Summit Notebook

No bonds for Arabtec; not for now anyway

Just to be clear, Arabtec is not considering a convertible bond issue.

The builder has no need for funds and has adequate access to capital if needed. But nonetheless its chief financial officer Ziad Makhzoumi is watching the region’s increasing capital raising activities with interest.

“I don’t think we need any funding whatsoever… As a CFO I have to look at all the options all the time,” he told the Reuters Middle East Investment Summit in Dubai on Monday.

Convertible bonds are an attractive way to raise funds for listed companies, he said, highlighting Emaar Properties’ recent issuance plans.

Earlier this month, Emaar, the builder of the world’s tallest tower in Dubai, outlined plans for a $500 million convertible bond issue.

Makhzoumi said he saw more convertible bonds coming to the market, but there was no mention at all of Arabtec.

Arabtec has expansion plans which include a push into Central Asian states like Kazakhstan and Uzbekistan, which could be funded from internal resources, he said.

Is investor confidence returning to the Middle East?

A recovery in the Middle East and the prospects for investment are on the agenda at the Reuters Middle East and Investment Summit, taking place in Dubai, Riyadh, Cairo, Kuwait, Beirut, Bagdad, Abu Dhabi and London.

In the wake of Dubai’s debt crisis, which rocked financial markets globally and dented confidence in the region, top executives and officials will discuss whether the investment climate in the region is improving and confidence returning. 2011 will be a year of more restructurings, but the region’s capital needs will lead to a surge in debt issues and even a possible revival of the IPO market.

Reuters Middle East Investment Summit will generate exclusive stories, investable insights, online videos and blog postings. Check back here for more over the course of this week.

Awaiting the alternative energy sukuk: Innovation vs conservatism

MANAMA, Feb 18 (Reuters) – Dubai’s debt fiasco and real estate bubble bust pushes investors to look out for alternative assets underlying Islamic finance products – could renewable energy provide a way-out?

Predominantly, Islamic finance and investment products have been backed by infrastructure or commodities assets. But executives at the 2010 Reuters Islamic Banking and Finance Summit said product diversification was needed to cut the over-reliance on real estate in the Gulf.

“Sharia scholars are eager to support the renewable energy initiative, but the Islamic banking industry (in the Gulf) does not seem to be overly interested in this area although I am aware of a couple of deals involving acquisitions of clean tech companies in the U.S. and wind farms in the UK,” said Ayman Khaleq, partner at the Vinson & Elkins law firm in Dubai.

“The big banks have teams that focus on renewable energy as an asset class. However, the problem is that Islamic banks are not big enough to be able to cover specific sectors such as alternative energy,” he added.

In order to launch an alternative energy sukuk, the Gulf’s small local banks would need to team up with bigger international players such as Deutsche Bank, Barclays, or BNP Paribas, which have been active on the renewable horizon.

But some experts have warned more originality in the Islamic finance industry could alienate investors, who are reluctant to take on fresh risk in the wake of Dubai’s debt crisis and recent sukuk defaults in the region.

WAITING FOR THE GREEN PUSH

Islamic Banking & Finance to attract new attention in 2010

Islamic banking is one of the world’s fastest growing financial sectors, according to industry estimates. It has attracted more attention in the aftermath of the global financial crisis as investors are increasingly looking for alternative, ethical ways of investing. This has also intensified a debate within the industry on whether it should move further away from conventional banking, designing products based more directly on Islamic principles.

Global issuance of Islamic bonds, or sukuk, is expected to fall this year from 2009 levels, a recent Reuters poll showed, as the Dubai debt crisis and an expected rise in borrowing costs weigh on market sentiment. In the Gulf Arab region, a funding crunch at Bahrain-based Islamic investment house Gulf Finance House shows that the financial crisis is far from over in the region and that the industry urgently needs to develop new products and business lines to generate revenues.

CEOs and other top names will discuss these and other topics in a series of closed on-the-record interviews at the Reuters Islamic Banking and Finance Summit, to be held in Dubai, Manama, Kuala Lumpur, London, Geneva and Jakarta on February 15-18, 2010.

from MediaFile:

Islamic Banking & Finance set to attract more attention in 2010

Islamic banking is one of the world's fastest growing financial sectors, according to industry estimates. It has attracted more attention in the aftermath of the global financial crisis as investors are increasingly looking for alternative, ethical ways of investing. This has also intensified a debate within the industry on whether it should move further away from conventional banking, designing products based more directly on Islamic principles. Global issuance of Islamic bonds, or sukuk, is expected to fall this year from 2009 levels, a recent Reuters poll showed, as the Dubai debt crisis and an expected rise in borrowing costs weigh on market sentiment. In the Gulf Arab region, a funding crunch at Bahrain-based Islamic investment house Gulf Finance House shows that the financial crisis is far from over in the region and that the industry urgently needs to develop new products and business lines to generate revenues. CEOs and other top names will discuss these and other topics in a series of closed on-the-record interviews at the Reuters Islamic Banking and Finance Summit, to be held in Dubai, Manama, Kuala Lumpur, London, Geneva and Jakarta on February 15-18, 2010.

Dubai returns to fixed income sphere

Dubai returns to the fixed-income sphere for the first time in more than a year after raising about $2 billion from dirham and dollar-denominated Islamic bonds.

Confidence in the emirate had run aground earlier this year as investors bet on Dubai’s state-linked entities not being able refinance debt. So far, this year it has met all its obligations and with the fresh issue booking about $6.5 billion from regional and international investors, Dubai’s doomsday scenario appears to be vanishing. 

With much of the United Arab Emirates’ oil coming from the largest of the emirates Abu Dhabi, investors have flocked to the capital this year as appetite for good emerging market debt revives. The spread between Abui Dhabi and Dubai widened at its peak to over 500 basis points in February, but Dubai government efforts to restore confidence — kickstarted by the UAE central bank buying $10 billion of its bonds — has helped spreads narrow to about 200 basis points.

Dubai still has a long way go. The next test will be property developer Nakheel resolving its $3.5 billion Islamic bond maturing on Dec. 14 and then a raft of debts in 2010…..but as Harold Wilson once said, ”A week’s long time in politics.”  

from Chris Wickham:

Climate change is off the agenda in Dubai

The headline in the Gulf News English language daily reads 'UAE tops world on per capita carbon footprint'.

For a place so reliably bathed in sunlight, the Dubai property explosion seems to have generated enough construction noise to drown out the environmental debate raging elsewhere in the world.

For the first-time visitor, the scale of the global construction superlatives - The Palm, made from reclaimed land jutting out defiantly into the Gulf, the skyscrapers built in a region where there is no shortage of space - is staggering.

The amount of environmentally 'sinfull' concrete poured over the last decade is ncalculable. Billboards lauding the benefits of solar power look like a bit of an after thought.

Climate change was just beginning to take hold as an issue for property developers when the economic downturn struck and put paid to nascent environmental ambitions.  "Green is not cheap," says Markus Giebel, chief executive of Dubai property group Deyaar Development. "Dubai was on the right track, but there's no money now. People are thinking about survival."

from Raissa Kasolowsky:

Dubai is super enough, thanks

Dubai has sufficient superlatives – record-setting landmarks unique in their size, cost or concept -- to last it for the next decade – so enough already, says Deyaar CEO Markus Giebel.

“I endorse having the tallest building in the world, the first seven-star hotel in the world, the palm,” he says. “What I don’t endorse are attempts to now outdo these superlatives…they are going to last us the next 10 to 15 years.”

Dubai is home -- amongst other attractions -- to the world's largest indoor ski slope, the world's tallest tower, and the world's first, albeit self-rated, seven-star hotel that also sports its own Rolls Royce fleet and helicopter landing platform. The global financial crisis brought a real estate boom in the emirate to a screeching halt, leading to a raft of new, hugely ambitious projects  -- including a 1-km high tower and the world's largest mall -- to be shelved or delayed.

Green shoots and short attention spans

Coming out of one of the darkest recessions, have we learned the lesson at all? Or are we going to repeat the mistakes of the past again?

Khuram Maqsood, managing director of boutique corporate financing advisory firm Emirates Capital, thinks we may well repeat them.

He says a second wave in the downturn – if it comes at all – is unlikely to come from a new, unseen fault in world markets.

from John Irish:

Mid-East business leaders to discuss economic recovery

Starting Monday, Reuters is inviting  business leaders from various sectors in Dubai, Riyadh and Cairo to discuss key challenges facing them in the aftermath of the global financial crisis and the lessons they have learnt.

Is the downturn over or are we set for a double-dip? Will buyers flock back to Dubai's property bonanza or will they stay away for the foreseeable future? Will the oil-reliant economies of the Gulf manage to diversify as they had hoped at the start of the boom in 2002 or will they continue to rest on their barrels of crude? Read this for a preview.