Kuwait's NBK gets nod for Boubyan buy
National Bank of Kuwait (NBKK.KW) (NBK), the country's biggest lender by market value, has received the central bank's approval to raise its stake in Islamic lender Boubyan Bank (BOUK.KW) to up to 60 percent.
Shares of NBK were down 1.6 percent, underperforming Boubyan's shares which were up 5.4 percent at 0825 GMT.
"The central bank of Kuwait has approved the request of (NBK) to acquire a maximum stake of 60 percent of Boubyan Bank's capital," NBK said in a statement on the Kuwaiti bourse website on Sunday. The approval is valid for three months starting March 22, it added.
Bankruptcies and liquidations still likely in Dubai real estate (Re-post)
Last week’s government rescue plan for its wholly-owned property group Nakheel should not obscure the fact that Dubai still faces a difficult recovery from its 18 month old real estate crash.
To date their have been no large bankruptcies or liquidations, and only a few properties have been repossessed by the banks. As in the rest of the world the local banks have been highly supportive of their clients in this crisis. But this is not a situation that can last indefinitely, globally or locally.
Bankruptcy
Put at its most simple there is always a point at which a client must go bankrupt. If they are hopelessly trapped with no way of ever repaying a loan then all that happens as time goes on is that the amount owed gets bigger and bigger as interest is not paid.
Consider the position of some of the developers of Dubai skyscrapers. They funded these projects with a mixture of off-plan sales and bank debt. Sales dried up. Bank credit ended with the crisis. The contractor walked off. So they have a half-finished tower, no money and no contractor.
What are they going to do? Well there is not much they can do, it is up to their banks to say ‘hold on, how are we ever going to get our money back?’ That can only happen if the project is liquidated and the assets sold for whatever they will realize in the market place. Even providing money to finish the project might just end up funding an empty building with even more debt.
Now banks are not stupid, whatever their recent lending practices might suggest. They will always try to delay a liquidation until the sale will at least recover what they have loaned. They are not that interested in whether anything is left for other parties.
Calling in loans
So the moment the banks can sense a market upturn they are likely to pull the plug and call in the loans from Dubai developers. It does not need a great deal of imagination – just by looking around Dubai at the number of stalled projects – to realize that this is a big problem.
However, it is very hard to see how it could be addressed without a substantial number of bankruptcies and liquidations. The government can summon up enough capital and rally the support of banks to save Nakheel, but can it really do the same for all the other developers now in trouble?
Sure it makes sense to cushion the blow and make this as orderly a process as it can be. But market forces will sort out the aftermath of a real estate crash far more effectively than a wider government support program, which is probably just not practical in any case.END
Subscribe to:
Posts (Atom)