Friday 25 December 2009

Venues for 2010 and 2011 Gulf Cup Football Championship Announced

Announcement here:  Yemen 2010 and Iraq 2011.

I think I will miss both though I suppose a loss might be easier to take in Yemen.  Wonder if there are qat vendors in the stands?  Both sites in Yemen are in the south of the country, if you're wondering.

Bank of Kuwait and Middle East To Switch To Islamic Banking

BKME will hold a shareholders' ordinary general meeting and extraordinary general meeting on 10 January to authorize the various steps, including revision of the bank's memorandum and articles of association, in connection with the bank's reversion* to an Islamic bank.

The bank intends to begin operating according to Shari'ah principles beginning in 2Q10.

AlQabas news item here.

(*Reversion in the theological sense.  BKME has always operated as a conventional bank).

Thursday 24 December 2009

Dubai - World's Longest Ambulance


Picture Copyright AlArabiyya

Here's the announcement from WAM dated today.

Here's one from AlArabiyya dated 21 May 2009.

No apparent reactions yet from Russia or Texas.

Novaar Capital Announces JV with Urals Polar

FT news report here.

Novaar's press release on the subject.

HRH Prince Saud Bin Mansour Bin Faisal Bin Saud Bin Abdulaziz Al Saud is the owner of Novaar.

Here's some background on Novaar:
  1. An earlier article about its formation.  
  2. And here's the registration information from the DIFC website.

Dubai Assumes Leadership Role in Tackling Global Financial Crisis

(The following article has been prepared according to press guidelines at "Gulf News" for reporting on the non-crisis in Dubai. Delay in publication resulted from the normal review process to ensure that the article did not contain any deviant or incorrect thoughts).

14 December 2009 – Dateline Dubai, United Arab Emirates

Under the patronage of the wise and benevolent leadership of the Emirate of Dubai, the Government of Dubai graciously hosted a meeting for international bankers still reeling from the effects of the global financial crisis. While the meeting was called in part to afford international bankers an opportunity to enjoy the much warmer climes of Dubai during this winter season, the meeting had a much more serious purpose.

As a leading global financial centre, Dubai and its progressive leadership are well aware of the responsibilities such an unrivaled status places on their capable shoulders. Therefore, Dubai World took the unprecedented step of advising its creditors at this meeting that it was willing to extend the repayment tenor of its obligations. This generous sacrifice is being made in view of the desperate need of international and local creditors for high quality earning assets, saddled as they are with poor underwriting decisions made outside the UAE. A Dubai World spokesman was reported to have said that while this step was perhaps inconvenient for Dubai World and its subsidiaries "the decision was sound and favours all parties in long term and not short term as Dubai World Group has strategic projects."

Not unexpectedly, creditor response was enthusiastic.

One unnamed European banker said, "GLOBAL crisis or not, Dubai has done it again. It has once again shown the world, beyond doubt, its ability and willingness not only to meet its obligations but any challenge to its unrivalled status as the most dynamic global financial and trading hub in the Gulf region."

Another grateful banker noted: 'Usually, each of the world's countries has an icon to be proud of. Dubai has many, such as Burj Dubai, Burj Al Arab, Dubai Mall, as well as Dubai International Airport and the Emirates Airlines which are seen as major drivers for tourism."

A local banker from Dubai commented: "People try to pelt stones or anything else within their reach at a fruit bearing tree. Then how it will be when we have seven fruit-bearing trees or more? It is natural that we are exposed to all these exaggerations, which are far from reality".

One US investment firm with a sizeable position in Nakheel sukuks said: "However, the markets might react, this is Dubai we are talking about. An emirate that has redefined the terms "vision" and "ambition" for the world, which has given it the tallest tower, the largest mall, the tallest hotel, the largest man-made harbour and, in-the-making, the world's largest airport, among a host of other marvels. It has a track-record second to none. Dubai is one of the foremost centres of world gold trade and has indeed been gaining in importance as the preferred global destination for tourism, entrepot, real estate and construction activity, especially over the past three decades."

A banker with a faint Scots burr in his voice remarked: "The Dubai dream lives on. If anything, this latest episode is a sign of Dubai's economic maturity, a clear conscience and commercial intent." In a culturally uncharacteristic bit of loqaciousness, he continued: "Dubai World's debts are small and some companies have been saddled with debts more heavier than tnose of the Dubai Group."

Finally, another banker from Dubai neatly summed up the consensus of attendees at the meeting: "And I want to tell those people who nag about Dubai and Abu Dhabi to shut up."

(Editor's note: All quotes are actual verbatim statements made by various parties and reported in the press, though attribution may vary from that in the original reports).

The Investment Dar Restructuring - Alternative Views on Success

Here are a couple of alternative views on the results of TID's approach to its creditors for agreement on the proposed restructuring.

The view is success at The National.

At Maktoob it's "close to success".

That leaves AA as Scrooge, though I may take a mid day nap so stay tuned.

The Investment Dar Restructuring - One Third of Creditors Refuse to Agree

TID announced today that it had gotten agreement of over two-thirds of its creditors to its rescheduling proposal.

Bader Al Ali, as official spokesman for the Creditors' Committee said:
“We are delighted to have achieved this important milestone and would like to thank all banks and investors for their strong support and commitment to this complex restructuring process. We are looking forward to working with the consenting banks and investors towards a final implementation and quick resolution of this matter.  In the meantime, we continue to encourage the small minority of banks and investors who have not yet expressed their support to do so as quickly as possible in order for them to be included in the final implementation phase.”
The full press release is here.

When did 33.3% become a small minority?

Clearly, TID has failed and is trying to put the best possible face on the situation.   Wonder if they're getting PR advice from someone in the UAE?

Also interestingly enough, the press release was issued after market closing hours.  It made it on Nasdaq Dubai but not the KSE.  

Bahraini Saudi Bank - New CEO

Abdisheikh not Sheikh.

Correction to earlier post and press release here.

The Investment Dar - More Bad News on the Restructuring

If yesterday's news in AlQabas wasn't distressing enough, here's another.

Key points from the article:
  1. Khatif Holding Company (I think this is the Kuwaiti PE/VC firm) has withdrawn from the Creditors' Committee.  As such, its resignation means it is not agreeing to the extension.
  2. The Creditors' Co-Ordinating Committee ("CCC")  has yet to secure a sufficient level of acceptance to proceed with the initial steps of implementing the restructuring, e.g., transferring TID's assets to the holding companies.
  3. As well, many of the existing creditor agreements are not final.  Others are pending and the  article says that the committee has "built great hopes on them".
  4. Part of the problem is that in many cases there are funds or syndicated facilities.  In some cases the agents have asked for more time to get their shareholders or participants to agree.  In some cases it appears the agents themselves are not agreeable which complicates getting approval from the shareholders or participants.
  5. As noted before, those who financed TID through wakala or murabaha transactions believe that they are not "lenders" but rather have a deposit or trust arrangement and therefore have ultimate priority of payment over lenders.  If that view is legally upheld, they might well secure 100% repayment.
  6. Complicating matters is the fact that there are 149 separate creditor entities - banks, funds, individuals, wakala holders, murabaha - and each group has its own characteristics which require different methods of accommodation.
  7. While creditors may agree to these first steps to implement the restructuring, there will be another decisive phase in February where they will have another option to refuse.
  8. Finally, the following companies were identified as those who intend to pursue legal actions to secure repayment:  Khatif Holding Company, National Investment Company, Aref Investment Group, Al Masar Company (Kuwaiti Leasing Company?) , Noor Investments plus unnamed numerous others.
Apparently, the plan (at least according to AlQabas' sources) is to extend the time period two weeks and then if results are not obtained another two weeks.

TID seems to be in a very difficult position.  It's unclear how two weeks or four is going to be sufficient to overcome the various obstacles in path of securing creditor agreement.

If a significant enough group of creditors believe they have legal priority, it's going to be hard to get them into a restructuring where the creditors themselves estimate that TID cannot pay back 100% of principal.   If in fact these creditors do have a legal priority, they have absolutely no incentive to join.  The other creditors are left with the prospect of a bankruptcy - with the inevitable further loss of value in the remaining estate.  One solution might be to pay off this creditor group assuming it's not too large.  Then go forward with the remaining TID assets to maximize recovery.

Another would be to hope the government would lean on the recalcitrant creditors to force them to agree.  If it does this, it seems to me that the Kuwaiti Government would want to avoid taking any steps that could legally undermine the legal status of Islamic structures, e.g., interpreting wakala and murabaha transactions as equivalent to loans.  Kuwait is the second largest GCC market (by assets) for Islamic banking.

I wonder if TID will be the first case under the Financial Stability Law?

Faysal Private Bank Appoints Mark Koch as CEO

Reuters story here.

Previous posts here and here.

Pretty Nice Moves

Pretty moves up to Acting CEO at Gulf Finance House after Ahmed Fahour resigns after five months as CEO to take up a post with Australia Post.

In a completely unrelated story, Bahraini Saudi Bank announced that Mr. Khalid Shaheen, CEO, had been appointed an advisor to the board and Mr. Ahmed S. Shaikh, the COO of Al Salaam Bank Bahrain was appointed Acting CEO as well.

Esterad Bahrain Offers Convertible Bond

I thought that readers might find the transaction description of interest.  So here's the link.

The announcement provides a description of several of the requirements/features under Bahrain law:
  1. Shareholder pre-emptive rights
  2. Renunciation of those rights
  3. Conversion mechanism (See comment below)
Regarding the conversion, you will notice it is at the option of the bondholder not the issuer.

And you will notice the strike price mechanism provides the buyer a bit of protection.  If the book price (and note that is not the same as the market price) goes below BD0.365 per share, the bondholder may convert at the book price.  Current trading range for the shares is around BD0.300 and the book value is close to the strike price.

Wednesday 23 December 2009

S&P BICRA Ratings - Kuwait Downgraded from 4 to 5

Standard and Poor's analyzes the health of national banking sectors and then assigns them a rating from 1 (best) to 10 (worst).

Here's a recent ranking report from 2 October 2009.  A more recent report requires a subscription to S&P.

This week S&P downgraded Kuwait from 4 to 5.

When the Going Gets Tough, The Tough Shut Up Any Criticism

Rupert Bumfrey posted this gem about the new "style guide" at Dubai's "Gulf News" newspaper at his blog.

All the news that fits the government view is fit to print.

You can measure how bad a situation is by the attempt to control the press.

Though I suppose points should be given for upholding the sacred concept of lèse majesté.  They are often quite fragile I'm told.  A sad condition of those in power.

Abu Dhabi Islamic Bank Signs with Emcredit

Emcredit is the UAE's first government backed credit bureau founded in 2006.

Here's the official announcement that ADIB has signed up for Emcredit's services.

Some interesting footnotes to that story:
  1. ADIB announced that it had signed up for Emcredit's services today.  (Small note it is 2009, three years after the founding of Emcredit).  
  2. ADIB is the first Abu Dhabi bank to have signed up.
Let's file this news item in our "Лучше поздно чем никогда" file with the comment that when lending it's a good idea to use all credit tools at one's disposal. 

Otherwise, it's like having a building without fire alarms and sprinklers.  And one really doesn't have to wait for a fire to figure out that's not a particularly bright idea.  There is abundant pre-existing evidence.  Just coincidentally as there is with extensions of credit.

Global MENA Financial Assets Update

Some news on Global MENA Financial Assets ("GMFA") from the London Stock Exchange:

(1) GMFA's EGM has approved settling the debt with Global by taking shares in AlFajer.  60.3 million shares voted "yes".  6.6 million no.  The "Yes" votes were 90.2% of those voting.  However,  GMFA has 252 million shares so the "Yes" vote represents 23.9% of total shares. In any case GIH's obligation to GMFA is now extinguished in exchange for the AlFajer shares.  As per GMFA's notice to the LSE, the formal re-registration of the shares will take place in January.  Earlier post here.

(2) The Board of Directors of GMFA has informed the LSE that it intends to ask the shareholders to vote to delist.  The reason is essentially to get around the IFRS requirement that the quoted price of the shares be used to determine their value for financial statement reporting for shareholders preparing financial statements according to IFRS.  The justification is that the shares are thinly traded and are trading below market.

(3) An EGM is scheduled for 27 January to vote on this measure.

(4) GMFA has filed the necessary notice with the LSE to advise that Global Investment House's shares in GMFA have been transfered to Global MENA Macro Fund (as per the requirements of the restructuring agreement).

Earlier posts on GMFA and Global can be found by using the respective labels on Suq Al Mal's homepage.

The Investment Dar - Apparent Failure to Secure Approval of Restructuring Proposal

If AlQabas' sources are right, TID and the Creditors'  Co-Ordinating Committee ("CCC")  have been unable to convince all creditors to accept the proposed restructuring agreement.  The deadline for agreement (already extended once) is 23 December.

According to the article, the CCC pulled out all the stops in an effort to persuade the creditors.  Appeals were made over the heads of the management of the creditor companies to their large shareholders and to various other parties in an attempt to get acceptance of the deal.  Visits and pressure continued through 22 December.

Apparently, the plan will be to try to go forward with the restructuring.  I had mentioned earlier that this is one tactic that can be used when less than 100% of the creditors sign up.  Those promoting the restructuring treat the recalcitrant creditors as having signed up and make payments to them according to the restructuring agreement.

This does not abrogate those creditors right to sue, but the hope is that the courts will consider the restructuring or that the debtor and agreeing creditors can tie up the rejectionists long enough so that they simply give up.

Earlier posts on The Investment Dar can be found by using the label "The Investment Dar" in the Label Section on SAM home page.

Manazel Restructuring - Gulf Bank

AlQabas reports that the bank involved in the restructuring is Kuwait's Gulf Bank.

Earlier post here.

By the way earlier I omitted mentioning that The Investment Dar owns 25% or so or Manazel.  Carrying value in 2007 was some KD 25 million.  A recovery in Manazel will be positive for TID, but isn't going to close the asset - liability gap identified in the creditors' assessment.

Tuesday 22 December 2009

Faysal Private Bank Geneve CEO Resigns

Reuters reports that Marco Rochat has resigned.

Earlier post here.

Property Sector to Build on Past Mistakes (UAE)


Picture Copyright The National Newspaper Abu Dhabi


This probably consists of piling on, but I just couldn't resist quoting this headline from The National Newspaper in Abu Dhabi. 

And this absolutely delightful quote:
“A large number of brokers have left and the same with developers. There’s been a lot of correction. Going forward, you’ll have a much maturer market. People are now aware of the risks.”
Usually, it's considered better form to be aware of the risks before the project heads south.  But as those rich visitors from up North say, "Лучше поздно чем никогда".