The National reports that David Jackson has resigned today as CEO of Istithmar World.
Here's another item from GulfNews which includes a critical bit of the press release: the farewell statement thanking David for his contributions. In a situation like this, it's important that the employer signal whether or not it had an issue with the departing employee. Saying nothing is code for a negative view.
It may be reading a bit much in from one announcement, but it seems that Aidan's role is larger than a consultant. Then again as part of the ritual of debt restructurings, the debtor is often obliged to make a ritual sacrifice of one or two members of management. I suppose in that case the CRO might be the right person to officiate at the service to appease the creditors.
Posts
6 comments:
Of course I'm a total layman when it comes to investment banking.
But I do remember that Isthitmar recently lost a prime hotel property in NYC, which they had bought with lots of leverage at the very peak of the market. After they defaulted and someone bought it at a foreclosure auction (including debt warts and all) for less than half its value, Isthitmar lost the 50m USD of their own money which they had put in it in less than two years...
Presumably as CEO Mr.Jackson thought that was a very shrewd move?
I suspect that proximate cause of the loss of the hotel was the lack of financing.
No more room to gear the hotel.
No cash from elsewhere.
As the cash flow for Dubai World was cut off, as maturities began to loom, as this new reality began to bite, sober discretion was no doubt discovered as a corporate and national virtue. And so David's pleas for just a bit to tide him over were probably ignored or turned down.
Whether the original investment made economic sense - and thus the investment was doomed from the start -, I don't know.
My impression is that a lot of Istithmar's investments were made at the top of the market. But without details who knows.
As to liquidation values, there was a hotel in midtown Manhattan that a European chap built some 15 years ago. He spared no expense. It was elegant. Problem was the cost base was so high that he couldn't pay the lenders. A Japanese investor bought it for half the original cost.
I am not talking about the technicalities of restructuring the debt involved but the wisdom, or lack of it.
That 2007/early 2008 was the peak of the property market pretty much everywhere was clear even at that time. How clever was it at that time to buy a luxury hotel (i.e. one of the first types of properties to suffer in a downturn) with just about 10% equity?
I'd buy a dreamhome with that much, hoping to be able to keep a job down long enough to pay it off and then bequeath it to my kids.
But surely investment banking has somewhat nearer horizons in sight?
What astonishes me immensely is the number and magnitude of stupid decisions Dubai Inc. has taken in the last 5-7 years - and which become apparent only now... It is mindboggling how these people are running a country. They'd not be allowed to run a bath elsewhere.
If there ever was a misnomer, Isthitmar is it.
We're probably a lot closer in our views than it appears from our posts.
Was over leveraging investments a wise move?
No.
Particularly dangerous with investments that are highly sensitive to the overall state of the economy.
What happened in Dubai? I think it was three things primarily - though there are more.
First, often good luck or success in a "managed" market is misinterpreted as being due to one's own genius.
Second, when a market is in full irrational mode, it is hard to resist the urge to make a quick buck.
Third, when lenders are throwing money at borrowers, it's hard not to take it. And it's very common that someone with a pocket full of money is going to make some purchases he shouldn't have.
So it's the familiar story of the drunk and the bartender.
First, often good luck or success in a "managed" market is misinterpreted as being due to one's own genius.
!! I should like to get this sentence set in stone and erected at Dubai Airport's arrival lounge as a warning to newcomers, and another one at the departure gates as a memento for all those real estate cowboys...
Those words could be appropriately posted in many places.
Post a Comment