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Reuters blog archive

from Breakingviews:

Builder’s shaky foundations dent UAE’s credibility

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The shaky foundations of the most prominent builder in the United Arab Emirates have dented the country’s credibility. Shares in Dubai-based Arabtec, which helped erect the world’s tallest tower in the emirate, have more than halved since May 15, wiping almost $4.9 billion off its market value. The debacle is a warning to investors attracted by the UAE’s new emerging market status.

Graphic: Arabtec's rise and fall

Arabtec’s slide began last month amid rumours of a rift between its two largest shareholders. Chief executive Hasan Ismaik mysteriously trebled his stake in the contractor to 28.9 percent this year before resigning as chief executive on June 18. Fears that he will sell out have left a massive overhang on the stock. The slide accelerated earlier this month when Aabar, an investment fund of the Abu Dhabi government, cut its stake from 21.6 percent to 18.9 percent.

Arabtec has not provided any serious explanation for what is happening. The company has said that it’s implementing a “limited restructuring” but it hasn’t quantified that in any way. A cadre of senior executives has also left the company raising questions marks over the expansionist strategy Arabtec has pursued in the past two years, taking it into new sectors such as heavy industry and oil and gas.

from Global Investing:

New frontiers to outpace emerging markets

Fund managers searching for yield are increasing exposure to frontier markets (FM) as a diversification from emerging markets (EM), as the latter have been offering negative relative returns since January, according to MSCI data.

Barings Asset Management  said on Monday it plans to launch a frontier markets fund in coming weeks, with a projected 70 percent exposure to frontier markets such as Nigeria, Saudi Arabia, the UAE, Sri Lanka and Ukraine.

from Financial Regulatory Forum:

Gulf BlackBerry row lifts veil on state cyberspies

By Peter Apps, Political Risk Correspondent

LONDON, Aug 6 (Reuters) - The arguments over whether several emerging nations can effectively hack BlackBerry devices give a rare glimpse of the shadowy world of state electronic surveillance already changing politics, espionage and business.

Saudi Arabia and the United Arab Emirates are both in dispute with Canadian smartphone maker Research In Motion, saying they want access to the encrypted phones to monitor security threats. Both are threatening to block its messenger function.

from Financial Regulatory Forum:

Abu Dhabi’s Dubai aid shrinks to $5 billion

By Amran Abocar and Nicolas Parasie

DUBAI, Jan 18 (Reuters) - Dubai said on Monday that half of a $10 billion bailout from Abu Dhabi last December came from an older debt deal, highlighting what analysts said was the emirate's poor market communications and lack of transparency.

Investors said news that Abu Dhabi directly lent less new money than previously thought also indicated the wealthy emirate wanted more evidence of Dubai's fiscal probity, after helping it avert an embarrassing default on a state-linked bond.

from Financial Regulatory Forum:

Abu Dhabi throws Dubai a $10 billion lifeline, terms unclear

   (Adds background, paragraph 16)
   By Amran Abocar and Rachna Uppal
   DUBAI, Dec 14 (Reuters) - Abu Dhabi threw its flashy but debt-laden neighbour Dubai a $10 billion lifeline to head off a bond default, cheering Gulf and global markets on Monday but raising questions about the undisclosed terms.
   The surprise rescue enables Dubai World to repay a $4.1 billion Islamic bond its property developer unit Nakheel was due to honour on Monday.
   The cost of insuring Dubai's debt against default fell sharply on the news, and the stock market in the glitzy emirate rose 10.4 percent, its biggest one-day gain in 14 months.
   Shares in Abu Dhabi, Saudi Arabia and Qatar also recovered on relief an immediate crisis had been averted. 
   Dubai World rocked global markets on Nov. 25 when it asked creditors for a standstill on $26 billion in debt mainly linked to its two property firms, Nakheel and Limitless World.
   The bailout marked a spectacular double policy shift. Dubai last month declined responsibility for Dubai World's debts, and conservative Abu Dhabi, which produces 90 percent of the United Arab Emirates' oil exports, had given no hint that it would ride to the flamboyant business hub's rescue.
   However, credit ratings agency Fitch Ratings said Abu Dhabi's support was only "a tactical step to permit an orderly restructuring of obligations within Dubai to continue." 
   A Dubai government statement said the remaining $5.9 billion not used to pay the Nakheel bondholders would support Dubai World until the end of April next year.
   But the conglomerate at the centre of a $26 billion debt storm still needs creditors to agree a standstill, and a massive restructuring, in order to get financial support to cover working capital and interest expenses. 
   Statements from Nakheel and the Dubai government indicated the Nakheel bondholders would be paid unconditionally. However a Dubai government source made clear other lenders would only receive interest payments if they agreed to the debt standstill.
   Analysts said the emirate's troubles were far from over. They questioned a statement by a Dubai government source that there were no conditions on the loan beyond the debt standstill.
   "We've still got $35 billion due in bonds, loans and repayment over the next couple of years, so this is only one thing," said Saud Masud at UBS. "The big question is how are they are going to do this next step?"
  
   LOAN OR GRANT?
   Loans worth a total $3.7 billion to DW unit Limitless World and to Borse Dubai, 60 percent owned by state-owned Investment Corp. of Dubai, fall due before the April timeline. 
    Separately, a Japanese government study showed the Dubai government and affiliated firms owe non-financial Japanese companies roughly $7.5 billion in credit that had not been collected as of Oct. 31.
   Neither emirate made clear whether the bailout was a loan or a grant.
   The Dubai government source, who would not give his name, told journalists on a telephone conference call there was "no conditionality". He also said the terms were "internal" to the governments involved.
   Among issues on which Abu Dhabi might seek concessions are Dubai's trade with Iran, the future of its Emirates airline, and its freewheeling nightlife in a conservative Muslim region.
   Analysts say Abu Dhabi and Washington have pressured Dubai to take a tougher line on Iran, one of its main trade partners.
   Upping pressure for a debt restructuring, Dubai announced it would implement immediately an insolvency law modeled on U.S. and British practices in the event Dubai World needs to seek protection from its creditors.
   A government statement said this was necessary because Dubai World's existing structure did not allow it to seek protection from creditors. 
   "This is kind of above and beyond what people expected. It is a crucial and essential lifeline," said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole in Riyadh. "That should bring in a lot of confidence. Basically Abu Dhabi is footing the bill.
   "I highly doubt this kind of money has no strings attached. There was no other choice for Abu Dhabi but to bail out Dubai. The (United Arab Emirates) federation would have been at stake."
   The price of Nakheel's $750 mln January 2011 bond leapt to 64/68 cents in the dollar from Friday's close of 40. London traders said prices were not longer being quoted for the larger $3.52 billion bond that was due Monday, and which traded below 50 last week. The U.S. dollar jumped against the yen, while Asian stock markets rebounded. U.S. S&P stock futures jumped 0.7 percent, reversing early losses, and European shares were also higher.
  
   ASSET SALES
   Speaking on a telephone conference call in which his identity was not disclosed to reporters, the Dubai government source said the restructuring process could include asset sales, but they would be confined to Nakheel and Limitless, excluding Istithmar World assets, which owns U.S. luxury retailer Barneys, or port operator DP World.
   The property unit's assets included man-made islands shaped like palms and a map of the world in Dubai, as well as mixed-use real estate projects in Indonesia and Malaysia.  
   The UAE central bank said it would back local banks who have exposure to Dubai World. Dubai World said it would continue to work with creditors to negotiate a standstill in an orderly way. 
   Dubai's creditors include London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland, along with United Arab Emirates lenders Abu Dhabi Commercial Bank and Emirates NBD.
 (Additional reporting by John Irish, Thomas Atkins, Inal Ersan, Nicolas Parasie, Rachna Uppal, Jason Benham, Martina Fuchs, Luke Pachymuthu and Rania Oteify; Writing by Amran Abocar and Paul Taylor; Editing by Andrew Hay) 
 ((amran.abocar@thomsonreuters.com; +971 4 391 8301; Reuters Messaging: amran.abocar.reuters.com@reuters.net))

from Financial Regulatory Forum:

Dubai “needs more time”; investor confidence hit

Investors monitor stock prices at the Dubai Financial Market December 8, 2009. Investor confidence in Dubai took a fresh knock on Tuesday as its leaders dithered over a rescue for debt-laden company Dubai World and ratings agency Moody's slapped a downgrade on government-related debt.   REUTERS/Mosab Omar By Tamara Walid and Tessa Walsh

DUBAI, Dec 8 (Reuters) - Investor confidence in Dubai took a fresh knock on Tuesday as officials dithered over a rescue for debt-laden state conglomerate Dubai World  and ratings agency Moody's slapped a downgrade on government-related debt.

"You can usually take the view that no news is good news, but in Dubai's case it's quite the opposite -- investors need to hear some developments on Dubai World's restructuring," said Julian Bruce, EFG-Hermes director of institutional equity sales.

from Financial Regulatory Forum:

Cayman court freezes $9.2 bln of Saad assets

By Tom Freke and Souhail Karam

LONDON/RIYADH, July 31 (Reuters) - A Cayman Islands court has frozen $9.2 billion of assets belonging to Saad Group, the Saudi Arabian investment firm at the centre of a financial storm, including some of its equity stakes outside the Gulf.

In a related development, bank creditors of one of the main Saad Group companies, Saad Investments Company Limited (SICL), filed a petition to the same court seeking immediate repayment by the company of a more than $2.8 billion loan and accrued interest.

from Financial Regulatory Forum:

EXCLUSIVE – UAE central bank tells lenders to raise provisions over Saad, Algosaibi

By Stanley Carvalho
ABU DHABI, July 23 (Reuters) - The United Arab Emirates central bank has directed banks to take provisions over a two-year period of up to 75 percent of their exposure to a pair of troubled Saudi firms, bankers told Reuters on Thursday.

The central bank met bankers on July 16 to review lenders' reports on their exposure to Saad Group and Ahmad Hamad Algosaibi & Bros.

from The Great Debate:

Arabia and the knowledge gap

Bernd Debusmann - Great Debate-- Bernd Debusmann is a Reuters columnist. The views expressed are his own. --

Think big. Think global. Spare no expense. That could be the motto for an ambitious effort by the United Arab Emirates to close the knowledge gap with the West and eventually restore Arab learning to its former glory.

Headlines from Dubai, the second-largest and most flamboyant of the seven emirates that make up the country, have been dominated by the bursting of a spectacular property bubble and an exodus of foreigners who lost their jobs as the global recession slowed down the economy. One thing that is not slowing --an education drive without parallel in the Arab world.

from Pakistan: Now or Never?:

Should Pakistan grow food for the Gulf?

Queuing to buy wheat flour in Peshawar/May file photoThis is an idea that looks crazy at first glance -- Pakistan, struggling with its own food shortages and rising prices, rents out its farmland to grow grains for the rich Gulf states instead. 

But the idea appears to be gaining momentum. Saudi Arabia is holding talks with officials in Pakistan, among other countries, to set up projects to grow wheat and other grains to protect itself from crises in world food supplies. Dubai-based private equity firm Abraaj Capital has already said it is looking at investing in agriculture in Pakistan  and other Gulf countries are also showing an interest.

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