Kuwaiti Financial Stability Law

This post summarizes what I consider to be  the key points in the Law for the Strengthening of Financial Stability ("Financial Stability Law" or "FSL").  I'll follow-up with a second post to discuss issues relating to TID using the FSL for its rescheduling.

On 26 March 2009, the Amir of Kuwait issued the FSL as Decree Law #2 of 2009.  He had dismissed the Majlis Al Umma on 18 March so the Majlis' ratification took place after the new elections of 16 May. 

So you can follow along and as well perform your own analysis, here's the English language version (note the Arabic text above governs). Also here are the draft implementing resolutions in both Arabic and English.  

The FSL is composed of  Preamble and 5 Sections with a total of 33 Articles.

1. The Preamble provides the legal basis for the law as well as definitions (Article #1).
2. Part 1 Banks.  The Government acting through the CBK will provide a guarantee to banks to cover shortfalls in their provisions for (a) loan losses or (b) declines in their local security and real estate investments - all of which assets must be existing as of 31 December 2008. (Articles 2 – 7). 
3. Part 2 Productive Local Business Sectors.  Provides for a State of Kuwait guarantee for 50% of certain types of collateralized new finance offered by local banks to companies in this sector. (Article 8 – 9). 
4. Part 3 Investment Companies. Chapter 1.  Provides procedures for restructuring debt outstanding as of 31 December 2008 for solvent companies.  As part of the program,  the CBK will provide a guarantee of up to 50% of  collateralized new facilities  to facilitate a restructuring.  (Articles 10 – 14). 
5. Part 3 Investment Companies Chapter 2.  Establishes the legal basis and mechanism for a US Chapter 11-like cramdown of creditors (Article 15 – 21). 
6. Part 4 Penalties.  Outlines the penalties to be applied for supplying misleading information or attempting to exploit the law. (Articles 22 – 27). 
7. Part 5 General and Final Provisions. (Articles 28 -33).
   

Part 1 "Banks" 

1. The Kuwaiti Government will provide an adjustable guarantee for provisions and investment "shortfalls" against credit facilities and investment portfolios existing as of 31 December 2008. Shortfalls in provisions on assets created or acquired after this date will not be covered. 
2. Changes in values of the portfolio as of 31 December 2008 occurring in 2009, 2010 and 2011 will be considered and the guarantee adjusted. 
3. After 1 January 2012 the guarantee may not be increased. 
4. Banks have to continue to monitor these assets and make efforts to collect them. The program is not a license to walk away.
5. Banks are required to build provisions to cover the deficit.  Starting from 31 December 2011, they must take provisions of at least 8% of the shortfall per year.  Thus, the guarantee is intended to be reduced over time.  It is not bailout (government assumption of the shortfall) but as a bridging mechanism to allow the banks time to take the required provisions.
6. The guarantee will be for a maximum of fifteen years with a 1% per annum guarantee fee. 
7. If a bank cannot cover the deficit over time, the KIA has the right to subscribe for sufficient equity to cover the shortfall.  This is the potential bailout, though it comes with increased government ownership.
8. The Central Bank of Kuwait (CBK) will set the terms of the guarantee including  conditions to the issuance of the guarantee: costs controls (including over management salaries and bonuses), imposing mergers, etc.  To get the guarantee the bank must secure shareholder approvals to these conditions.
   

Part 2 "Productive Sectors" 

1. The Kuwaiti Government will provide a guarantee of up to 50% of new  collateralized facilities extended by local banks to companies from productive sectors. 
2. The loans may not be used to refinance existing debt. Nor are they to be used by the borrower for "speculating or trading" in real estate or securities.   They are supposed to be used so the company can conduct its core business to the benefit of the Kuwaiti economy.
3. Loans are for a maximum of five years and must have regular principal amortization during their term. As noted above, they must be sufficiently collateralized.
4. The guarantee will cover 50% of the net loss after collateral has been realized and applied to the entire loan. So this is a shortfall guarantee, not an absolute guarantee of 50% of the face amount of the facility.
   

Part 3 "Investment Companies" - Chapter 1 – Restructuring Plans. 

1. Companies will be screened to determine if they  have sufficient capital (الملاءة) and are able to continue in business and face their financial problems.  Thus, the FSL is designed to help Investment Companies with liquidity problems not those with solvency problems. 
2. Specialist firms – appointed by the CBK or proposed by the company and acceptable to the CBK – will undertake studies to determine the financial condition of the firm and prepare a report taking into consideration the three points mentioned above. 
3. The FSL makes a particular point of noting that to be granted a facility the company must have   الملاءة.  I've seen this term most frequently used to mean adequate capital so it would appear it's not just a case of having a positive net worth but having sufficient capital and reasonable leverage to  be able to continue its business.
4. If the study is positive (the company meets the three tests) and the CBK believes it is qualified for the FSL program, the State will provide a guarantee for up to 50% of new finance provided by local banks. The new finance may be used for two purposes only.  First to settle obligations to local parties (but NOT local banks) that were outstanding as of 31 December 2008. Second, to support rescheduling to foreign banks and financial institutions, provided that the initial cash repayment not exceed 25% of the debt with the remainder rescheduled as per the specialist firm's study above. 
5. The company must provide sufficient assets by way of collateral to cover in full the company's rescheduled obligations and the new loans made under the FSL.
6. With respect to Kuwaiti banks providing such loans, the Government of Kuwait will include this new finance in its guarantee provided in Part 1. (The one exception to the 31 December 2008 asset rule).  Note banks are not forced to provide such loans. 
7. There's also a provision for the injection of capital by shareholders or the KIA into the investment company.  Again the government has the right to subscribe for equity.  And can take over the company if the capital need is large enough and the existing shareholders don't step up.
8. The CBK will appoint a local bank as manager of the restructuring. It will determine the amount of new loan to be provided by local banks and the collateral to be taken.  It will take part in negotiations with foreign creditors to craft a rescheduling. The Central Bank of Kuwait must approve the terms of the rescheduling.  In effect then the manager will propose these terms to the CBK, but the CBK will have the final word. 
9. The restructuring plan will have similar restrictions on expenses and a requirement for possible mergers along with CBK imposed changes in the management and organization of the company. As with banks, the investment company must obtain agreement from its shareholders to these conditions before it can obtain the guarantee.
   

Part 3 "Investment Companies" Chapter 2 Legal Matters. 

1. The FSL establishes a special Circuit Court at the Court of Appeals.  This Court has  exclusive jurisdiction to review and rule rescheduling plans on a summary basis.  Its decision are final and not subject to any appeal.
2. The CBK or the company may present a restructuring plan to the chief judge of this special court along with all documents necessary to support the plan. Once the chief judge records receipt of these documents there is an automatic four month stay of all legal action. All creditors must be notified. 
3. Any interested party may appeal but the appeal must be (a) lodged within 15 days of receipt of notice of the original decision and (b) well organized and giving a reason why the stay should be lifted. The Circuit Court will make a decision whether to continue the stay.   A mere objection without reasons will be rejected.
4. If the Court decides to uphold the stay, CBK then will cause a detailed study to be made of the financial position of the investment company. The study should be submitted within four months, though there is a provision for an additional extension of up to four months. The restructuring plan will then be submitted to the Court for its approval or rejection. 
5. If the Court approves the plan, then all legal cases are stayed. If it rejects the plan, affairs return to their pre-stay condition.  In this case, creditors may again seek redress through the courts.  The judgment of the court is final. The company must then advise all creditors. 
6. In the case where the plan is approved, the CBK monitors compliance. 
7. If after a rescheduling plan is approved and implemented and the company fails to comply with its terms,  the CBK shall refer the failure to the Court to render the restructuring plan null and void. In which case creditors regain their rights to sue under the original loan contracts.
   

Parts 4 and 5 deal with respectively "Penalties" and "General and Final Provisions". If you're interested you can take a look.

Some quick observations: 

1. The FSL is designed for solvent companies, except for banks where the CBK guarantee program is designed to forestall mandatory declarations of insolvency and wind-ups. 
2. The programs under the FSL come with a heavy price tag. The CBK may mandate cost cuttings, changes in organizational structure and force mergers. The Government has the right to become a shareholder.  Any new loans must be collateralized.
3. The bank and investment company programs are unlikely to be used, except in extreme situations. 
4. The guaranteed loan  program for productive sectors is also unlikely to be utilized.   Banks are being careful with new loans.  They certainly won't be making new loans to clients already past due. Companies are going to have trouble finding unpledged collateral sufficient to support new loans.   With the decline in asset values, banks have asked companies to top up existing collateral.  Not much is left to support loans of any value.

3-1

 

Enough with the injuries.

Majid Saif AlGhurair Resigns from RAKBank

Here's the press release.

Anyone who knows why please post.

If you know what "Final Greetings" are, please also post on that.  It sounds rather ominous.  Sort of like a "final warning".

NBAD Requests Cancellation of Approval to Buy Back Shares

 

A rather curious announcement over at the ADX.  The UAE SCA agreed to NBAD's request to cancel its previously granted permission to buy back up to 10% of its shares.

Why is this strange?

NBAD had obtained permission earlier from the SCA to re-purchase its own shares.  The decision whether to purchase shares or not was entirely in NBAD's hands. 

In other words, it needed no official sanction not to purchase it shares.  And therefore did not need to obtain cancellation of the authorization.

As you'll recall, the IMF had expressed some concern about the capital levels of UAE banks.  Also when the government has given you "rescue" capital, it would be a bit ungrateful if you were to buy out your existing shareholders.  I suspect that the Central Bank had a quiet word with NBAD to encourage them to get the cancellation.  In that way the CBUAE does not have to rely on the discretion of NBAD not to repurchase its shares.

Since NBAD is one of the more conservative local banks, if I'm correct other banks with similar permissions may suddenly develop a CBUAE-sparked desire to cancel them.

Global Investment House Wins Deal of the Year Award for its Restructuring (!)

 

GIH proudly announced that the Islamic tranche of its debt rescheduling won the Euromoney Award for "Most Innovative Deal" of 2009.

Some comments:

1. AA recalls a time in the past when firms did not brag about their restructurings. Then a restructuring  was considered the financial equivalent of being arrested for drunken driving.  One  generally didn't speak of it for fear of reminding the public that one had been pulled over for less than prudent behavior.  I guess when the problem is someone else's fault it's OK to speak about it.   If you missed GIH's 10 page apologia for its restructuring, you might not know that  the "International" Financial Crisis (no, not the "Global" Financial Crisis) is to blame.  GIH's business model and GIH's management definitely had nothing to do with this.  Really, you have GIH's word for that. 
2. I couldn't suppress a snicker (or maybe that was a guffaw) when I read  "innovative structure of the deal which has enhanced the stability of Global’s financial platform".  That's like describing having one's gangrenous leg  amputated as enhancing one's health.  It was hopefully a life saving operation.  But it was one necessitated by the failure to to properly care for the original wound.  Or in this case one's business strategy.
3. Awards not only tell us something about the winner but also about the competition.  When AA was in high school gym class, through the fortune of surnames I was always paired with the same fellow to run laps.  I won every race by a very large margin.   For a brief moment, I fancied myself another Abebe Bikila.  Apparently there weren't that many innovative deals in 2009 - either in general or in the Islamic sphere.
4. I'll refrain from applying that principal to GIH.  Investment banks like to brag about everything.  You should see the self praise in pitch books!
5. O tempora o mores!  "The award was in recognition for Global’s professionalism and transparency in dealing with the banks during the restructuring process".  That speaks volumes about the professionalism and transparency of the competition.  When being honest distinguishes one from the competition we are indeed in sad times, though perhaps this has something to do with the award being for the "Islamic" tranche.

The Investment Dar - Restructuring "Deal" Unravelling?

Quoting a source connected with TID's Creditors' Co-Ordinating Committee ("CCC"),  AlQabas states that last week the CCC asked TID if it wanted to pursue a restructuring under Kuwait's Financial Stability Law.  This apparently because significant numbers of creditors refuse to join the restructuring and  continue to pursue repayment through legal cases.

AlQ says that TID's did not respond with a direct answer but said that it would give its position at meeting Sunday with creditors in Kuwait and then Monday with creditors in Dubai.

If you've been reading this blog, you know that I've been fairly skeptical about the announcement that TID had a deal with its creditors given the absence of a cramdown mechanism under Kuwaiti law. There is an exception for an investment company licensed by the Central Bank of Kuwait  which submits to the Financial Stability Law.  Otherwise, an obligor needs 100% of its creditors to have a restructuring binding on all creditors.  TID  claimed that more than two-thirds of its creditors had agreed its plan. 

If this article is correct, the wheels appear to be coming off TID's "deal". 

As to the Financial Stability Law, as far as I know no obligor has yet undertaken a rescheduling under its provisions.  But when the storm is severe, any port may be preferable than the high seas.

It seems pretty clear that if the FSL were an "easy path" it would have been taken before.  And this probably explains why TID wants to explain its position on the FSL face-to-face. 

I'll follow up with a post on the FSL shortly.

Capitalism, Risk Management & Football

An insightful piece from Simon Kuper in today's Financial Times.  A Minsky moment on the pitch?

As with all stories, there are exceptions that prove the rule. 

The sons of Herbert, George, and Arsene made no such mistakes.

The Investment Dar Court Case with BLOM Undermines Islamic Banking

 

One of the reasons that many people prefer to deal with Islamic Banks is that they claim to hold themselves to a higher standard of behavior than conventional banks.  In fact many Islamic Banks emphasize this claimed distinction in their marketing literature.

Recent developments in a court case brought by Banque du Liban et d'Outre Mer ("BLOM") Beirut against TID prove sadly that you can't always believe what you're told.  Or sold.  

Seems that BLOM advanced some US$10.7 million to TID under a Wakala structure.  TID got into financial difficulty and did not repay.  Happens all the time.  Or frequently enough so that it shouldn't be a shock.  What happens next is what separates the ethical from the unethical.

As reported in The Guardian, TID is now arguing in an English court that it shouldn't have to pay any profit (interest) to BLOM because the deal did not comply with Sharia law and was therefore void.  A small point: TID's Shari'a Board had approved the deal at the time it was concluded.

This tactic speaks volumes about TID's ethics or perhaps more precisely lack thereof.  

Bankers are generally expected to conduct their affairs with the interests of their clients foremost - regardless of the religion they claim to profess.  That is, one deals ethically and fairly with one's clients. 

When bankers engage in Trust arrangements, they are held to an even higher standard.  A wakala is an Islamic trust arrangement.  

When one professes that on top of these normal banker virtues one's business is guided by a religion, then the standard of behavior it seems to me should be even higher.

Sadly, it's hard to avoid drawing the conclusion that TID's sudden "religion" in this case is a matter of selective application of the Shari'a.   And therefore the religious scruples on display are more feigned than real. I'm willing to bet that BLOM is not the only financial institution in a Wakala structure like this.  And if it were inside the restructuring, TID's objection would vanish.  This episode probably also provides an explanation why TID's creditor banks insisted on certain things during the negotiations and incorporated certain requirements in the rescheduling agreement - steps generally above those taken by banks in  most restructurings.  When one is forced to deal with those whose ethics appear questionable,  the wise person  prudently implements many safeguards. Let's hope the restructuring is sufficiently so equipped.

A failure to live by the creed it professes is the least of TID's offenses in this case.  More importantly, through its behavior TID is doing fundamental damage to the good name of Islam and  concept of Islamic banking.  All for expediency. And for a rather small price.  A pretty clear indication of the value it ascribes to both.

More importantly, this case introduces a new risk for those who do business with "Islamic" banks.  A risk that is difficult to evaluate.  And therefore difficult to mitigate.  That an "Islamic" bank will seek to abrogate contracts or major elements of contracts based on retroactive re-interpretation of their compliance with Sharia.  Or perhaps more precisely what they claim Sharia is based on what's currently convenient for them.  What's surprising as well is that a court in London has apparently agreed to entertain TID's argument.  One hopes that the court is merely allowing TID to raise this claptrap, but will render a just verdict.

This sort of legal risk fundamentally relates to the ethics of one's business partner.  Generally, it's hard to know this for sure until one's partner is in a difficult or inconvenient situation.

The problem a potential creditor or depositor faces then is distinguishing between an Islamic Bank and  an "Islamic" Bank.  The latter being a bank that merely professes Islam as a marketing slogan.  (Sura AlBaqara Ayat 8 would seem the appropriate scriptural reference.) 

There is an ironclad law of finance.  Or at least there should be.  If you cannot adequately assess a risk, do not do the deal.  The danger is that market participants will apply that principle across the board and simply refuse to deal with Islamic Banks.

This is a very serious matter.  One wonders what the Central Bank of Kuwait and TID's Shari'a Board think of TID's legal strategy.  Do they think that it is in the interest of the Kuwaiti banking sector or true Islamic banking?  I guess we'll know by the action they take.  Or don't take.    

Gulf Finance House - S&P Increases Rating to CCC

 

S&P announced that he had raised the rating on S&P from SD (selective default) to CCC-/C with a negative outlook.

Negative factors affecting the rating were:

1. Weak liquidity
2. Debt repayments coming due in the near term
3. Concerns about ability of GFH to implement its plans to improve its liquidity or revenues
4. Lack of longer term financing

S&P would raise GFH's rating if it is able to:

1. Raise additional sources of liquidity, including longer term financing
2. Develop new business activity as operating cashflow is minimal.

Major UAE Banks Have Rengotiated AED15 Billion (US$4.1 Bn) in Loans - Signs of Writeoffs to Come?

The National reports that three of the UAE's largest banks have renegotiated some AED15 billion in loans.  To be clear this is the stock of renegotiated loans as of 31 December 2009.

1. EmiratesNBD - AED7.8 billion in 2009 on top of an existing AED2.5 billion.
2. NBAD - AED3.2 billion
3. First Gulf Bank - AED2.5 billion

Some comments.

1. It's common practice for a bank to renegotiate a loan with a client if the client cannot fulfill the original terms.  This is often the smartest thing to do.  Court windups are costly - both in terms of time and ultimate recovery.  No more so that in the UAE which has one of the worst insolvency regimes in the region.  The goal of any banker is to get back as much of the contractual amount due as is possible.
2. Under IFRS loans are included in the "renegotiated" category if a material change has been made that is a concession the Bank would normally not make or terms of the loan have been amended.  So for example if the interest rate has been reduced.  Or if changes have been made in repayment schedules - extension of maturities.   So some changes may not reflect fundamental credit weakness in terms of ultimate repayment but a bit of slack - a lower interest rate, an extra six months for repayment.
3. That being said, can renegotiations be used to push problems into the future?  Yes.  Do banks sometimes do this?  Yes.   
4. Looking at NBAD's 2009 financials (Note 4), they have classified roughly AED557 million of the AED3.183 billion of renegotiated loans as "OLEM"  which means weak  or watch credits.  Those monitoring  the health of NBAD would want to keep an eye on the OLEM category which has gone from AED454 million at FYE08 to AED3.3 billion.  "Non Pass" loans were AED3.0 billion at FYE 2008 and AED2.3 billion at FYE 2009.  An improvement not only in amount but as well in allocation among the classifications.
5. Looking at FGB's financials (Note 32.2), renegotiated loans were AED836 million at FYE08 increasing to AED2.456 billion at FYE 09.  FGB's watch loans increased to AED1.2 billion from AED0.8billion.  There has also been a fairly dramatic rise in the amount of "non pass" loans (= weaker credits) from roughly AED3.5 billion to AED6.3 billion. 
6. Therefore, I think that when looking for potential future problems, the OLEM or "Watch" category  is probably the best early warning indicator, followed by a close eye on the movement in renegotiated credits.

TIBC Administrators to Pursue Debtors

 

The Gulf Daily News reports that TIBC's Administrators,  Trowers and Hamlins, advised creditors that they had secured funding from a group of major creditors and were preparing to go after major debtors of the Bank to secure repayment.

This is an interesting development.  

You'll recall that the Ernst and Young Report on TIBC certainly left the impression that there had been massive fraud at the Bank with the implication that there was little prospect for recovery.

Clearly, creditors wouldn't be putting in more money if there wasn't a real prospect of a reasonable recovery.

Aayan Leasing and Investments Near a Rescheduling Deal with KFH?

Citing sources at the company, AlQabas reports that Aayan received verbal approval from Kuwait Finance House to its proposal to reschedule its KD395 million (US$1.38 billion) outstanding debt at the end of last week.

As soon at the company secures the agreement of all its local creditors, it will approach foreign creditors and holders of its sukuk - who represent 25% of the total debt.  Aayan has been negotiating with its creditors for about one year now.

Earlier post on restructuring proposal here.  Other posts on Aayan (relating to suspension of trading on KSE) can be accessed by using the label "Aayan".

International Petroleum Investments Abu Dhabi Refinances US$2.5 Billion Loan

 

Gulf News reports that IPIC has refinanced a US$2.5 billion loan maturing this June with a three year term loan of the same amount.

The original loan was part of a US$5 billion financing announced 4 August 2009.  Two tranches each of US$2.5 billion.  Tranche A was a one-year facility designed to be refinanced with a capital markets issue.  At the time the market reported that pricing was 250 basis points for the first six months, then 350 basis points for the next six months.  And if extended beyond that date, 400 basis points.  Tranche B was a two year term loan, which at the time was reported to carry a 350 basis points margin.  Each lender had the right to agree a one year extension on its portion of the loan.

According to Gulf News the new loan is at 150 basis points margin with commitment fees of 150 basis points for commitments of US$200 million with lower fees for lower amounts.  

As described this doesn't sound like a traditional "commitment fee" but more an upfront underwriting/participation fee.  A one time "up front" flat fee.  Such a fee would vary directly with the size of the lenders' underwriting in the loan and final take.     

A traditional commitment fee (on undrawn balances) would be the same percentage for each lender but applied to the respective undrawn amounts of their commitments during some period, e.g., semi-annually usually.

Assuming a US$200 million take and that this is a underwriting/participation fee, a bank making a US$200 million commitment to the loan and holding that amount as a final "take" would have an asset with an effective margin of 202 basis points per annum - or 52 basis points over the stated margin.

Taking this story at face value, it shows that:

1. Unlike Dubai, Abu Dhabi has access to the market and to term funds.  It has raised a three year loan to refinance a maturing one year loan.  
2. The margin on the new loan appears to be much lower than on the previous loan.  Without knowing the front end fees on both loans, it's not possible to calculate the exact differential, but it appears to be substantially less on the refinancing - perhaps as much as 200 or more basis points.
3. Capital markets are not offering an alternative for a take-out or not offering as attractive pricing as the loan market.  So IPIC has refinanced in the bank market.

Dr. Mohammad Daud Bakar on Sukuk Structures

A brief analysis from a recognized Shari'a expert (Malaysian view) courtesy of Zawaya.

Bahrain - Crown Prince Meets Arcapita CEO To Show Support

AlAyyam Newspaper reports that the Crown Prince HE Salman Bin Hamad Al Khalifa met with the CEO of Arcapita, Atef AbdulMalik.    If you don't read Arabic, here's an English version from Gulf Daily News.

The message is pretty clear.

When you're having a rough patch, it's nice to have a friend.  It's even nicer when the friend is someone influential.

As noted before, Mr. AbdulMalik is one of  distinguished band of brothers - all prominent in regional banking.

Embassy of the Kingdom of Bahrain Washington DC Honored for Its Activities

 

 

 

H.E. Houda Ezra Ebrahim Nonoo

Ambassador of the Kingdom of Bahrain to the United States of America

The Gulf News reports that the Embassy of Bahrain has been recognized as one of the ten most active embassies in Washington DC as per a survey conducted by International Investors.  And I'd guess - even putting aside some national chauvinism - that the District has to be considered to be in the Premier League for embassies.

But it's not hard to win awards when you have a dedicated, hard working team, including an Ambassador who is first rate.

الف مبروك ومبروك

Boubyan Bank - Vice Chairman Resigns To Become Chairman of Warba Bank

Boubyan announced on the KSE today that its Vice Chairman Mr. Jasaar Dakheel AlJasaar had resigned as he had been elected Chairman of Warba Bank.  He submitted his resignation effective 23 February.  However, the Board decided to push the effective date to the coming ordinary general meeting of shareholders. Presumably to avoid having to nominate an interim Vice Chairman and appoint a new board member.  As posted earlier, there is anticipation that NBK will be inserting some of its "people" on the Board given its 40% shareholding.  Nominations for the board opened today (2 March) and extend to 16 March.

Text of press release (Arabic only) below.

[9:53:52]  ِ.استقالة نائب رئيس مجلس إدارة بنك بوبيان ‏
يعلن سوق الكويت للأوراق المالية بأن بنك بوبيان قد أفاده بأستقالة ‏
السيد / جسار دخيل الجسار ، وذلك نظراً لاختياره رئيساً لمجلس ‏
إدارة بنك وربة وأصبحت استقالته نافذه من تاريخ 23-2-2010 ‏
كما أفاد البنك بأن مجلس الإدارة الحالي قد تقدم بأستقالته التي ستصبح ‏
نافذه بتاريخ انعقاد الجمعية العمومية المقبل علما بأنه تم الإعلان عن فتح ‏
باب الترشيح لانتخابات مجلس الإدارة في الفترة من 2 إلى 16 مارس 2010 .‏

Gulf Finance House - Confirmed: US$100 Million Loan Revised Repayment Agreed

 

A follow-up to my earlier post.

GFH issued a press release today that it had agreed a repayment schedule on its US$100 million Wakala facility due 3 March 2010.  

US$20 million will be paid this month and 4 equal installments of US$20 million every six months thereafter.  As I commented before, GFH must be really strapped for cash as this is a rather small amount for the first payment.  I was expecting something more in the US$30 million to US$40 million range.  

What's interesting is that the LMC syndicate has agreed to much less favorable terms than the  West LB syndicate:

1. West LB received two-thirds of the amount due it on the original maturity date.  The LMC syndicate only 20%.
2. West LB extended the remaining US$100mm for six months.  LMC extended the remaining US$80 million for two years - with an average life of one year.
3. Not hard to tell which financial institutions are looking out for its shareholders.

Some comments on the press release:

1. I don't see this announcement at the Bahrain Stock Exchange, the Kuwait Stock Exchange, the Dubai Financial Market or the London Stock Exchange.   This is information material to the trading of shares. Of course, the regional three banks in the facility may not have finalized their answer until after the markets were closed - though it's hard to imagine them working past London's close. But there was a press report on this in the press yesterday - at that point an unconfirmed rumor - which contained information which by any criteria would be material to an investor.  A responsible company would have made sure an announcement was at the stock exchanges bright and early this morning - either to confirm the press report (negotiations concluded successfully) or to state that negotiations were still in process. 
2. To call this a new facility strains credulity.  This is a rescheduling of an obligation that GFH was unable to pay. It is an attempt to make something out of a "busted play".
3. This is less a demonstration of faith "in GFH’s business model and the strategy that the Bank’s management team are following" than it is lenders restructuring a loan that the borrower cannot repay on its due date.  
4. Selling assets one has suddenly "discovered" are non core, firing staff and other cost cutting measures are not a strategy.  They are tactics designed to deal with the failure of one's strategy.
5. Talk of GFH"s business model is misplaced.  At this point, GFH is in search of a viable business model.  Its old model is precisely why it cannot pay its debts on time.  When it demonstrates that its plans for the future are more than words on a page, it can speak of its "business model".
6. The date on its press release needs to be amended.  This is like the previous "magical date" press release from 4Q09.
7. GFH has yet to update its website for the first downgrade by S&P. 

Awal Bank & The International Banking Corporation - Update on Legal Investigations Including House Arrest of Maan AlSanea (?)

Here's a summary of a 17 February report from  AlWatan Newspaper (Bahrain) on the latest in the AlGosaibi/AlSanea affair.   For those who are interested in Mr. AlSanea's fate, you'll want to at least read #7 below.

AlWatan's article is based on an "informed source".

First, the head of the Public Prosecution Nawaf (Abdullah) Hamza, has formed a  panel of independent experts to provide an independent opinion on the financial statements of Awal Bank and The International Banking Corporation.  (Digression from article:  While not stated by AlWatan, clearly this report will be used as part of the justification for the levying of charges.  In 2007 the Public Prosecutor's Office also known as   النيابة الكلية  was given jurisdiction over the investigation of all financial and economic crimes.  At that time Mr. Hamza joined the office leaving his post as Head of the Middle Prosecution Office, though at that point he was not made head of Public Prosecution).

1. The investigations continue at both banks.  Lately the focus has been on management and employees.  It's not clear just how far down the management ladder the investigation is proceeding.  The article uses the terms "managers and employees".  
2. Among the parties being interrogated at the CEO and members of the Executive Committee at Awal Bank.
3. The investigation of Awal's Head of Operations has been completed.  There are no further details in the article on what the results were.
4. In the past 10 days, Awal's CEO has charges directed against him.  He has been released against an unspecified bond and forbidden to travel.  Later the article uses the term "rasmiyan" to refer to charges against the CEO of TIBC.  So assuming the insertion of that additional word was deliberate  and has significance, Awal's CEO appears not to have been formally charged with a crime.
5. Awal's Head of Treasury and Foreign Exchange has been released against a BD2,000 bond and forbidden to travel.  AlWatan does not mention that formal charges were levied.
6. The CEO of TIBC has been formally charged with breach of trust and stealing two billion dollars from AlGosaibi Company for Commercial Services (Bahrain).  He has been released from custody against a BD10,000 bond and forbidden to travel. 
7. The article lists five cases pending against Maan AlSanea in Bahrain: (a) Awal Bank v Maan AlSanea, (b) Bahrain Islamic Bank v Maan AlSanea and Others, (c) Bahrain Islamic Bank v Maan AlSanea and Others, (d) Hasan Sharif and 18 Others v Awal Bank (labor case),  and (e) Salah AlKawaari v Awal Bank (labor case).   I suspect the latter two cases were brought by individuals whose employment was terminated and who feel that their termination process and payments were not fair.  It is not uncommon for a dismissed employee in Bahrain to lodge a complaint with the Labour Ministry.  If the employer and employee cannot reach a solution among themselves, then the dispute proceeds to the Labour Court for a decision.  So, perhaps a more accurate statement is that there are three commercial cases against Mr. AlSanea.  With all the downsizing going on in Bahrain, just about every bank who let someone go, has at least one Labour case against it.
8. Also that a freeze (block) has been put on the assets of Mr. AlSanea and his family in Bahrain and that he has been forbidden to travel until the completion of the investigation.

That last point, the reported arrest, seems to be a topic of some interest out there from the number of hits this blog gets related to that topic. 

A couple of observations. 

First, as you've noticed from the cases pending against some of the senior managers of the two banks, they have been released from jail (against rather small bonds considering the allegation of the amounts involved) and forbidden to travel.   I'd guess that would involve surrender of one's passport. That is a modified form of house arrest, meaning in this case that they can move about within the country but may not leave.  No electronic ankle bracelets and stay at home rules.  Just to be clear I have not seen any credible report that Mr. AlSanea has been arrested/jailed.  I'd also note that modified house arrest would be fairly normal procedure for someone accused of a major crime.  Or someone who could be a material witness in an investigation.

Second, it's not clear to me if Mr. AlSanea is currently in Bahrain.  If he's not, then the Bahraini prohibition on travel would be theoretical rather than practical - at least until he entered the Kingdom.  My impression is that he is in Saudi Arabia, probably in AlKhobar.  If so, he's probably subject to similar restrictions on travel in the Kingdom. 

In the interest of fairness a couple of points.  And it's very important that all who follow news on these cases keep these two points in mind.

First, this post is based on a newspaper article.  It is not an official statement issued by the Public Prosecutor or any other official body in Bahrain.  Reports in the press are not always complete or accurate.  "Informed sources" often aren't. And note that AW's article seems to be based on a single source.   

Second,  individuals named in this post (either directly as in the case of Mr. AlSanea or others by their titles) may have been accused of wrongdoing.  However, at this point, there have been no convictions by any competent courts of any criminal or civil offenses.  And it is only the courts that are competent to issue such judgments.

Gulf Finance House - US$100 Million Loan Revised Repayment Agreed

The National reports that GFH has agreed repayment terms with on its US$100 million "Islamic" facility arranged by the Liquidity Management Center Bahrain.

US$20 million this month and then 4 equal installments of the remaining balance every six months commencing this September.

Interestingly enough, the US$300 million syndicate was able to secure a  66.7% immediate repayment, while the LMC syndicate only 20%.   

If this report is true (see next paragraph), either GFH is really strapped for cash or the LMC syndicate of Islamic banks is being really kind.  I'm guessing it's the former.

However, it should be noted though that this is not an official announcement but a report based on "an informed source". 

ABC Launches US$1.11 Billion Rights Offering

Details here.  Note offer price is par.  Key issue will be whether ADIA steps us to participate. 

Earlier post on Rights Offer here.

“Boring” IMF Report Contains Interesting Information on Dubai

The typical reaction to a report issued by one of the multilateral agencies is a polite "yawn" as one consigns it to the bin. That is a mistake that both investors and lenders make because these reports often contain important information. Information the IMF gains through its special access to the sources.  And which often is better than that given creditors or rating agencies.

What can be learned from these reports? 

1. Insights into fundamental factors or conditions that can help one look beyond the current hype – whether it's irrational exuberance or unjustified pessimism. From these agencies' autopsies of earlier financial problems, one can develop an insight into the factors that were associated with problems in other countries. Not universal laws. Nor magic equations that infallibly predict the future. But reasonably good early warning indicators that help one identify situations that lead to potential problems or are themselves symptoms of such problems.  One can also develop some ideas about the likely exit path if a problem hits. What happened in other countries? How severe and how long were those problems? And some "back of the envelope" comparative metrics one can use to make directional (but not exact) predictions of the path and severity of a  similar problem in another country.  Or at least set bounds on the severity estimate and likely paths.  This information is not only useful when the crisis hits, but when one is considering whether to make the initial investment.  Or if one has made the initial investment (or loan) when might be a good time to get out. - hopefully before the crisis occurs.   For example of this sort of information see the comparative analysis of real estate crises in four countries on Page 23 which might give some insight into the potential impact on UAE banks.
2. Then robust data on that country with which to apply these insights - or at least as robust as the country is able or willing to disclose.  One can use that data to see if those same conditions that caused problems in other countries are developing in this country. To what extent? Or, if the crisis has hit, what are the new vulnerabilities and exit path? 
3. Finally, other information - facts and judgments. For example, this report contains  an estimate of the amount of debt of Dubai Inc and the Government of Dubai.  The maturity profile. And, as I've noted in earlier posts, sometimes in the diplomatic language of the reports, one can discern the multilateral agency's assessment of problems and it sconcerns.  In some cases pointing out problems.  In other cases pointing out trends that will lead to fundamental changes from past. behavior  As an example of the latter look at the discussion the labor market in structural issues below.

Here's the link to the IMF "Staff Report for the 2009 Article IV Consultation" with the UAE so you can not only follow the analysis below, but also read and "wring" out additional bits of information.  This post long as it is does not discuss every insight or bit of information in the Report.

Pages 38 to 49 contain a special section on the Dubai World Debt Situation. 

Let's take a look at these first as they are likely to be of the most immediate interest to most readers.  But don't skip the section after that which discusses the main body of the Report.  It has some interesting information.  

Now to the topic of keen interest - the Dubai World Restructuring.

1. Page 39 Paragraph 6 "Dubai Inc. dominates the economy of Dubai (Annex Box 1). Dubai Inc. is a network of commercial companies and investment arms owned directly or related closely to the Ruler of Dubai, his family, or the Government of Dubai (GD). At its simplest, Dubai Inc. consists of three holding companies, Dubai Holding (owned by the Ruler), Dubai World, and the Investment Corporation of Dubai (both owned by the GD). A few other companies are owned jointly. Each holding is present in Dubai's growth engines and this overlap has fostered competition as well as duplication. Each holding has choice assets with solid earnings, as well as start-ups requiring large amounts of capital upfront, particularly in property.3Dubai's private companies are mostly owned by old merchant families. The private sector is fairly small and dependent on Dubai Inc.'s business." What this suggests is that the collapse of the Dubai development model (leveraged real estate development) and the sharp decline in many (but not all) foreign assets are going to have a serious effects on Dubai until there is a turnaround in Dubai Inc's fortunes.  Probably not a near term event.
2. That's reinforced by Paragraph #8 on Page 40 "DW's real estate interests are concentrated in Nakheel Properties, Limitless World, and Istithmar World. Nakheel's focus is Dubai; Limitless World, a more recent company, has comparatively more overseas real estate ventures; and Istithmar World is an investment arm with several overseas property-related interests. Although consolidated financials of Dubai World are not public, Nakheel and Limitless likely constitute about half of Dubai World's assets, the rest being held mainly by DP World, JAFZ, and Istithmar. Nakheel's remaining interests in overseas properties were transferred to Istithmar in September 2008." Assuming the statement that troubled real estate assets are roughly 50% of Dubai Inc's holdings, there is going to be a substantial ongoing drag on the Emirate.  Cashflow from existing projects is likely to be negative - diminished cash from operations eroded by heavy financing  charges.  And limited opportunities to sell the assets.   As  new projects are likely to remain stalled.  Since property and construction have represented 25% of economic activity, a slowdown in new projects will be another stress on Dubai.  Even assuming a relatively quick agreement with creditors on a restructuring, these problems are going to weigh on Dubai. Talk of any sort of a rebound in 2012 seems very premature. 
3. On Page 41, you'll find a handy chart showing the companies belonging to each of the three holding companies: Dubai Holding, Dubai World, and ICD. And the following pages contain some additional information on the various entities in each of the three.
4. On Page 45 there is a breakdown of DW debt between local and foreign banks. "Information on debt within the DW standstill perimeter has become clearer than on debt of DW's consolidated or Dubai Inc.'s debt. At this time, and after the payment of the Nakheel 09, the standstill perimeter is about $22 billion (in local and foreign currencies), of which $12 billion is in the form of syndicated loans, $7.5 billion corresponds to bilateral loans and $2.5 billion to bonds. The share held by national banks is 45 percent of the total ($10 billion), of which 2/3 is to Dubai-based banks (6 percent of their book) and 1/3 to Abu Dhabi banks (3 percent of their book). The national banks also hold 80 percent of the Nakheel 10 and 11 sukuk bonds. The debt subject to negotiation is owed by Nakheel, Limitless, and by DW at the holding company level (DW Holding, DW Group Finance), the largest component being at the holding company level. The extent and form of the needed debt restructuring will become clearer as the negotiations between DW and its creditors progress."  This quantifies the UAE bank exposure and raises some questions about market access.  Was this exposure built up in the last few years as foreign creditors reduced appetite for DW debt? Were local banks "stuffees" on deals the market wouldn't absorb?
5. Page 49 has IMF estimates of the Emirate of Dubai's Debt with a breakout of Dubai Inc's debt.  And then a further allocation within the constituent parts of the Dubai Inc . The headline number which you've probably read elsewhere is some US$109.3 billion for the Emirate.   That is 130% of the Emirate's GDP - not a comforting ratio.  But the IMF estimate does NOT reflect all liabilities.  There are amounts due to contractors for work already performed.  Advance payments taken from customers for real estate purchases.  So the total amount of Dubai's liablities is likely to be much more.  The debt burden measured in US$ or in terms of percentage of GDP is therefore much more.  All of which implies a severe economic burden to unwind the position - to pay down the debt.  To de-leverage.   In an article today, The National estimates another US$ 60 billion.  Whether that's the right number or not isn't clear.  Unfortunately, the financial statements of DW, DH and ICD  are not available.  Otherwise one could use these to round out the liability estimate.   So with the caveat that US$109.3 billion may be significantly understated, let's drill down to see what additional ew can learn.  First a look at the overall composition of debt among the various Dubai Inc entities and the Government of Dubai.  A boom built on a "credit card".
   

Entity	Total Debt (US$ Billions)	Percentage
Dubai World Entities To Be Restructured	US$ 14.35	13.1%
Other Dubai World (DW Ports, etc)	US$ 11.69	10.7%
Dubai Holding	US$ 14.79	13.5%
ICD	US$ 20.40	18.7%
Other Dubai Inc	US$ 24.35	22.3%
Dubai Inc Total	US$ 85.59	78.3%
Government of Dubai	US$ 23.70	21.7%
Total All Govt Related Dubai Debt	US109.29	100.0%

Now an estimated maturity profile (amounts in US$ billions) to outline cashflow demands on Dubai.  For the DW entities to be restructured, their problem is a near term two-year window of "bunched" maturities.  This occurs at a time when there are much heavier cashflow demands on other Dubai Inc entities. It doesn't seem that there are resources that could be taken from other entities in the Group to tide over Nakheel, Limitless and Istithmar.  And with these sort of amounts, a clear need for refinancing.  The Emirate remains dependent on banks and investors - probably foreigners as the Central Bank of the UAE tamps down on credit from local banks.  At best higher margins.  At worst limited access which in itself might tip other entities into restructurings.  A difficult situation to navigate.

Entity	2010	2011	2012	2013	2014	Beyond
DW To Be Restructured	US$ 5.2	US$ 4.6	US$ 1.9	US$ 1.1	US$ 0.3	US$ 1.3
Other DW	US$ 0.2	US$ 2.0	US$ 5.7	US$ 0.5	US$ 0.0	US$ 3.2
Dubai Holding	US$ 3.5	US$ 3.2	US$ 0.8	US$ 0.5	US$ 2.1	US$ 4.6
ICD	US$ 2.0	US$ 5.8	US$ 5.7	US$ 3.0	US$ 0.1	US$ 3.8
Other Dubai Inc	US$ 4.7	US$ 8.8	US$ 4.9	US$ 1.8	US$ 0.6	US$ 3.6
Total Dubai Inc	US$15.5	US$24.4	US$19.0	US$ 6.9	US$ 3.2	US$16.5
Govt of Dubai	US$ 0.0	US$ 0.0	US$ 0.0	US$ 1.8	US$21.9	US$ 0.0
Total Dubai Govt Related	US$15.5	US$24.4	US$19.0	US$ 8.6	US$25.1	US$16.5

Note: Amounts do not add exactly due to rounding.

Now to the rest of the report.

1. Page 4: "With foreign investor confidence shaken and international capital markets less accessible, Abu Dhabi's policy of selective support to Dubai will play an important role in limiting contagion to the U.A.E. economy and the banking system." The key takeaway here in case anyone out there missed it is that Abu Dhabi is not writing a blank check to bail out its neighbor. And that reason for that is clear. In fact there are 109 billion reasons. 
2. Page 6: "The crisis unfolded with differential impact on Abu Dhabi and Dubai. It highlighted three key issues: (i) the contrast between growth based on hydrocarbon resources and that based on nonhydrocarbon diversification funded by maturity-mismatched leverage; (ii) the spillover effects and financial support structures in the federation; and (iii) the volatility of markets in response to a lack of information disclosure and transparency. In particular, the debt announcement undermined the widely held market perception of implicit government support, including from Abu Dhabi."  
3. Page 11 contains a series of charts that provide in graphic terms (sorry for the pun) an indication of the nature of the problem and some potential early warning indicators. First is the dramatic increase in foreign borrowing from BIS banks. The second is a chart showing the explosion in local borrowings beginning in 2004 where the growth curve moved from roughly a 6 degree angle to over 60 degrees. As noted in Paragraph #38 on Page 20 some US$ 100 billion of credit above the trend line was extended. Third is a dramatic rise in short term borrowings. Anyone familiar with the Asian Crisis of 1997 would recognize this pattern.  It's very similar to what happened in Thailand.  If that lesson had been assimilated, perhaps Dubai would not have crashed.  Or at least those who paid attention would have avoided the collapse.
4. Paragraph #21 on Page 13 brings home the point that while the IMF is projecting 0.5 percent growth for the UAE in 2010, that growth is going to be very uneven. Abu Dhabi's growth will be propelled by a significant public works program.  Dubai is going to stagnate.  Footnote 2 on Page 7 gives an indication of the growth differentials. If these 2009 statistics are any guide to the future, Dubai will experience negative growth again in 2010. Very roughly  8% or so negative assuming Abu Dhabi repeats 2009's 6% growth and using a very crude 60/40 split.
5. Page 14 contains a box with a detailed discussion of the  mechanics of the Dubai special insolvency regime for Dubai World. It also raises two questions as to whether its decisions will be recognized outside the Emirates (I'm guessing they will unless they seem to be overly slanted towards the borrower) and whether the special tribunal will enforce foreign judgments against DW entities. If the intent is that the tribunal is applying "global standards", then it should enforce foreign judgments - again presuming they are reasonable.  If one wants to play in the Premier League, one has to follow the rules.
6. Page 16 some quotes on the Dubai model of development. "Even though Dubai has achieved an impressive degree of diversification and has become a major trading and services regional hub, recent events call into question the sustainability of enhancing growth through large-scaled and highly leveraged property development. The Dubai authorities recognized that the recent events require a reassessment of Dubai's real estate sector to ensure the economic and financial viability of the emirate's corporate sector. As a result, over the medium term real growth was likely to be slower but more sustainable than in the period preceding the crisis. The authorities were of the view that Dubai had a top quality infrastructure, and that its hospitality, trade and logistics engines should continue to benefit from Asia's pull. Although the scope of the restructuring was still being defined, the focus would be on refinancing the property sector."  The question is what replaces the old model.  The implications for growth seem to be clear.  Less growth. Normal commercial activities are not going to deliver the growth that a speculative property boom did.   Less growth also has a negative implication for debt service abilities.  For the rise of asset values.
7. Page 18 a confirmation that the Dubai crisis has strengthened Abu Dhabi's hand. "The authorities emphasized that the crisis had encouraged greater cooperation between the federal and emirates levels of government and between the emirates themselves. Going forward, Abu Dhabi would continue to support Dubai in its efforts to achieve a viable position. However, the Abu Dhabi authorities emphasized that Abu Dhabi was not legally liable for DW debt and that any decision to extend support would be made on a case-by-case basis. In this regard, they stressed that they did not want to create moral hazard by supporting potentially nonviable corporations, but would provide support if necessary to limit contagion to the .A.E. economy and banking system." Greater co-operation will mean more centralization. Abu Dhabi will benefit from that. And "moral hazard" probably also encompasses the hazard to Abu Dhabi's check book given the size of Dubai's obligations. 
8. Page 20 gives some idea of the credit growth that lead to the crisis. " The U.A.E. financial system entered the global crisis exposed to a highly leveraged economy. The system is bank-based and focused on the domestic economy. Commercial banks expanded credit very aggressively during 2004–08, generating about $100 billion of credit above the underlying trend growth. Credit growth was the fastest among emerging markets by a good margin, and the capital base was disproportionately low for such growth (figure 4). During this period, banks by and large did not retain sufficient profits to maintain capital buffers, despite their exposure to an economy with significant leverage. Nevertheless, banks remained highly rated throughout 2004–08, in part reflecting perceived support from governments and in some cases government ownership. In addition, banks' liabilities (deposits and interbank loans) have been under 3-year blanket federal government guarantees since September 2008."  Hence the Central Bank of UAE initiatives to force banks to retain capital by limited cash dividends for 2009 and imposing tighter provision requirements.
9. Pages 23 to 25 present stress tests of the banking system for various haircuts. Paragraph 41 on Page 23: "However, the DW debt situation has increased the need for additional capital as these contingencies have become more likely to materialize. The uncertainty created by the prospective debt restructuring implies that banks may need material capital buffers above the regulatory minimum to maintain adequate ratings for dealing with market counterparties. To illustrate, assuming that banks need at least a 14 percent CAR, the additional capital needs would be about $6 billion or 2.7 percent of GDP. 5he possibility of a principal haircut on the DW debt subject to the standstill cannot be ruled out, an outcome which would have a significant effect on banks' provisioning. As an illustration, staff estimates that the capital top up could reach 3.4 percent of GDP for a 25 percent haircut and 4.3 percent of GDP for a 50 percent haircut of DW debt subject to the standstill."  Something every equity investor in UAE banks should be considering in terms of anticipated performance. As well as something for foreign counterparty banks to consider in terms of the amounts, types, and tenors of credit they extend.  While the UAE has demonstrated a very strong intent to support its banking system, a careful creditor always looks at the underlying strength of the obligor. 
10. Page 24 provides an assessment of the quality and capacity of the Central Bank of the UAE as a regulator. "While the extra capital need appears manageable, the exercise underscores the importance of contingency planning, supported by intensified supervision. The global financial crisis is testing the CBU as a regulator, as it did with many other regulators. The DW standstill has increased the potential for surprises and, consequently, the need for a more pro-active supervisory approach and effective enforcement. The CBU could for example use more systematically its power to block dividend distributions in the interest of building larger capital buffers. There may also be a need to re-assess how exemptions to large exposure limits are granted in the case of GREs. Finally, CBU inspections follow a traditional model of rolling examinations of individual institutions, whereas the current situation suggests the need for simultaneous cross-firm examinations of specific risks such as sectoral concentration, name-lending, or deteriorating funding standards. In the latter case, the CBU's limited resources, including for off-site analysis, hinders such an approach." A clear criticism of a failure to control banks' exposure to groups like DW.  The Central Bank of the UAE has taken the IMF's advice.  It has limitied2009 cash dividends.  Paragraph 45 on Page 25 details other measures it is implementing: a 1.25% general reserve on risk weighted assets and the new 90 day non accrual rule. 
11. Pages 26 and 27 discuss three structural issues. Labor markets and the need for uptiering skills. As this unfolds, it's likely that labor will be imported from different countries than it is now.  This is going to have some strong implications for those countries, e.g., a decline in worker remittances, loss of safety valve for unemployment, etc.  The need for long term financing and the lack of adequate local financing sources. Until markets for term financing can be developed, a dependence on foreign financing will remain - probably with the same short tenor preference on the part of foreign banks and investors which was in part responsible for the current crisis.  Inadequacy of data that limits the government's ability to monitor the economy and formulate policy. This issue is also related to debt management since each Emirate has been responsible for its own finances.  Without co-ordination (ideally central direction) there is a potential for problems.

Those 67 "boring" pages were packed with a lot of information and, as well, hopefully some lessons useful for future investment decisions - both at the underwriting as well as the monitoring stages.  And there's still more to "mine" from the report.