Tuesday, 23 February 2010
Dubai Shares Drop Most in Week After Moody’s Dubai World Report
Dubai’s measure declined the most in more than a week after Moody’s Investors Service said United Arab Emirates banks are owed about 55 billion dirhams ($15 billion) by Dubai World.
Emirates NBD PJSC, the U.A.E.’s largest bank, dropped to the lowest level in almost two weeks. Dubai Islamic Bank, the nation’s biggest bank complying with Islamic banking rules, fell the most in more than a week. Emaar Properties PJSC retreated for a second day. The Dubai Financial Market General Index dropped 1.8 percent to 1,593.29 at 1:28 p.m. in the emirate, the lowest level since Feb. 1.
The possibility that U.A.E. banks will be forced to accept less than they are owed will hurt their ability to borrow money at attractive rates, the Moody’s report yesterday said, adding that they “are in a position to weather sizeable haircuts.” Gulf region banks are poised for “another difficult year,” Standard & Poor’s said, as they grapple with bad loans and the fall-out from the credit crisis.
Saudis to Keep Rates Low Until Lending Revives, Jadwa Says
Saudi Arabia will keep its reverse repurchase rate at a record low until there is an increase in bank lending in the Arab world’s biggest economy, Jadwa Investment Co. said.
“The reverse repo rate is at an all-time low of 0.25 percent in order to encourage banks to lend,” Riyadh-based Jadwa said. The Saudi central bank “is expected to maintain this rate at its present level until there is a sustainable pick-up in bank lending to the private sector.”
Saudi banks have tightened lending and increased provisions against bad loans in the world’s largest oil exporter, as the economy slowed and Saudi Saad Group and Ahmad Hamad Algosaibi Group defaulted. Bank lending to non-government companies fell by 14.5 billion riyals ($3.9 billion) in December, the largest decline since November 2004, Jadwa said in the report.
Dragon Oil Will Invest $870 Million to Boost Output
Dragon Oil Plc, the London-listed explorer focusing on projects in Turkmenistan, plans to invest as much as $870 million on oil and gas projects through 2012 to boost production.
Dragon targets annual output growth of 10 percent to 15 percent over the period, the Dubai-based company said today in a statement. It intends to spend $250 million on oil infrastructure to raise production by 15 percent this year.
“We have to be reasonable in our expectations because we don’t want to commit to a much higher growth rate and then we can’t make it,” Chief Executive Officer Abdul-Jaleel Al-Khalifa said today by telephone, citing reliance on rig availability. “Sometimes the progress with contractors there is not as pleasant as you want it to be, you have to be careful.”
Tough 2010 for banks in Dubai, Kuwait - Moody's, S&P
Banks in Dubai and Kuwait will endure a tougher 2010 than their Gulf peers as lenders in the region continue to take provisions against bad credit, which will curtail profits, ratings agencies said.
"We believe that 2010 will be another difficult year for Gulf banks as they continue to clean up their loan books -- an effort that will weigh on their financial performance," ratings agency Standard & Poor's (S&P) said late on Monday.
The United Arab Emirates banks' specific provisions for non-performing loans (NPL) stood at 33.4 billion dirhams ($9.09 billion) in January 2010, a 64 percent surge from a year earlier, according to Central Bank data released on Tuesday.
Limitless seeks to revise payments
Limitless, one of Dubai World’s property units, is renegotiating payment schedules with construction companies on three big Dubai developments ahead of a US$1.2 billion (Dh4.4bn) loan repayment due next month.
The property company’s liabilities are part of the $26bn debt that Dubai World is renegotiating with creditors.
Limitless is winding down contracts on the Downtown Jebel Ali development, a business and residential centre on Sheikh Zayed Road, as well as the Arabian Canal, a huge waterway and property project that is still in its early earthmoving stages. Talks on payment for Limitless’s headquarters on Emirates Road are also under way.
Dubai Won't Step to Front of Debt Line
Dubai's government said Monday it won't seek senior creditor status in restructuring talks now under way between Dubai World and lenders, a position that may help simplify negotiations with creditors over some $22 billion of the company's debt.
Dubai World shocked investors in early November saying it would ask for a six-month debt standstill. In December, neighboring Abu Dhabi, the capital of the United Arab Emirates, extended Dubai a $10 billion lifeline, following a separate $10 billion infusion by the federal government last February.
Since then, Dubai has pumped more than $6 billion into Dubai World, its flagship corporation, with businesses spanning ports, private equity and real estate. The government has paid off maturing debt and unpaid bills from contractors; serviced debt payments and paid advisory fees for both the company and its creditors during restructuring talks that began in December.
Moody's estimates UAE lenders have $15bn of exposure to Dubai World
Banks based in the United Arab Emirates have $15bn of exposure to Dubai World, Moody's estimated in a report yesterday, as the group prepares to present a restructuring proposal to creditors next month.
The rating agency said 12 rated UAE banks and the regional entity of HSBC could probably absorb losses of 40 per cent.
The government denies the likelihood of losses on this scale. Under such a scenario, the lenders would incur losses of about 9 per cent of their capitalisation at the end of 2009, affecting profits but not threatening solvency.
Nakheel executive joins the exodus
Manal Shaheen, Nakheel’s influential chief commercial officer, has left the Dubai-based developer as the emirate attempts to draw a line under its past real estate excesses.
The departure of Ms Shaheen comes amid large-scale redundancies at the troubled property company, which lies at the heart of the restructuring of a total of $22bn in debts by Dubai World, its parent.
The company confirmed that Ms Shaheen had left but declined to say when or under what circumstances she quit. Ms Shaheen herself said yesterday that she left for “personal reasons”.
Qatar learns lessons of Dubai property peril
Gulf state Qatar will have to endure at least another 12 months of falling property prices before a recovery in 2011, when the benefits of a prudent approach towards real estate development begin to pay off.
Industry experts said Qatar is learning lessons from Dubai's flawed speculative building model, which imploded during the global financial crisis and saw residential prices plunge some 60 percent from their 2008 peak.
Qatar escaped from that storm with minor injury and state moves to control development of new offices, shops and homes mean its fledgling market may heal up to a year before Dubai.
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