1MDB Scandal: "The UAE Connection"

This post deals with the second “phase” of the alleged misappropriation of funds from 1MDB and is based primarily on the US Department of Justice (DOJ) complaint against Red Granite, producers of The Wolf of Wall Street.    (the “Red Granite Complaint” or “Complaint”).   Paragraph not page numbers are used to cite the Complaint.  Where other sources are used, I’ve included links to websites, when possible.

Before I begin one very important note.

The US DoJ has filed complaints.  Certain parties mentioned in the complaints have been accused but have not been convicted of any crime, nor have they had a chance to neither respond to the charges made against them, nor have their responses and the original complaints tested by the judicial process.  At this stage all that can be said is that allegations have been made.  Please bear that in mind as you read this post. 

As before the focus is on connections to the GCC, though AA will be unable to resist excursions off his natural turf should the information be compelling.

In this post, I’ll look at the involvement of IPIC and Aabar, specifically that of two individuals who were officials of those companies at the time of the alleged misappropriation: 

· H.E. Khadem Abdulla Al-QUBAISI, Managing Director of IPIC (until 2015) and Chairman of Aabar (until 2013)  

· Mr. Mohamed Ahmed Badawy Al-HUSSEINY, CEO of Aabar until 2015.

I’d note that both these individuals’ names appear in the Complaint unlike the officers of PetroSaudi International (discussed in an earlier post) who were not explicitly named.

The Aabar Phase – Overview (Paras #9-10 and Paras #112-120)

During 2012, 1MDB raised US$3.5 billion in notes (laymanspeak “bonds”) arranged and underwritten by Goldman Sachs to fund the purchase of energy assets in Malaysia.  There were two issues each for US$1.75 billion.  IPIC guaranteed the issues either “directly or indirectly” as per the Complaint.  (Para 114).  1MDB also provided guarantees because the issuers of the Notes were newly created subsidiaries of 1MDB with no track records of their own.

The Complaint alleges that US$1.367 billion of the proceeds (39 percent of face value and 43 percent of estimated net proceeds) were diverted to a Swiss bank for the account of Aabar Investments PSJ in the British Virgin Islands (Aabar – BVI or BVI).  Despite the similarity to IPIC subsidiaries Aabar Investments and Aabar Investments PSJ, the BVI company was not owned by IPIC or Aabar. 

Funds were later allegedly transferred from the BVI account to an account controlled by TAN Kim Loong, described by the Complaint as an associate of Mr. LOW and further transferred presumably to disguise their origin and then used to acquire assets and transfers were made for the personal benefit of officials at 1MDB, IPIC, and Aabar.

The Aabar Phase Selected Details (Paras #121-227)

May 2012 US$1.75 Billion 5.99% Notes Issue Maturing 2022 (CUSIP XS0784926270)

Paras #122-127:  In order to fund its purchase of power generation assets from Tanjong Power, 1MDB decided to raise70 percent in Malaysian Ringgit (MR) from local banks and engaged Goldman Sachs (GS) to arrange and underwrite the Notes to fund the remainder.  After GS’s fees and transaction expenses, the net proceeds of the US$1.75 billion issue were estimated to be US$1,553,800,000.  Approximately, US$810 million of the proceeds were to be used for the purchase.   The remainder (US$744 million) was to be used for “general corporate purposes, which may include future acquisitions” as per the offering circular.  

AA side comment:  That is, almost half the proceeds were for unspecified “general corporate purposes”.  That pattern continued with the subsequent deals.  A natural question is why 1MDB continued to issue more Notes while accumulating an apparently ever increasing cash hoard.  There is a natural dilemma bankers face in structuring transactions.  The bigger the deal, the bigger the fees and, thus, the larger the personal bonuses.  On the other hand the banker has a duty to both the issuer and investors to ensure that amounts raised are appropriate.

Para #130 – Goldman earned US$192.5 million--11 percent of the Notes face amount--in fees (US$17.5 million) and commissions (US$175million). 

AA Side Comment:  Much has been made of the fees GS made on the three bonds it arranged for 1MDB.  The percentage appears “rich” but Goldman was underwriting the issues.  If it could not place the bonds, then it would wind up owning them itself.  It is also a fact that “debutante” (first time) issuers pay more in interest and fees than more “seasoned” issuers. Besides being a debutante, 1MDB presented a set of issues that increased the riskiness of the deal.  While it is owned by the Malaysian state, 1MDB is not full faith and credit.  As well, 1MDB had a very aggressive (risky) capital structure –one that would delight the heart of the stereotypical Kuwaiti “investor”:  maximum use of OPM --heavy on debt and low on equity.  1MDB’s fiscal year is 31 March so let’s use 2012 financials as a starting point. Then, before the Note issue, equity was already a scant twelve percent of total assets.  Not much structural balance sheet protection for lenders or bond investors.  By 31 March 2013, it was five percent.  Any banker or investor with a modicum of intelligence could have factored in this issue and seen that 1MDB’s already weak credit profile would be weaker after the issue. The riskier the issue, the higher the bankers’ fees. 

1MDB Financials here. 

Paras #129 and #146 – Within one day of closing of the issue (21 May 2012), 1MDB transferred approximately US$577 million to the Swiss account of Aabar Investments PJS – BVI. Note that Tanjong was paid US$650 million (Para #144).

Para #134 – 1MDB granted Aabar Investments PJS – BVI a ten year option to acquire up to 49 percent of these assets for a maximum of MR1,225,000,000.  Note that the compensation for the IPIC guarantee is going to an alleged unrelated party not to an IPIC or Aabar entity.

October 2012 US$1.75 Billion 5.75% Notes Issue Maturing 2022 (CUSIP XS0829573913)

Paras #137-139  This issue also for US$1.75 billion was arranged and underwritten by Goldman, guaranteed by 1MDB with “indirect” guarantee provided by IPIC.  The Notes were to fund the purchase of energy assets from Genting.  Net proceeds after expenses and Goldman’s fees were estimated at US$1,636,260,000 of which US$692,357,340 was for purchase of the Genting assets. As before the rest was for “general working capital purposes”.   Roughly fifty-eight percent of the issue.   This just reinforces the issue above about 1MDB’s real need for such large issues. 

AA Side Comment:  Assuming a rough US$4 million for expenses, as was the case with the first issue, Goldman’s fee was roughly US$110 million, six percent of the face amount of the Notes, and 57 percent of the fee on the first issue.  This validates the comments about debutante issues above. The lower fee may also be due to the support IPIC provided for the issue.  For more on that see below.

Para #141 – 1MDB guaranteed the Notes but IPIC did not.  IPIC “nevertheless agreed to privately secure the bonds on a bilateral basis with Goldman. No reference to IPIC’s indirect guarantee was included in the offering circular.”

AA Side Comment:   If IPIC originally provided credit support to the issue, it would seem that Goldman would have to disclose this to potential investors as a material fact.  However, if the support were in connection with the underwriting, then GS would not have had to disclose this information.  In an offering circular for the 1MDB guaranteed US$3 billion note 2013 issue by 1MDB Global Investments, the second US$1.75 billion is described as guaranteed only by 1MDB.  . 

This is all very strange “privately” securing the bonds “on a bilateral basis with Goldman” sounds as though IPIC is providing support for the underwriting.  This might have been structured as a “put” option.   If GS couldn’t place the Notes, it could exercise the option and “force” IPIC to buy the bonds immediately.  Perhaps, it was structured as a credit default swap, with GS being able to claim after default.  In any case, it doesn’t sound like IPIC’s undertaking extends to holders other than GS.

Para #141 – As compensation for procuring IPIC “indirect guarantee”, Aabar BVI was granted an option to acquire up to 49 percent of the Genting assets for up to ten years.  As the Complaint alleges, BVI is not an IPIC/Aabar entity and thus the compensation owed them was misappropriated.

Para #152 – One day after the second issue closed, 1MDB transferred US$790 million to Aabar BVI’s Swiss account, bringing the total transferred to US$1.367 billion.   Per Para #116, 1MDB recorded these transfers as “deposits” at Aabar Investments PJS in its financial statements. 

Disposition of Funds at Aabar – BVI

As outlined above, the Complaint alleges that US$1.367 billion was transferred to Aabar BVI’s Swiss account.  What happened to the funds?  I’m not going to recite details of the intermediary transfers, though I will make a general comment on the mechanics.

AA Side Comment: Not completely relevant to this post, but interesting.  The names of all the intermediaries allegedly used for the subsequent funds transfers make them sound like investment firms or funds.  (Paras 173-176) Two of them were actual investment funds according to the Complaint.  The Complaint notes that Aabar moved money into these two funds through CITCO.  That’s a tantalizing comment.  It suggests the possibility that these transfers did not pass through normal commercial banking payment channels, that is, Aabar moved funds to its account at CITCO and then instructed CITCO to credit accounts on its books. This would make detection harder.  In any case the use of “investment firms/funds” to move money provides an apparent justification for the transfers: investment firms (not individuals) making investments.  If true, a neat way to disguise the transactions and deflect any AML (anti-money laundering) queries.     

Para #181 and 182– US$473 million in four transfers between 29 May and 30 October 2012 to Bank Privee Edmond de Rothschild Luxembourg for the account of VASCO Investment Services SA, described as “affiliated with AL-QUBAISI” who is the “beneficial owner”.

Para #186  to 189 -US$55 million in four transfers between 29 May and 3 December 2012 to BHF Bank Frankfurt for Rayan Inc.  AL-HUSSEINY is identified as the “beneficial owner”. 

Paras #190-192 - US$11.6 million in two transfers 18 December 2012 and 22 January 2013 to Bank of America Texas for MB Consulting for “Services Rendered” of which AL-HUSSEINY is identified as “beneficial owner and sole signatory.”

Paras #194-196 - US$30 million to AMBank Malaysia for the account of Malaysian Official 1.  As per my post about PetroSaudi International, MO1 would appear to be the current Prime Minister of Malaysia.

Paras #197-198 – US$5 million to Falcon Bank Zurich for account of 1MBD Officer 3 identified as 1MDB’s General Counsel and Strategic Director in Para #27. 

Paras #202 – US$238 million to Red Granite Capital.  A portion of these funds are alleged to have been used to produce The Wolf of Wall Street, acquire assets, and fund a gambling vacation in Las Vegas.

AA Side Comment:  I can’t resist.  According to the Complaint, Paras #222-225 Red Granite transferred US$41 million to Alson Chance (AC) in June 2012.  On 10 July 2012 AC transferred US$11 million to the Venetian Casino in Las Vegas for deposit to LOW’s account.   On 15 July 2012, five days later, an apparently very unlucky LOW withdrew US$1.1 million from the Casino (US$0.5 million for the remainder of the deposit and US$0.65 million for chips.  Of course, gambling is not the only thing that one can spend money on in Las Vegas.  And Mr. LOW was hosting several people, including a former 1MDB officer and a famous movie star. On the other hand, chips are “bearer instruments”.   If I want to pay you, I can give you some chips.  When you cash them in, they are “winnings” and there is no obvious connection to the provider.  

The UAE Connection

Let’s look at some of the allegations made against AL-QUBAISI and AL-HUSSEINY as well as some other UAE connections.   Please note that AA’s comments are not assertions of wrong doing by the individuals named, but rather comments on what the allegations would mean, if they are indeed true. 

Para #115 - H.E. Khadem Abdulla ALQUBAISI and Mohamed Ahmed Badawy AL HUSSEINY were directors of Aabar Investments PSJ-British Virgin Islands, the company allegedly used as the first link the misappropriation of the US$1.367 billion.  They were at the same time officials of IPIC and/or Aabar, entities that were also defrauded in the scheme.  If the allegations are true, then they also participated in weakening 1MDB which could lead to calls under the guarantee.   See Para #162 for 1MDB’s claim that the BVI is indeed owned by Aabar/IPIC. 

Para #125 – When a Goldman MD met with Shaykh Mansour Bin Zayed, the Chairman of IPIC, to discuss the first bond issue, LOW was present, though “not involved in the deal” as “far as” the Goldman MD “was aware”. 

It’s interesting to speculate on how LOW became involved in the meeting.  Introduced by ALQUBAISI?  Direct relationship? 

What are the chances the LOW just popped by when Goldman’s MD came for a no doubt pre-arranged meeting to talk about the transaction?  Another “remarkable coincidence”?  That being said, Sh. Mansour is no doubt a very busy individual with many demands on his time.  Perhaps, he is double booking appointments as way of meeting all those who need to talk with him. 

Paras #131 and 141- 1MDB issued options as compensation for IPIC’s guarantees, but these were granted to the BVI which is not related to either IPIC or Aabar, according to the complaint.   The options granted the BVI the right to buy up to 49% of the two power projects financed with the bonds over a ten-year period.  For the Tanjong option, AL HUSSEINY allegedly signed on behalf of the BVI.  Thus, IPIC/Aabar was also a victim of “misappropriation”.   See also Para #162.

Paras #181-192- As outlined above, ALQUBAISI allegedly received US$473 million and ALHUSSEINY US$66.6 million.

AA Side Comment:  Geez we all want a bit when we retire, but US$473 million? Surely a lot more than 10,000 Swiss Francs a month.  Seems like a rather “princely” sum for a mere “excellency”.   As noted before on this blog, AL QUBAISI acted as an intermediary for Shaykh Mansour Bin Zayed on the Barclays capital raising.  If the 1MDB allegations are true, perhaps, he (QUBAISI, not Sh. Mansour) decided it was time to “wet only his beak”.  Rather a bold and highly risky move by an individual whose continued livelihood in the UAE depends on remaining in Sh. Mansour’s good graces. Sh. Mansour is personally committed to IPIC and the tarnishing of its name in a scandal is no doubt unwelcome as well as what would appear to be betrayal by a very trusted business partner.      

The 1MDB Scandal - An Overview

Happier Days

This post is based upon the 20 July 2016 complaint filed by the US Department of Justice (DoJ) against Red Granite pictures. (the “Red Granite Complaint” or the “Complaint”), producers of The Wolf of Wall Street.    I will cite sources paragraph numbers rather than page numbers as “sourcing” for various points.

The Red Granite Complaint is one of at least fifteen other complaints filed to secure the civil seizure and forfeiture of assets alleged to have been purchased with the proceeds of an alleged misappropriation of approximately US$3.5 billion from Malaysia’s state-owned strategic investment and development fund, 1MDB.

The DoJ is making the individual complaints available at this website.   Also note the powerpoint with pictures of some of the assets.  Link here. 

This post will set the stage for subsequent posts here at Suq Al Mal.  Because SAM focuses on the GCC banking sector, those posts will look at GCC parties involved in transactions with 1MDB where those parties’ behavior raises questions –at least to AA.  Of course, if past is prologue, then you know that AA will not be able to resist the urge to venture beyond the GCC if something interesting catches his eye.

Before I begin one very important note.

The US DoJ has filed complaints.  The parties mentioned in the complaints have not been convicted of any crime, nor have they had a chance to neither respond to the charges made against them, nor have their responses and the original complaints tested by the judicial process.  At this stage all that can be said is that allegations have been made.  Please bear that in mind as you read this post.

According to the Complaint, the misappropriation of funds from 1MDB took place from 2009 through 2013.  The DOJ identifies three phases named for the vehicles purported to have been used in the theft.

1. The Good Star Phase (2009-2011)                US$1 billion 
2. The Aabar Investments BVI Phase (2012)     US$1.367 billion
3. The Tanore Phase (2013)                               US$1.2 billion   

The Good Star Phase (Para #8 and Paras 40-112)

In 2009 1MDB signed a joint venture agreement (JVA) with PetroSaudi International, a privately owned Saudi-registered firm, to develop properties in Argentina and Turkmenistan. 

According to the JVA, 1MDB was to contribute US$1 billion in equity to the JV. 

The Complaint alleges that in late September the Malaysian fund made payments totaling US$1 billion, but that US$700 million were transferred to an the Swiss account of Good Star, a company actually controlled by Malaysian LOW Taek Jho. 

In May 2011 and October 2011 an additional US$330 million was transferred to Good Star, ostensibly advances under a murabaha facility extended by 1MDB to the JV.

The Aabar Investments PSJ BVI Phase (Paras #9-10 and 112-226)

During 2012, 1MDB raised US$3.5 billion in bonds (arranged and underwritten by Goldman Sachs) and guaranteed by 1MDB as well as IPIC, an Abu Dhabi state-owned investment fund. 

The Red Granite Complaint alleges that US$1.367 billion of the bond proceeds were diverted to a Swiss bank for the account of Aabar Investments PSJ in the British Virgin Islands.  

Despite the similarity to an IPIC subsidiary Aabar Investments and Aabar Investments PSJ, the company in the BVI was not owned by IPIC or Aabar.  Curiously, according to Para #115 of the Complaint, the directors of the BVI were H.E. Khadem Abdulla al Qubaisi (Managing Director of IPIC) and Mohamed Ahmed Badawy Al Husseiny (CEO of Aabar).

Funds were later allegedly transferred from the BVI account to an account controlled by TAN Kim Loong, described by the Complaint as an associate of Mr. LOW.  Funds were used to acquire assets and transfers were made for the personal benefit of officials at 1MDB, IPIC, and Aabar.

The Tanore Phase (Para #11 and Paras #227-290)

The Complaint alleges that US$1.2 billion was diverted from a US$3.0 billion third Goldman Sachs arranged bond issue in 2013, which in part was to fund investments with Abu Dhabi in the Abu Dhabi Malaysian Investment Company (ADMIC). 

The US$1.2 is alleged to have been transferred to an account in Singapore for Tanore Finance Corporation, a company alleged to be ultimately controlled by Mr. LOW.  This amount inter alia is alleged to have provided funding to Red Granite for the production of The Wolf of Wall Street.

What Were They Thinking

For the sake of making a few comments, I will assume that the Complaint is accurate.  That is, that roughly $3.567 billion was misappropriated from 1MDB.    

As of 31 March 2014, 1MDB’s financials show roughly MR51.4 billion in total assets or approximately US$15.7 billion.

• 1MDB Financials
• BNM Exchange Rates

US$3.5 billion represents almost twenty-three percent of total assets. The size of the fraud is immense not only in dollar terms but as a percentage of assets. 

How did the perpetrators think a fraud of this size would go undetected?

In the future, assets booked to disguise the defalcation would prove worthless and have to be written down or written off.   This would have been very visible not only because of the amounts of the write-downs/write-offs but perhaps more importantly by their relation to the fund’s equity.

As of 31 March 2014, 1MDB had equity a shade over MR 2.4 billion (US$747 million), roughly twenty percent of the US$3.5 billion that is alleged to have been stolen.  Thus, even a partial write down would wipe out equity.

Often in such “operations” the proceeds of new misappropriations are used to partially cover the previous ones.  That is, for example, funds from the Aabar Phase would have been used to cover the Good Star Phase misappropriations, justified by a statement that the PSI/1MDB JV projects were not proceeding according to plan and to prevent further losses “prudent” management was terminating the JVA.  An amount could be written off ostensibly as costs incurred without necessarily ringing alarm bells. 

Or was there something else at play here besides simple greed and less than adept defalcation skills?

Aabar: UAE Securities and Commodities Authority Orders AED1.95 Tender Price

The UAE SCA ordered IPIC to raise its tender price to AED1.95 per share based on the average of the past six months' trading.

It also set the Offer Period from 20 July through 5 August with payment to all tendering shareholders no later than 10 August 2010.

I must confess that I hadn't expected the SCA to upset the original price.  And for the small percentage I assigned to that event, certainly not as dramatic an increase in price as this.  The SCA may show only one eye in its logo, but it apparently has keen sight and a strong will - even when faced with "important" parties on the other end.   Hopefully, a trend that will continue.

Aabar Takeover - The Wall St WTF "Take"

Ken has a good post on Aabar's take-over offer over at his blog.  Worth a read.

Aabar Investments - Behind the 2009 Earnings Press Release

You've probably seen press reports on Aabar's 2009 performance.

1. Comprehensive income of AED2.075 billion versus AED727 million in 2008.  Roughly 2.9x.
2. Shareholders' equity up 5.5x to AED12.7 billion versus AED 2.3 billion at FYE 2008.
3. Total assets up 11.7x to AED37.3 billion from AED3.2 billion at FYE 2008.

Let's look a bit closer at Aabar's 2009 performance.   Not a full credit or investment analysis but just some points that caught my eye.

And what better place to look than its 2009 audited financial statements.

Income

1. The company's 2009 income was largely driven by non cash changes in fair value in one investment, Daimler.  That resulted (Note 8) in some AED 9.1 billion of income.  Interestingly as disclosed in Note 9 Aabar incurred an expense of AED6.8 billion from derivatives on the Daimler shares - put options and a collar.  Note 22 (i) describes the collar range.    I'm guessing that  the hedge is in place at the request of the lenders of Term Loan 1 and 2 who financed some AED10.7 billion equivalent for the purchase price.  
2. What's a collar?   Here's a simple definition.  In short a technique to reduce the cost of buying downside protection (buying a put)  by giving away some of the upside (by selling a call).
3. Aabar acquired its 9.1% stake in Daimler in March 2009.  A glance at a stock price chart for 2009 will show that this was the absolute ideal time.  During that period Daimler's shares were at their lowest - in fact at their lowest in the past five years.  Aabar got the shares at Euro 20.27.  At YE the shares were Euro 52.95 and are trading currently at about Euro 36.00. And I suppose in this context one might be tempted to remark that at least it didn't buy Chrysler or GM.
4. In essence then from an income statement perspective, Aabar is currently a "one trick" pony.   As Note 38 states a 10% change in European equity prices results in a change of AED2.04 billion in its income statement.
5. For 2008, the company's income was driven by one event, the sale of Pearl Energy Limited.
6. Of course balancing this fact is that the company adopted a completely different strategy in 2009 so one would not expect it to have fully achieved  its goals in one year. But this is definitely a point for lenders and investors to keep their eyes firmly on.

Equity Increase AED10.4 Billion

1. AED6.7 billion was from the conversion of a mandatory convertible bond issued to IPIC (Aabar's 71.23% shareholder and an Abu Dhabi Government company).  
2. AED1.6 billion from a shareholder loan - also from IPIC.
3. AED2.1 billion from income and related events.

Debt

1. Borrowings increased from AED893 million to AED 15.1 billion or AED14.2 billion.  And since we're keeping score that's 16.9x the level in 2008.
2. What's even more important to note is that on a net debt basis Aabar went from a negative debt (it actually had cash in excess of its debt at FYE 2008) to a debtor position.  Now having debt is not in itself bad.  One would expect an investment company to use leverage.  But leverage is something to watch if one is an investor or creditor.  Especially where investment values are volatile.  Or where they may prove to be illiquid.
3. On that latter point, of the company's six borrowings, five were secured by its investments (Note 22).  Some brave lenders extended a US1.6 billion short term loan facility repayable in 2010.   At a lower rate  than that on the company's secured debt!  ?  Against which Aabar had drawn USD0.6 billion.  As a general rule, it's not the wisest of ideas to be an unsecured lender when the borrower's most liquid assets are pledged to other creditors, including the asset that generated the company's income.   The unsecured creditor is the one who gets "squeezed" first and hardest if there is a problem.  

Other Assets - Advances on Properties

1. Aabar has roughly AED7.8 billion in Advances on Investment Properties.  That's roughly 24% of assets.  There's no descriptive footnote to explain what these assets are and where they are.  I also note that the company depreciates buildings over 67 years (Note 3, page 20) on a straight line basis. 
2. There are some "banking assets" in the consolidated financials related to Falcon.  But creditors and depositors at Falcon have first claim on these.  Probably to the tune of approximately AED4 billion (Due to Banks and Customer Deposits).

Cashflow

1. You knew I'd get here eventually.
2. On a cash operating basis Aabar was negative for both cashflow from operations and cashflow after working capital changes.  Considering the latter (AED1.1 billion)
3. Investing Activities and Financing Activities were in a roughly balance at (AED21.4 billion) and AED22.2 billion. 
4. Leading to an overall decline in cash of very roughly AED300 million.

Other

1. The company has advised that its Board is recommending to the shareholders that they authorize the issuance of AED7.3 billion in convertible bonds  with a AED2.5 per share conversion price (roughly the current trading price).  The bonds would be issued to IPIC.  If the bonds are converted in full,  IPIC will own 85%.
2. Since the bonds are not mandatorily convertible, they do not appear to be legally subordinate to other creditors.  Maybe some attorney out there who practices in the UAE can say if equitable subordination is a UAE-law concept.  (Editor's Note: The mere fact this question is posed here is perhaps a fairly clear sign of a bit of manifest delusion by the writer about the readership of this blog).

Summary - Trends to Watch

1. Ability to diversify income.  Right now as described above the company is a one trick pony. Not something that realistically can be  changed overnight.  But something that should be worked on.
2. Diversification in investments.  Beyond single name concentration (Daimler), the company is heavily skewed to the auto industry and has made some additional investments in this space  - though it has also diversified since then with an investment in Virgin "Space"! 
3. What the additional AED7.3 billion in convertible bonds are used for.  Replacement of debt? Additional investments?    
4. What is the investment philosophy of Aabar?  What sort of portfolio is it building?   Does the portfolio exhibit a common theme?  Or competence resident at the company (Aabar) level?  Is Aabar merely a financial investor?  Or somehow will it be involved in developing value?  Or is it just  buying "stuff" that looks good at the time?  And which might later be discovered to be "non core" assets? There doesn't appear to be a clear statement on investment strategy on Aabar's website.  The last analyst presentation posted on the site dates from 2007.
5. How do Aabar's investments fit in with IPIC's mandate?  As per its website, "The International Petroleum Investment Company, IPIC, was formed by the Abu Dhabi government in 1984, tasked with an ambitious mandate to invest in hydrocarbons industries across the globe."  And how  might that affect its contribution of future cash to Aabar in the future?
6. Use of secured debt.  Are the key cash generating liquid assets pledged to creditors?  What does that mean for investors and unsecured creditors?
7. Cashflow, cashflow cashflow.  The life blood of companies.  "Man" does not live by capital appreciation alone.

UAE Markets Lose AED33 Billion (US$9 Billion)

ADX down 8.2% and DFM 7.3%.  The ADX drop was the largest in is history.  The DFM hasn't had a drop like this for over a year.

On the ADX (Abu Dhabi) there was a broad decline with many stocks down 9% for the day.  While one would expect declines in the banking, real estate and construction sectors, there were also large declines in companies such as Aabar (AD Government owned energy company), Abu Dhabi National Hotels, Agithia Group (Food Company).  Clearly a general market sell-off as investors  rush to liquidity (cash).   Looking at individual stocks, the forward order books are one-sided - all "asks" (sell offers) and no "bids" (buy offers).  That suggests market pressure for tomorrow.

On the DFM (Dubai), essentially all of the market's drop was in the first 45 minutes of trading - from 1970.2 to 1942.6 with a further slight drop to 1940.36 in the last 45 minutes.  I couldn't find the forward order book summary.  But again a quick glance indicates a broad sell off as in Abu Dhabi.  I'd expect more selling pressure tomorrow at the DFM as well.

On Nasdaq Dubai, Dubai Ports lost 14.88% (and earned the distinction of being the stock with the largest drop and the largest trading volume).  You'll recall that the Government announced that DP would not be part of the debt standstill.

Trading patterns suggest an absence of buyers during today's session.  And as indicated above (at least based on ADX data), there don't appear to be many buyers waiting to jump in tomorrow morning. 

Abaar Loan

AlQabas quotes an unnamed analyst at National Bank of Abu Dhabi that the loan may be for:

1. Temporary refinancing of a maturing loan while Aabar sorts out financing options.
2. Purchase of additional shares in Daimler.
   

Aabar Raises US$1.6 Billion Six Month Club Loan

Aabar disclosed to the Abu Dhabi Exchange that it had raised a US$1.625 billion six-month club loan from a group of international and local lenders.

Looks like a bridge to a capital markets issue or perhaps a syndicated loan.