Abu Dhabi's Aldar Properties (ALDR.AD: Quote) tumbled to a five-month low on Sunday after the indebted developer said it planned to take $2.9 billion in impairments and issue a $760 million convertible bond.
These are part of a restructuring plan for the state-linked firm, which has made losses for four straight quarters and faces an estimated $3 billion funding gap in 2011. Abu Dhabi's government will pay Aldar $4.5 billion for various assets. [ID:nLDE70F01C]
'Equity holders suffer immediate equity impairment and future dilution, but solvency is now assured,' Nomura wrote in a research note. 'The stock now looks expensive relative to its peers and that will likely take some time to correct.'
Sunday 16 January 2011
Dubai Inc.’s Debt Is Bigger Than Most Estimates, Credit Suisse Says - The Media Line
Just as there were signs that Dubai might be climbing out of its debt hole, Credit Suisse has released a report that puts the size of the emirate’s borrowings above conventional estimates.
Entities 50% or more owned by Dubai’s government and ruler Sheikh Mohammed Bin Rashid Al-Maktoum amount to $129.3 billion, the Swiss bank said in a report dated January 13. It said the debt burden could, in fact, be “much higher than our final numbers owing to the lack of full disclosure.”
The debt of what is popularly known as Dubai Inc, a collection of government and quasi-government businesses and agencies, is usually put at about $110 billion. A restructuring of the debt of Dubai World, the biggest of the Dubai Inc. borrowers, last September brought some improvement in investor sentiment and a handful of bond offerings at the end of last year. But Credit Suisse said it sees new problems ahead in 2011.
Entities 50% or more owned by Dubai’s government and ruler Sheikh Mohammed Bin Rashid Al-Maktoum amount to $129.3 billion, the Swiss bank said in a report dated January 13. It said the debt burden could, in fact, be “much higher than our final numbers owing to the lack of full disclosure.”
The debt of what is popularly known as Dubai Inc, a collection of government and quasi-government businesses and agencies, is usually put at about $110 billion. A restructuring of the debt of Dubai World, the biggest of the Dubai Inc. borrowers, last September brought some improvement in investor sentiment and a handful of bond offerings at the end of last year. But Credit Suisse said it sees new problems ahead in 2011.
Egypt 91-day T-bill average yield down at 9.203 pct | Reuters
The average yield on Egyptian 91-day treasury bills declined to 9.203 percent on Sunday from 9.515 percent at last week's auction, the central bank said.
The bank accepted bills worth 1 billion Egyptian pounds, the same amount it was seeking.
The rates of the accepted bills ranged from 9.09 percent to 9.308 percent versus a range of 9.451-9.539 percent at the previous auction.
The bills, for issue on January 18, mature on April 19, 2011.
The bank accepted bills worth 1 billion Egyptian pounds, the same amount it was seeking.
The rates of the accepted bills ranged from 9.09 percent to 9.308 percent versus a range of 9.451-9.539 percent at the previous auction.
The bills, for issue on January 18, mature on April 19, 2011.
Corruption Continues To Plague Jordan, And 5 Steps To Fighting It at The Black Iris of Jordan
The Heritage Foundation’s economic freedom report for 2010 has come out and Jordan has actually improved.
Jordan’s economic freedom score is 68.9, making its economy the 38th freest in the 2011 Index. Its score is 2.8 points better than last year, with significant gains in fiscal, monetary, and investment freedom and improved control of government spending. Jordan is ranked 4th out of 17 countries in the Middle East/North Africa region and registered the sixth highest score improvement in the 2011 Index. Progress toward upgrading Jordan’s economic infrastructure has aided economic growth despite the challenging global economic environment. Levels of trade, fiscal, and investment freedom are relatively competitive. The financial sector has taken steps to meet international standards.
Public finance management and privatization have been key parts of the reform agenda. Social security and pension reforms are being followed by efforts that include public wage bill containment and capital spending reduction. Future planned adjustments include better-targeted capital spending, water and energy market liberalization, and private-sector development. Overall economic freedom is limited by corruption and the judicial system’s vulnerability to political influence. [source]
Kharafi Group, Etisalat continue Zain deal talks-NIC | Reuters
A unit of Kuwait's Kharafi Group, a major shareholder in Zain (ZAIN.KW), said on Sunday that talks to complete a firm deal for the sale of a 46-percent stake in the Kuwaiti telco to Etisalat (ETEL.AD) will continue.
National Investments Co (NINV.KW) (NIC), working on behalf of its parent firm, is gathering Zain shares to tender to the Etisalat offer.
'National Investments Co states that its client Al Khair National told the company that the parties involved in the deal are continuing their talks until a clear and firm deal is completed,' NIC said in a statement on the Kuwaiti bourse website on Sunday.
National Investments Co (NINV.KW) (NIC), working on behalf of its parent firm, is gathering Zain shares to tender to the Etisalat offer.
'National Investments Co states that its client Al Khair National told the company that the parties involved in the deal are continuing their talks until a clear and firm deal is completed,' NIC said in a statement on the Kuwaiti bourse website on Sunday.
Etisalat Misses Deadline in Concluding $12 Billion Kuwait Zain Stake Deal - Bloomberg
Emirates Telecommunications Corp. will continue talks to reach an accord on its $12 billion offer for control of Kuwait’s Zain after it missed a deadline on “unforeseeable delays” to complete the diligence process.
“The parties have not made sufficient progress toward completion of the proposed transaction in order to meet that deadline due to unforeseeable delays in Zain providing access to all relevant information,” Etisalat said in an e-mailed statement today. “The parties do continue to work toward the announcement of a definitive transaction.”
Emirates Telecom, the United Arab Emirates’s biggest phone carrier and also known as Etisalat, is aiming to expand its presence in the Middle East, where Zain operates in countries from Kuwait and Iraq to Bahrain after selling most of its African assets last year to Indian billionaire Sunil Mittal’s Bharti Airtel Ltd. for $9 billion. For Zain, it is the second attempt by majority shareholders to sell control.
“The parties have not made sufficient progress toward completion of the proposed transaction in order to meet that deadline due to unforeseeable delays in Zain providing access to all relevant information,” Etisalat said in an e-mailed statement today. “The parties do continue to work toward the announcement of a definitive transaction.”
Emirates Telecom, the United Arab Emirates’s biggest phone carrier and also known as Etisalat, is aiming to expand its presence in the Middle East, where Zain operates in countries from Kuwait and Iraq to Bahrain after selling most of its African assets last year to Indian billionaire Sunil Mittal’s Bharti Airtel Ltd. for $9 billion. For Zain, it is the second attempt by majority shareholders to sell control.
Egypt Stocks Drop Most in Six Weeks as Tunisia's Leader Ben Ali Overthrown - Bloomberg
Egyptian stocks fell the most since November after a popular uprising in Tunisia forced the ouster of President Zine El Abidine Ben Ali, raising concern Egypt’s regime may face similar pressure.
Commercial International Bank Egypt SAE, the country’s biggest publicly traded lender, headed for its lowest close in more than a month. EFG-Hermes Holding SAE, Egypt’s biggest publicly traded investment bank, declined 3.3 percent. The EGX30 Index lost 1.2 percent, the largest intraday decline since Nov. 30, to 7,073.86 at 12:59 p.m. in Cairo. Tunisia’s benchmark Tunindex tumbled 13 percent last week as increasing violence lead to the toppling of the country’s leader on Jan. 14.
The Tunisian protests may embolden demonstrators who have recently taken to the streets in other North African and Middle Eastern countries, including Egypt, Morocco and Jordan, all of which have experienced demonstrations about economic conditions, said Marina Ottaway, director of the Middle East program at the Carnegie Endowment for International Peace in Washington.
Commercial International Bank Egypt SAE, the country’s biggest publicly traded lender, headed for its lowest close in more than a month. EFG-Hermes Holding SAE, Egypt’s biggest publicly traded investment bank, declined 3.3 percent. The EGX30 Index lost 1.2 percent, the largest intraday decline since Nov. 30, to 7,073.86 at 12:59 p.m. in Cairo. Tunisia’s benchmark Tunindex tumbled 13 percent last week as increasing violence lead to the toppling of the country’s leader on Jan. 14.
The Tunisian protests may embolden demonstrators who have recently taken to the streets in other North African and Middle Eastern countries, including Egypt, Morocco and Jordan, all of which have experienced demonstrations about economic conditions, said Marina Ottaway, director of the Middle East program at the Carnegie Endowment for International Peace in Washington.
Aldar Properties bailout poses FDI problem for UAE and local bourses « ArabianMoney
Abu Dhabi is putting the finishing touches on a bailout package for the emirate’s largest developer, Aldar Properties, which would otherwise go bankrupt.
However this is likely to raise the state shareholding in Aldar from 38 per cent to above 50 per cent, effectively nationalizing the company. The US did very much the same in bailing out General Motors and Citibank.
Clearer picture on banks’ bad loans risks set to arrive - The National
Banks are steeling themselves for a difficult few weeks, with changes in Central Bank regulations expected to expose the full extent of troubles with bad loans.
Across the region, lenders including Samba Financial Group, Al Rajhi Bank, Doha Bank and National Bank of Bahrain are expected to report earnings for the final three months of last year before the end of the week. UAE banks will soon follow, with the Abu Dhabi Commercial Bank (ADCB) and First Gulf Bank due to report full-year earnings on January 26, and National Bank of Abu Dhabi is expected to follow by February 1. Emirates NBD is due to report on February 10, although some banks could start to provide early earnings estimates from this week.
Sofia el Boury, a banking analyst at Shuaa Capital, said the results for the quarter would be likely to result in a great deal of adjustment for banks, as the true extent of their exposure to bad debts became apparent.
Across the region, lenders including Samba Financial Group, Al Rajhi Bank, Doha Bank and National Bank of Bahrain are expected to report earnings for the final three months of last year before the end of the week. UAE banks will soon follow, with the Abu Dhabi Commercial Bank (ADCB) and First Gulf Bank due to report full-year earnings on January 26, and National Bank of Abu Dhabi is expected to follow by February 1. Emirates NBD is due to report on February 10, although some banks could start to provide early earnings estimates from this week.
Sofia el Boury, a banking analyst at Shuaa Capital, said the results for the quarter would be likely to result in a great deal of adjustment for banks, as the true extent of their exposure to bad debts became apparent.
Debt traders eager for bonds Nakheel gives to creditors - The National
Investors and debt traders are planning their strategies to pick up new Nakheel Islamic bonds at discounts of up to 40 per cent when they are issued to trade creditors in the next three months.
Nakheel revealed last year that it would issue as much as US$3.2 billion (Dh11.75bn) of five-year bonds with a 10 per cent annual return to contractors who were owed money. The contractors would receive 40 per cent of their agreed-upon debts in cash.
Most of Nakheel's contractors will be eager to sell the sukuk on receipt to get much-needed cash into their businesses, analysts said.
Nakheel revealed last year that it would issue as much as US$3.2 billion (Dh11.75bn) of five-year bonds with a 10 per cent annual return to contractors who were owed money. The contractors would receive 40 per cent of their agreed-upon debts in cash.
Most of Nakheel's contractors will be eager to sell the sukuk on receipt to get much-needed cash into their businesses, analysts said.
Aldar support framework will set the tone for markets - The National
Details of the Abu Dhabi Government's support for Aldar Properties will be the overriding market mover this week, analysts say.
A funding framework was revealed on Thursday comprising the sale of Dh10.9 billion (US$2.96bn) of infrastructure assets on Yas Island, Dh5.5bn of residential units and land, and a Dh2.8bn convertible bond.
Ahmed Ali al Sayegh, the chairman of Aldar, said the financial framework would "strengthen our capital structure and provide us with a stable and sustainable platform from which we can continue to capture commercial opportunities to deliver value to shareholders".
A funding framework was revealed on Thursday comprising the sale of Dh10.9 billion (US$2.96bn) of infrastructure assets on Yas Island, Dh5.5bn of residential units and land, and a Dh2.8bn convertible bond.
Ahmed Ali al Sayegh, the chairman of Aldar, said the financial framework would "strengthen our capital structure and provide us with a stable and sustainable platform from which we can continue to capture commercial opportunities to deliver value to shareholders".
Dubai's debt default risk receding, says Credit Suisse - The National
The Swiss investment bank Credit Suisse has produced the latest estimate of Dubai's total indebtedness in a detailed report on the emirate's financial and economic prospects.
The lender believes, however, that after a year of restructuring at the emirate's two biggest debtors, Dubai World and Dubai Holding, fears over potential defaults are receding, and it says the UAE's well-capitalised banks will be able to absorb any major hit from provisioning requirements.
But "there is a chance of further restructuring of debt", it adds.
The lender believes, however, that after a year of restructuring at the emirate's two biggest debtors, Dubai World and Dubai Holding, fears over potential defaults are receding, and it says the UAE's well-capitalised banks will be able to absorb any major hit from provisioning requirements.
But "there is a chance of further restructuring of debt", it adds.
gulfnews : GCC Focus: Ranking of index is flawed
Reflecting continuation of earlier practices, the 2011 Index of Economic Freedom continues depicts an inaccurate picture of level of economic freedom within the six-nation Gulf Cooperation Council (GCC). Released last week, the report views Bahrain's economy as the only truly free economy within the GCC by virtue of clinching spot No. 10 worldwide.
In reality, the Heritage Foundation and the Wall Street Journal are noted for their conservative ideologies and embracing of private sector initiatives. Amongst others, the report sees governmental involvement in the economy as something negative.
Yet, the global financial crisis of 2008 revealed the need for governmental leadership in restoring confidence in local economies through rescue packages on the one hand and steady spending on the other. This was true of the US, which under a Republican-controlled White House opted to use tax-payer funds for bailing out financial institutions.
In reality, the Heritage Foundation and the Wall Street Journal are noted for their conservative ideologies and embracing of private sector initiatives. Amongst others, the report sees governmental involvement in the economy as something negative.
Yet, the global financial crisis of 2008 revealed the need for governmental leadership in restoring confidence in local economies through rescue packages on the one hand and steady spending on the other. This was true of the US, which under a Republican-controlled White House opted to use tax-payer funds for bailing out financial institutions.
gulfnews : Correction expected this week in Qatar, Saudi markets
Regional stock markets are likely to witness a correction early this week as investors may be keen to book profits and build new positions, market analysts told Gulf News.
"I am expecting a correction in the Qatar market and possibly in Saudi Arabia as well. These markets have performed strongly in recent days," said Chahir Hosni, sales manager with EFG-Hermes.
"Overall, in the medium-term, the regional markets, which have been lagging most of the emerging markets are likely to gain momentum from higher global oil prices which are close to $100 (Dh367) a barrel," he added.
"I am expecting a correction in the Qatar market and possibly in Saudi Arabia as well. These markets have performed strongly in recent days," said Chahir Hosni, sales manager with EFG-Hermes.
"Overall, in the medium-term, the regional markets, which have been lagging most of the emerging markets are likely to gain momentum from higher global oil prices which are close to $100 (Dh367) a barrel," he added.
gulfnews : Abu Dhabi makes plans for huge investment
The capital's economy in recent years has made major steps to diversify its economy away from oil revenues into petrochemicals, steel and aluminium. The multi-billion dirham projects are in line with Abu Dhabi's Economic Vision 2030 that aims for sustainable growth on a solid economic basis.
According to Abu Dhabi's Urban Planning Council some $200 billion (Dh734 billion) will have been pumped by 2013 into various infrastructure projects.
"The idea behind Abu Dhabi's economic diversification is that if oil prices go down, there will be other sources of income to compensate [for the loss in oil revenue]," Mohammad Amerah, an Abu Dhabi-based economist, told Gulf News.
According to Abu Dhabi's Urban Planning Council some $200 billion (Dh734 billion) will have been pumped by 2013 into various infrastructure projects.
"The idea behind Abu Dhabi's economic diversification is that if oil prices go down, there will be other sources of income to compensate [for the loss in oil revenue]," Mohammad Amerah, an Abu Dhabi-based economist, told Gulf News.
gulfnews : Financing still a major concern for UAE companies
Heightened uncertainty brought on by the news that both Arabtec and Aldar Properties are looking to shareholders to help solve their funding needs spooked investors last week. This is a reminder to investors that financing remains an issue for many UAE companies given high debt levels, impact of the economic downturn, and growing oversupply in real estate. All will continue to weigh on the economy and stock market for the foreseeable future. Once again, investors are wondering, what's next?
The reaction was noticeably more bearish in Dubai than Abu Dhabi. This makes sense given the relative strength of the Abu Dhabi Securities Exchange General Index (ADI) compared to the Dubai Financial Market General Index (DFMG), which can be seen on the charts and is discussed below.
Investors will be watching closely to see how shareholders are handled in Arabtec and Aldar in regards to fairness, transparency and disclosure. This will impact the perception of current and future risk in UAE markets for investors. Regardless of this news, on a technical basis, both UAE stock markets continue to evolve normally, with the possibility of a recovery from the recent downtrend still in place, at least so far.
The reaction was noticeably more bearish in Dubai than Abu Dhabi. This makes sense given the relative strength of the Abu Dhabi Securities Exchange General Index (ADI) compared to the Dubai Financial Market General Index (DFMG), which can be seen on the charts and is discussed below.
Investors will be watching closely to see how shareholders are handled in Arabtec and Aldar in regards to fairness, transparency and disclosure. This will impact the perception of current and future risk in UAE markets for investors. Regardless of this news, on a technical basis, both UAE stock markets continue to evolve normally, with the possibility of a recovery from the recent downtrend still in place, at least so far.