Dubai Should Coordinate With U.A.E. Over Future Debt, S&P Says - Bloomberg.com

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Dubai should consult with the United Arab Emirates’ authorities before its government-owned companies issue debt, Standard & Poor’s said.

Dubai triggered a debt crisis last year after amassing more than $100 billion in borrowings. The emirate plans to centralize the debt strategy of its state-run companies, Sheikh Ahmed Bin Saeed Al Maktoum, chairman of the Supreme Fiscal Committee, said yesterday. Debt management offices will be set up at both, a federal U.A.E. and Dubai level, he said.

“There needs to be coordination taking place at a federal level,” Jan Plantagie, Dubai-based regional head of S&P in the Middle East, said in a phone interview today. “Recent experience shows that one market impacts the other.”

Dubai's Shuaa Capital sees first UAE IPO early June | Reuters

Investment bank Shuaa Capital SHUA.DU is the lead manager on what could be the first initial public offering in the UAE this year, expected to raise over 1 billion dirhams ($272.3 million), its chief executive said.

Sameer al Ansari said the Dubai-based investment bank was working with an Abu Dhabi-based company for the share sale expected in early June, speaking to reporters on the sidelines of a conference in Dubai on Monday.

Ansari said the IPO would list in Abu Dhabi. However, he did not reveal the name of the company planning the share sale.

Dubai Shares Slide to 2-Month Low on Moody’s Property Report - Bloomberg.com

Dubai shares fell to the lowest level since March, leading a decline in Gulf markets, as Moody’s Investors Service said the outlook for the region’s real-estate industry is negative because of excess supply. Oman’s benchmark index rose.

Emaar Properties PJSC, the developer of the world’s tallest skyscraper, and Aldar Properties PJSC dropped to the lowest level in more than two months. National Central Cooling Co., the Abu-Dhabi based refrigeration company, decreased the most in two weeks. The DFM General Index lost 2 percent to 1,646.73, the lowest since March 7. Abu Dhabi’s measure retreated 0.8 percent and the Bloomberg GCC 200 Index, of 200 companies in the Gulf, fell 1.3 percent at 2:27 p.m. in Dubai.

“The report’s findings are nothing new, but they reaffirm any negative sentiment investors had about the real estate market,” said Saud Masud, a Dubai-based analyst at UBS AG.

Persian Gulf Property Likely to Worsen on Supply, Moody’s Says - Bloomberg.com

Persian Gulf real-estate markets will probably worsen in the coming months as a “vast” supply of properties becomes available and lending remains scarce, Moody’s Investors Service said.

Moody’s gave the industry a negative outlook for the next 12 months to 18 months and has downgraded the ratings of all Gulf Cooperation Council-based companies affected by real estate, analyst Martin Kohlhase said in a report today.

“The supply-demand imbalance in commercial property, and to some degree in residential units, is likely to grow worse as vast supply meets slack demand,” he said.

UAE Banks Could Face $1B In Impairments From Dubai World Debt

Banks in the United Arab Emirates may need to take as much as $1 billion in total impairment provisions for their Dubai World exposure to account for the difference between market lending rates and the sub commercial rate offered in the conglomerate's restructuring deal, bankers said Monday.

"The difference between the rates that banks lent to Dubai World and the rate they are offered (in the restructuring proposal) is around 3%," one local banker who declined to be named told Zawya Dow Jones on the sidelines of a conference in Dubai.

"If you multiply this by the number of years of restructuring, 5 or 8 years, banks will have to take losses between 15% and 24% of their loan book. This amounts to more than $1 billion," he added.

After months of talks, Dubai World late last week said it has agreed in principle with its main creditors to restructure $23.5 billion of debt.

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Under one of the options put forward in the debt proposal, U.A.E banks could opt for a cash interest payment of 1% plus the difference between the emirates interbank offered rate, or EIBOR, and the London interbank offered rate, or LIBOR, up to a cap of 1%. This also includes payment in kind of up to 1.5%.

"Banks (U.A.E.) will have to take provisions for the difference between the two rates," Edward Quinian, U.A.E. country partner at Ernst & Young told Zawya Dow Jones at the same conference in Dubai.

IFRS STANDARDS

"Banks will have to abide by the International Financial Reporting Standards (IFRS) rules. It's a full conformity with the IFRS," Quinian said, adding that a U.A.E. central bank meeting with lenders is expected very soon.

The banker who declined to be named said "the worst part is that according to IFRS, banks have to take these provisions before the end of this year."

Ernst & Young, which audits the finances of some of the U.A.E.'s leading banks, expects lenders to make large provisions for their Dubai World exposure over the coming 12 months.

Mohammad Ali Yasin, managing director of U.A.E.-based Shuaa Securities, said the country's central bank should act in the interests of the financial sector and instruct local banks to not take impairment provisions for Dubai World's restructured loans.

"In such critical times regulators can and do take extraordinary steps similar to what the European central bank did in buying bonds to protect banks in the euro-zone and as the U.S. Fed did when they bailed out certain financial institutions and took toxic assets in their books," he added.

Investment Dar in restructure talks

The Investment Dar (TID) will meet its main creditors in Dubai today to hammer out details of a plan to restructure its US$3.5 billion (Dh12.85bn) of debts.

The proposals, which have been the subject of negotiations since the Kuwaiti company defaulted on a $100 million sukuk last year, are intended to put its obligations on a five-year repayment schedule.

So far the company, which owns half of the British car maker Aston Martin, has received the support of 80 per cent of creditors.

Gulf money union pause

GULF Arab countries planning a monetary union should take some time to draw lessons from the troubles in the euro zone and give fiscal policies equal importance in the process, Kuwait's foreign minister said on Sunday.

'There are a lot of lessons' to be drawn from the euro zone problems, the foreign minister, Mohammad Sabah al-Salem al-Sabah, said. 'We should pause a little bit and try to learn from what happened with the European monetary union. It would be irresponsible to proceed 'business as usual' without minding or... (learning) from the euro problem,' he said.

Sabah spoke to reporters in the Saudi Red Sea port city of Jeddah after a meeting of Gulf Cooperation Council (GCC) foreign ministers. In addition to Kuwait, which currently holds GCC's rotating presidency, the bloc includes Bahrain, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Saudi mortgage law: Potential model for GCC

The Middle East is waiting with bated breath for the adoption of Saudi Arabia's mortgage law. Mortgage providers stress that the Saudi law would be a precedent and a potential model for the other Gulf Cooperation Council (GCC) countries to follow.

The GCC mortgage market is potentially tens of billions of dollars in size, and according to several mortgage providers more customers in the GCC are opting for Islamic mortgages. For instance, Sakana Holistic Housing Solutions, the Bahrain-based dedicated Islamic mortgage provider, which was established some four years ago, reports that 40 percent of its customers are non-Muslims. One of the most experienced mortgage bankers in the GCC is Raman Lakhsmanan. He pioneered mortgages in the region, first in Oman where he was involved in the first mortgage bank, Alliance Housing Bank, there in 1998 and then as a senior manager at Amlak Finance, the Islamic mortgage finance entity of Emaar Properties, in Dubai in 2003.

Since then has been at the helm of Sakana driving its business through both the boom years of yesteryear and the tough market of today in the aftermath of the global financial crisis. Here Raman Lakhsmanan, CEO, Sakana Holistic Housing Solutions, discusses the current state of the mortgage market in Bahrain and the GCC; the potential impact of the pending Saudi mortgage law on the regional market; the regulatory and legal issues that still need to be resolved; and the challenges and prospects for the mortgage market going forward.

Urgent financial reforms for Dubai, UAE

The governments of both Dubai and the United Arab Emirates are to implement urgent reforms to address weaknesses in their financial systems, Sheikh Ahmed bin Saeed Al-Maktoum says.

Dubai's "Supreme Fiscal Committee... is establishing a comprehensive program to address vulnerabilities in our financial system," Sheikh Ahmed, who chairs the committee and is head of the Emirates Group, said on Sunday.

"At a federal level, urgent steps are being taken to address the gaps in the UAE's legal and regulatory infrastructure," he said at the opening in Dubai of the two-day MENASA economic form.