Saud AlGosaibi Resigns from Board of Saudi Re

25 November 2009 the Saudi Company for Reinsurance (Saudi Re) informed the Saudi Stock Exchange (Tadawwul) that Saud Abdul Aziz AlGosaibi had resigned as a director in view of his existing commitments.

He was one of the members of the founding committee of the company and one of the original members of the board.  The company was founded on 17 May 2008

Presumably related to the ongoing debt restructuring.

Saud is a board member of The International Banking Corporation (though since the bank is under Central Bank of Bahrain Administration, the Board no longer has any legal powers to commit TIBC).

Dubai Fallout Continues

GIB Bahrain postpones its US$4 Billion EMTN program.

Markets continue to react adversely - jump in Credit Default Swap spreads for GCC with Dubai leading the way reportedly in the 500's.

And 'Amm Ahmed tries to calm the markets.  So far the market isn't buying it. 

Earlier posts are here, here  with some in-depth comments here.

Eid Mubarak

عيد مبارك

 وكل عام وأنتم بخير

Official Press Release Re Dubai World Restructuring

Here's the link.

More Aftershocks from Dubai Debt Standstill Announcement

In case you missed it.

And a press report on market reaction outside the GCC.  As AA modestly notes, predicted much earlier here, though frankly one didn't need that large a crystal ball to see this coming.

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.
   

Global MENA Financial Assets LSE Announcement on AlFajer

Here's Global MENA Financial Assets announcement on the proposed debt for equity swap with Global Investment House ("GIH").

From the announcement, it seems that AlFajer isn't doing well right now.  However, GMFA's directors appear to believe it is a company with a lot of potential.   Or at least perhaps more potential than GIH.

Two paragraphs in the LSE release caught my eye.  Maybe they will catch yours as well.  Blue italics are courtesy of AA.

Taking the two statements at face value, it would seem that the Directors of GMFA who include Ms. Maha Al-Ghunaim, CEO of Global Investment House (though of course she may be a dissenting board member on this view) have a rather dim view of the recoverability of amounts due from Global.

1. "The agreed consideration will be the waiver of amounts owing from Global to GMFA under the Islamic finance contracts entered into between GMFA and Global (the "Global Financing Contracts"). As a result, the Company's exposure to Global under the Global Financing Contracts will be entirely eliminated. The Directors believe that this would be a very positive outcome given concerns over the recoverability of these amounts."
2. "As at 31 March 2009, KD48.6 million ($170.1 million), representing approximately 95.7 per cent. of the Al Fajer shareholders' gross assets was invested in short term assets and money market instruments. Due to the turmoil that has impacted financial markets recently, Al Fajer faces counter-party risk in relation to some of these investments. Al Fajer has made a provision of KD2.5 million ($8.9 million) in respect of these investments in its 31 March 2009 financial statements. As at 30 September 2009 approximately KD20 million ($69.9 million) of Al Fajer's investments were subject to a freeze on redemption. Since this time, approximately KD0.58 million ($2.0 million) has been received and the balance is currently in the process of being restructured."
   

Global Investment House Proposes Asset Swap to Global MENA Financial Assets

AlQabas reports that Global Investment House ("GIH") has proposed to swap its 20% share in Fajr Reinsurance Company as settlement of amounts owed to Global MENA Financial Assets.

Two earlier posts here and here.  Others can be accessed via the labels Global Investment House and GMFA.

I'm still a bit unclear on how/why GIH's creditors are tolerating the settlement of Global's obligations to a related party (Global owns roughly 30% of Global MENA Financial Assets) in full and without any rescheduling of obligations.  

Perhaps, it's that the amount is minor (US$40 or so million) in the context of Global's total rescheduling.  Creditors do seem to have agreed to GIH paying off its existing bonds (KD89.5 million - US$313.5 million) at their maturity dates.

I'm guessing the argument is that failure to settle these obligations might create potential legal problems that  would potentially upset the  KD500 million restructuring.  Or that it will be impossible to get the "widows and orphans" who hold these instruments to agree.

If you're wondering, no, AA doesn't actually think that widows and orphans hold these obligations.

The Investment Dar - Legal Suit Update: Investment Dar Bank and Aref

More from AlQabas.

Investment Dar announces following results of legal actions on 24 November:

1. Bahrain:  The Bahrain Court (presumably Court of Appeals though not specified) has ruled in TID's favor and lifted the legal freeze on its assets in Bahrain, including those all important (from a monetary standpoint) shares in Bank of Bahrain and Kuwait.
2. Kuwait:  TID noted that the judgment in Aref Investment Company's favor was issued by the Court of First Instance and the mere lodging of an appeal (to the Court of Appeals) would stay the judgment.

There are two interesting points to note:

1. Investment Dar Bank Bahrain is listed by Investment Dar Kuwait as an affiliate/subsidiary.  And there was earlier speculation in the Kuwaiti press about the rumored resignation of one of Investment Dar Bank's directors.  Earlier post here.  It is highly uncommon for a subsidiary/affiliate to sue a parent.
2. As I commented earlier, the existence of the Aref lawsuit is not helpful to the restructuring process.   Bankers don't like the threat of lawsuits hanging over obligors.

For more on TID use the label: The Investment Dar.

Dubai US$5 Billion Debt Sales - Less Than Meets the Eye and An Explanation for the Restructuring at Dubai World

Two stories came out today with contradictory themes:

1. The first was that Dubai had successfully sold US$5 billion in bonds from the Second Tranche of its US$20 billion program.  
2. The second was that Dubai announced the appointment of a Chief Restructuring Officer at Dubai World and more importantly asked creditors for a payment standstill until May 2010.

The explanation for this dissonance is in an article in Thursday's The National (Abu Dhabi).

It seems that the US$5 billion sale was actually US$2 billion in cash now with the promise to buy the remaining US$3 billion over the next year.  

US$ 2 billion is not enough to address the Emirate's  near term cash flow needsd - payments to suppliers and debt maturities, including  an AED12.85 billion Sukuk (US$3.5 billion bond) issued by Nakheel. 

So the Emirate was left with no option but to ask for a six-month debt repayment standstill.  

Looking behind this, what are the conclusions we should draw.

1. As I posted earlier and as The National confirms, this is an Abu Dhabi Inc. deal.  It is not a private sector non governmental deal.  
2. Despite attempts by Dubai to spin the bond sale as proof of access to the market, the Emirate  has only limited access.  If it did, it would have raised more money and not needed to tap Abu Dhabi again.  Today's announcement is likely to further restrict access.  
   
3. Abu Dhabi is still supporting Dubai but extending the time over which the cash is infused.  This presumably is to put pressure on Shaikh Mohammad to make some real changes. Until just recently Dubai was talking of raising the full US$10 billion of Tranche 2.
4. It is also a signal to the market - to other creditors - that Abu Dhabi is not necessarily the lender of last resort for Dubai.
   
5. The sudden dismissal earlier this week of Dr. Sulayman at DIFC and the replacements at the IFD are probably related.  And perhaps preparation for today's bad news.  Change that hopefully creditors will believe in.  New sober faces.  The guys who will use both sides of the Xerox paper.
   
6. Expect to see more evidence of a fundamental change in Dubai's strategy.  The new CRO at Dubai World is just the first step in this direction.
7. The standstill request is going to send shockwaves through the financial markets. Look for a reaction at the Dubai Exchange and some spillover elsewhere in the GCC. 
8. The credit markets - already struggling with Saad, AlGosaibi, The Investment Dar, Awal, The International Banking Corporation, Global Investment House - are likely to react negatively.   Not just foreign lenders and investors but also regional ones.  Spreads on Dubai Credit Default Swaps are going to increase.  Banks and bond investors are going to become more cautious across the region.   
   
9. As a result, Dubai's market access is going to be reduced.  It is going to have to focus primarily on restructuring its existing debt.  New financing, if any, is likely to be relatively modest compared to the past.  
10. This will have a direct impact on the local economy which was largely fueled by  an intense multiplier effect of a series of transactions of apparent (and note that is a deliberate word) increases in value - but whose primary basis was debt.  
    
11. Even Aabar may be impacted.  It could wind up paying more for the refinancing for its recently announced six month US$1.625 billion club loan.
    

The announcement seems to have been timed  to the Eid holiday - no doubt in the hopes that some of the shock will dissipate before markets begin trading again next Monday.

There will be more to come.  And the prognosis is not for good news.

AlGosaibi/Saad: Gold Shipments

A couple of interesting reports on gold shipments involving the Saad and AlGosaibi Groups as well as their banks. 

Here and here.

This may be the start of the explanation where the missing money went.

More Problems in Dubai Inc - Dubai World Restructuring & Debt Standstill

Gulf News reports that the Dubai Government has announced the appointment of a Chief Restructuring Officer for Dubai World (Aidan Birkett of Deloitte).

A bit further down is the more depressing news:  Dubai World is asking for a standstill on debt repayments until 31 May 2010.

Here's Khaleej Times report.

Just what is it they're humming down there?

UAE and Bahrain Rulers Join Forces to Combat Sand Shortage

26 November marks the last official day of Saudi sand exports to Bahrain.

As of tomorrow, there will be an official sand drought in Bahrain.

As noted in an earlier report, the Nass Company has already begun importing sand from Oman.

I was trying to think of a funny spin to put on this.  But it is a serious problem and steps are being taking to resolve it.

AA will, however, keep his eye on Saudi exploration to discover new sand reserves.

Earlier posts can be found through the use of the label "sand".

Learning to Let Go

They say that the ability to leave one's work at one's desk is the key to a happy life. 

Seems Mr. Pinto described in the article as a "financial compliance officer" was able to do just that on his lunch hours.

Tie Your Camel First, Then Trust in God - Part IV Or Not Exactly the Right Sort of Advertisement of Professional Skills

From the Gulf Daily News.

Dubai Raises US$5 Billion from "Private Sector" - Or Did It?

You've probably seen the news that Dubai raised US$5 billion in the second tranche of its US$20 billion bond program.

Much is being made of the fact that it secured funding this time from the "private sector" and didn't have to rely on help from the Emirate of Abu Dhabi.

Last time I looked the majority owner of both National Bank of Abu Dhabi and AlHilal Bank was the ADIC (Abu Dhabi Investment Council).

Isn't this pretty much what happened with Tranche #1?

Abu Dhabi didn't actually directly  purchase the bonds from Dubai.  The Central Bank of the UAE did (the first US$10 billion.)  Of course, with money given it by Abu Dhabi.

To characterize Tranche 2 as a non Abu Dhabi Government private sector deal is a bit of a stretch.  Well, maybe more than a bit.

And when you think about it, if you're Abu Dhabi, isn't it better to have the CBUAE or NBAD/AlHillal fronting your money?  It's a lot easier for a Sheikh Mohammed to stiff a brother ruler than it is the central bank or two financial institutions.

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.

Bahrain Islamic Bank Denies Market Rumor That Investment Dar Intends to Sell Its Shares to Repay Debts

Today Bahrain Islamic Bank issued a statement to the Bahrain Stock Exchange regarding a market rumor that The Investment Dar intended to sell its shareholding interests in Bahrain Islamic as part of its settlement of existing debts.

BIsB stated it had contacted TID and TID had denied.

BSE announcement here in Arabic.

Aref Announces KD12.6 Million Judgement in Its Favor Against The Investment Dar - Investment Dar Replies

Aref Investment Company issued an announcement on the Kuwait Stock Exchange that the court had ruled in its favor in its case against TID and awarded it KD12,644,771 (US$44,256,699).

[9:33:4]  ِ.صدور حكم لصالح مجموعة عارف الاستثمارية ‏

يعلن سوق الكويت للاوراق المالية بانه ورد الينا الان من شركة مجموعة ‏

عارف الاستثمارية بانه تم صدور حكم لصالح الشركة فى الدعوى رقم ‏

ِ2009/47000 تجاري كلي 9 ،ويفيد الحكم بالزام المدعي عليها (دار الاستثمار)‏

بان تؤدي للمدعية (مجموعة عارف الاستثمارية) مبلغ وقدره 12,644,771 د.ك ‏

والزمتها بالمصاريف .‏

وعليه سوف تعاد الشركة الى التداول بعد عشر دقائق من نزول الاعلان .‏

And TID issued its own KSE announcement in reply:  this is only the first round (first level court) and that they will lodge an appeal with the Court of Appeals.  By lodging an appeal, TID will stay enforcement.

[12:25:40]  ِ.ايضاح من دار الاستثمار بخصوص الحكم الصادر ضد الشركة ‏

يعلن سوق الكويت للاوراق المالية ،بان شركة دار الاستثمار افادت بخصوص ‏

الاعلان المتعلق بالحكم الصادر فى الدعوى رقم 2900/4700 ت.ك/ 9 ‏

المقامة من شركة مجموعة عارف الاستثمارية ضد شركة دار الاستثمار ،

افادت الشركة بان ذلك الحكم هو مجرد حكم ابتدائي صادر من محكمة اول ‏

درجة وغير قابل للتنفيذ اذ ان حجيته مؤقتة وتزول بمجرد الطعن عليه ‏

بالاسئناف ،حيث ستقوم شركة دار الاستثمار باسئناف الحكم سيما وان ذلك ‏

الحكم لم ينظر دعواها الفرعية المرتبطة بهذه الدعوى .‏

وافادت الشركة بانها سوف تقوم بموافاة ادارة السوق باى مستجدات مستقبلية ‏

بهذا الخصوص .‏

Coming on the heels of the report of less than a brilliant meeting Tuesday by the Creditors' Co-Ordinating Committee, this is another bit of bad news for TID as it will embolden other creditors in the "no" camp.

The Investment Dar - Dissension in Creditor Group?

AlQabas has a fairly negative report on this Tuesday's meeting of the Creditors' Co-Ordinating Committee with lenders.   

Here's a quick recap for those who don't read Arabic, plus a few opinions.

1. The restructuring plan is a five year term with increasing principal repayments:  6% in the first year, 10% in the second, 12% in the third year.  There also seems to be some accommodation to be made to small creditors, though the nature of that arrangement is not specified.  AA:  This leaves 72% of the loan to be repaid in the last two years.  Fairly typical in a difficult situation.  Banks structure a deal to restore the loan to performing status - those all important interest payments with a bit of principal reduction - in the near term.   After a couple of years of the borrower making those (easy) contractual repayments, a restructured loan can be considered performing and no longer need be reported in IFRS-based financials as restructured.  And, perhaps more important, as long as contractual interest and principal payments  aren't past due (usually 90 days), the loan is performing from a regulatory standpoint. No need for provisions or non accrual.  So with a  repayment schedule like this, the hope is that things will work out  in the future (a miracle).  Or failing that  those later maturities can be extended later.  Another benefit is that loan officers can present a five year restructuring to  credit committees.  Both can then pretend the loan tenor is only five years, when it may really need to be seven or more.   Today everyone can be happy.   The future day of reckoning  hopefully will be the problem of some other chap at one's bank.   In other words push the difficult bits of the problem to the future.  Extend and pretend.  Or if you're an "Islamic" banker, delay and pray.   I'm guessing the "deal" for small creditors is designed to secure more positive votes for the  restructuring proposal rather than a sudden burst of conscience. 
   
2. The plan is to get the approval of 66% of the creditors to declare effectiveness.  Legal advisors to some creditors are quoted as saying that the Committee Spokesman is either ignorant of or ignoring the law.  100% of creditors need to sign up.  If 100%  don't sign, then those who have not agreed remain free to pursue legal action.  AA:  Usually by now, especially in a difficult situation, banks have decided that their best course of action is to "go along" even if they don't believe.  At this point usually there are some small creditors looking to get bought out by refusing to vote yes.  The absence of a Chapter 11-like legally enforceable cramdown on dissenting creditors makes this a viable strategy.   100% is required for the deal to proceed.  The small creditor hopes that  if he is difficult enough, the bigger lenders with much more at stake will want to avoid recognizing a big loss, and so  will buy him out.  But  I think there is more going on.  What I think we're seeing here - assuming this article is correct - is that there is a significant group of creditors (at least 34%?) who don't want this deal.  That view is bolstered by the article mentioning two lenders - one with claims of KD20 million (US$ 70 million) and another with KD30 million (US$105 million) who are in the "no" camp.  An indication that major lenders not just small ones are opposed.  You'll remember (if you read this blog) my earlier comment about Wakala transactions perhaps being "outside" a rescheduling as they are "trust" transactions not deposits.  Perhaps, these lenders hold such obligations and feel confident of a favorable legal outcome.
3. The article also states that a large number of attendees at the creditors meeting (the word "aghlabiya" is used) complained about a long-winded boring presentation and useless details in the presentation of the plan.  So much so that they are reportedly going to ask for  detailed information in writing so they can study.  AA:  Usually these meetings turn out to be mini circuses (minus the bread) with lots of lenders speaking, many sadly who have little idea about banking or law.  And many with less than helpful ideas.  It is no fun being the chairman of such a meeting.  Again there appears to be more going on.  What I'm taking away from this comment is that  there remain substantial differences among the lenders about the way forward.  And if lenders lack confidence that the Co-ordinating Committee is up to the job, that is not a recipe for progress. 
   

Taking the article at face value, I would expect the deadline is going to have to be moved into next year.  Lenders apparently still need to be persuaded that this is the best deal and that failure to accept it means they will lose more than if they sign up.  If by now they are not convinced, a lot more work will need to be done to persuade them.  With upcoming holidays, not much chance of making the 23 December deadline.  

TID has yet to release its 2008 fiscal report.  Each day longer it is still in the water, the harder it will be for it to restart its engines and earn enough to pay banks back.  And even if it does,  it may be left fundamentally wounded by this delay.  While banks have a responsibility to their stakeholders to get their money back, they also have a responsibility to the borrower not to needlessly damage it.

We may be getting near the time to consider rescheduling under the Financial Stability Law. 

The Investment Dar - Apparent Good News in the Noor Investment Co Lawsuit

AlQabas also reports that TID has issued a press release (not yet on their website) that they Court of Appeals has ruled in TID's favor.

Noor had earlier filed a case charging TID's chief executive  (Adnan Musallam) and executive management with criminal behavior.  The Appeals Court has reportedly upheld the judgment of the lower court which rejected Noor's case.

It seems that now TID will return the favor by suing Noor's management for raising ibelous and untrue  accusations and sue for damages to their reputation.

British Bankers Ask UK Govt for Help on Saad and AlGosaibi

You've probably seen today's Financial Times.  

Thomas Harris, Chairman of the British Bankers Association Trade Policy Committee, reportedly wrote to the UK Minister for Trade, Lord Davies, urging him to push the Saudi authorities to help foreign banks (read "British banks".  This is the BBA after all)  resolve their problems with both Saad and AHAB.

Frank Kane has more details on the letter in Abu Dhabi's The National.  And he is a bit less gentle.  The FT has more to protect that The National.

Clearly, the leak of this letter is designed to put pressure on the Saudi Government.

First reaction.

It's fairly typical for bankers who have gotten themselves into trouble to seek  to identify those responsible for their predicament.  For some strange reason, they rarely look close to home.  Rather they blame regulators, accountants, the weatherman, and the chap standing on the corner for their misfortune.   Equally, it's typical for them to look for governments, central banks, and regulators to extricate them  - usually justified as needed to protect the good name of the country and future business. We're seeing a bit of the latter in this letter:  a  not so subtle threat that if the authorities fail to "assume responsibility", then future business will suffer.   Not a highly credible threat  as bankers  are known as a group to be congenitally pre-disposed to ADD.

But added to that normal pattern of behavior are a few other complicating factors:

1. The side deal cut to favor local banks.  A Saudi preferential tradition so it seems if the stories about Redec are correct.
2. Lenders' knowledge that the Saudi legal system presents formidable obstacles to redress through the courts, particularly for foreign lenders.  It's remarkable how laser-like the focus is on legal matters after the problem has occurred.  It's not just punters in the equity market who are  often irrationally exuberant.  Many times it's those presumedly sober pin-striped bankers.
   
3. As well, their knowledge that securing full and frank information will be difficult.
4. Both borrowers' apparent attempts to use the above and their financial difficulties to settle their obligations for pennies on the dollar.  
   

Certainly, a difficult situation, particularly when the sums involved are large.  And clearly they are.  The BBA is not writing letters to Lord Davies because the sums are modest.

One wonders (or at least AA does) how many times a person or a banker has to get hit in the head before he or she catches on.

Commercial banking is a fairly simple business.  A key element is understanding the market one is doing business or proposes to do business in - well before one looks at the credit of an individual obligor.  If there are  fundamental problems with the law itself, the enforcement mechanism, business practices, transparency etc,   there is a problem with the market.  If that is the case, one adjusts one's lending strategy - amounts, terms, collateral (offshore of course) - or simply does not lend. 

New Feature At Suq Al Mal: Links to Blogs and Other Sites

I've started the process of adding links to other websites, which I think are of interest/useful.  These are on the right hand side of the page right below "What is Suq Al Mal?"

If anyone out there has any suggestions for additional listings, post a comment.

I'll take a look at the website you recommend.  If I think it's worthwhile, I'll include it.

Tie Your Camel First, Then Trust in God - Success - Part III

Tamweel has refused to take delivery of villas in AlMazaya Development due to lack of infrastructure.

There's nothing like a recession to spark a bit of common sense in business.

Previous posts here and here.

UK Firms Providing Involuntary Supplier Credit in UAE (Dubai)

GBP 200 million.

UK Government asked to help earlier.

Dues down by 50% from May.

Who Else Will Miss the Special Security Bus at Doha Airport?

Besides AA?

It's nice being special.

I wonder if Ambassador LeBaron could check out the in-flight entertainment on Qataria, particularly the selection of songs from Kawkab AlSharq.  If there isn't a TSA regulation on this, there should be.

And You Thought You Had a Bad Day: Wait Till You Hear the MD at Shabka Holding Kuwait

Nayef AlEnizi who recently acquired a majority of Shabka's shares and is MD and Board Member described the company to AlQabas  using the phrase "la wujud laha nihaiyan".  "No existence to it in the final analysis".

If that wasn't enough:

1. The company has no office.
2. The new board can't locate records or financial statements.
3. The company doesn't have a finance director.
4. The new board isn't sure what the assets or liabilities are.  (See #2 above)
   
5. The Ministry of Commerce is delaying issuing certificates to the new board members,
   

And if that weren't enough, he expects that the company will lose the suit brought against it by International Leasing.

And I thought the chap at Safat Global had a sad story to tell.  This one tops Badr's by a kilometer or two.

As you recall, trading in Shabka shares is suspended for being late with its financials as well as not paying its KSE listing fees.

Oman to the Rescue: Sand Shipments Arriving in Bahrain - Formation of OSEC Near?

Picture in Public Domain as Per WikiCommons

Good News!

While intensive exploration for sand in Saudi Arabia continues, Bahrain has begun importing Omani sand.

And it seems testing other countries' sand to determine if they have the quality required.

Can the formation of OSEC (the Organization of Sand Exporting Countries) be far distant?

Background on critical sand shortage here.

AA will continue to follow this story.  Stay tuned.

Three Kuwaiti Banks Take Legal Action in Saudi Against Saad and AlGosaibi

AlQabas reports that three Kuwaiti banks have engaged Saudi legal counsel to commence legal action in Saudi Arabia against AHAB (AlGosaibi) and Saad (Maan AlSanea).

This was after negotiations in which the borrowers demanded "exorbitant" reductions in debt.  The banks felt they have a strong legal position and were unwilling to settle their debts for less than the deal given the Saudi banks especially since they believe that the borrowers can repay more than what they have offered.  (AlQabas did not identify the three banks).

You'll recall the earlier press reports that Saad and AlGosaibi were offering to settle for 8.6% of their debts.   Here's an earlier post.  

I suspect this is the first reaction to that offer.  And a way to ratchet up the negotiating heat on the two borrowers.

As for the favorable side deal cut for the Saudi banks, a similar thing was done long ago during the Redec rescheduling (Ghaith Pharaon) - where some Saudi Government receivables were used to reduce Saudi bank loans.

EmiratesNBD Exposure to AlGosaibi and Saad - Around US$350 Million

Khaleej Times reports.

And not a big deal for EmiratesNBD in terms of any real harm.

At 30 September 2009, the Bank had AED 32. 3 billion (US$8.8 billion) in shareholders' funds.  And had earned AED 3.2 billion (US$897 million) for the first nine months of 2009 - even after increasing loan loss provisions 163% to AED 2.0 billion from AED 0.7 billion in the corresponding period in 2008 (Note 7).

Aref Investment Group 3Q09 Financials - Summary in Arabic

Also for those with an interest.  Source again is the Kuwait Stock Exchange.

[11/18/2009-8:25:50]  بلغت (خسارة)(عارف) (55) مليون د.ك لل9 أشهر المنتهية في 30-09-09 ‏
يعلن سوق الكويت للأوراق المالية أن شركة مجموعة عارف الاستثمارية (عارف)‏
افادت بانها حصلت على موافقة بنك الكويت المركزي على بياناتها
المالية المرحلية للفترة المنتهية في 30-09-09 أمس الثلاثاء الموافق
ِ17-11-2009 ، وفقا لما يلي:‏
البند       ال3 أشهر المنتهية في 30-09-09   ال9 أشهر المنتهية في 30-09-09‏
الربح(خسارة)(د.ك)                (17.071.117)        (55.091.556)‏
ربحية(خسارة)السهم (فلس كويتي)      (16)                  (52)‏
اجمالي الموجودات المتداولة                -               330.465.773‏
اجمالي الموجودات                         -               780.859.321‏
اجمالي المطلوبات المتداولة               -                366.552.204‏
اجمالي المطلوبات                         -                 491.865.414‏
ِ اجمالي حقوق المساهمين                -                  245.081.571‏
بلغ اجمالي الايرادات من التعاملات مع الاطراف ذات الصلة مبلغ 2.918.745 د.ك
بلغ اجمالي المصروفات من التعاملات مع الاطراف ذات الصلة مبلغ 5.150.301 د.ك
ِ2- الفترات المقارنة :‏
البند       ال3 اشهر المنتهية فى 30-09-08  ال9 اشهر المنتهية فى 30-09-08‏
الربح (د.ك)                   12.141.478            39.627.332‏
ربحية السهم (د.ك)                11                          50‏
اجمالي الموجودات المتداولة        -                     323.139.772‏
اجمالي الموجودات                 -                      752.925.572‏
اجمالي المطلوبات المتداولة        -                      220.832.086‏
اجمالي المطلوبات                -                        379.557.786‏
اجمالي حقوق المساهمين         -                        329.508.905‏
وعليه سوف تعاد الشركة للتداول اعتبارا من اليوم الاربعاء الموافق 18-11-09.‏

AlMadar 30 September 2009 Summary Financials - Arabic

Apparently there's some interest out there in AlMadar's interims.  Here they are in Arabic.  Source Kuwait Stock Exchange website.


[11/17/2009-7:49:12]  
بلغت (خسارة)(مدار) (8.6) مليون د.ك لل9 أشهر المنتهية في 30-09-09 ‏
يعلن سوق الكويت للأوراق المالية أن شركة المدار للتمويل والاستثمار (مدار)‏
افادت بانها حصلت على موافقة بنك الكويت المركزي على بياناتها
المالية المرحلية للفترة المنتهية في 30-09-09 يوم الاثنين الموافق
ِ16-11-2009 ، وفقا لما يلي:‏
البند       ال3 أشهر المنتهية في 30-09-09   ال9 أشهر المنتهية في 30-09-09‏
الربح(خسارة)(د.ك)                (1.405.762)        (8.656.853)‏
ربحية(خسارة)السهم (فلس كويتي)     (3.95)               (24.34)‏
اجمالي الموجودات المتداولة                -              81.874.170‏
اجمالي الموجودات                         -               129.784.215‏
اجمالي المطلوبات المتداولة               -                77.910.681‏
اجمالي المطلوبات                         -                77.854.004‏
ِ اجمالي حقوق المساهمين                -                47.849.080‏
بلغ اجمالي الايرادات من التعاملات مع الاطراف ذات الصلة مبلغ(1.033.531)د.ك
بلغ اجمالي المصروفات من التعاملات مع الاطراف ذات الصلة مبلغ 414.205 د.ك
ِ2- الفترات المقارنة :‏
البند       ال3 اشهر المنتهية فى 30-09-08  ال9 اشهر المنتهية فى 30-09-08‏
الربح (د.ك)                   (1.417.870)            167.786‏
ربحية السهم (د.ك)                (3.99)                   0.47‏
اجمالي الموجودات المتداولة        -                     125.754.262‏
اجمالي الموجودات                 -                      176.248.835‏
اجمالي المطلوبات المتداولة        -                      91.821.680‏
اجمالي المطلوبات                -                        107.383.520‏
اجمالي حقوق المساهمين         -                        67.218.673‏
وعليه سوف تعاد الشركة الى التداول اليوم الثلاثاء الموافق 17-11-2009 .‏

Central Bank of Kuwait Requires Local Banks to Prepare Estimated 2010 Financials

AlQabas reports that the CBK has issued an order to local banks that they must prepare projected financials for 2010 shortly after the end of Fiscal 2009.  These are to be supplied within the deadline for the submission of the 2009 financials.

Given the financial crisis in 2008 and the impact on the banks, the CBK had not required projected financials for 2009.

Other than the obvious motive of instilling greater discipline in banks' planning, the CBK can use these reports to gauge current bank sentiment to business in 2010, the scope of their planned activities and thus the likely impact on the economy. 

Useful Research Tools & Sources on Macro Issues

There are a variety of useful studies and reports available on macro issues.

First the Worldbank's Reports on Observance of Standards ("ROSCs") which cover a variety of topics: Corporate Governance, Accounting and Auditing, Banking Supervision, and eight others.  No coverage on the GCC yet for Accounting and Auditing.  Nor on Banking Supervision. 

There is one Corporate Governance ROSC on Saudi issued this February.  The Central Bank of Kuwait has announced that the ROSC team will be in Kuwait this December.

ROSCs also available through the IMF portal here.

Second, the IMF's Financial Sector Assessment Program ("FSAP") which issues Financial System Stability Assessments ("FSSAs") available here.

No Money Laundering in Kuwait!

So claims Kuwaiti Minister of Commerce Ahmad Harun.

Quite a remarkable achievement.

Sort of like the humming in Dubai.

Of course, there's always someone with a different view.

Jubailat, Hojjair, and Karawah - Bahrain

Remembered here.

Soon remembered there one hopes.

It's understandable though I suppose how in a big country like Bahrain with its teeming millions one might lose a village or two.  And that might explain the slow delivery of the letters to the CIO.

Awal Bank - Analysis of 3Q08 and 4Q08 Financials

Summary

Based on limited financial information available, it appears that there was a severe reduction of the liquidity in Awal's balance sheet in 4Q08.  Without more financial reports (only 3Q08 and 4Q08 are available on Awal's website) and a full set of financials including the notes (only summaries are posted in public area of the website), it's impossible to determine what caused this reduction in liquidity.  

It's also equally difficult to determine if Awal's problems in 2009 (leading to Administration) were the result of illiquidity (reasonably good assets but illiquid so they could not be converted to pay off short term creditors) or insolvency (a decline in asset values significantly below carrying value).  As outlined below, my initial view is that it was the latter.    

Background

On 30 July 2009 the Central Bank of Bahrain announced that pursuant to Article 136 of the Central Bank Law, it had placed Awal Bank under administration.  Later on 9 August it announced the appointment of Charles Russell LLP as Administrator.

The Central Bank of Bahrain and Financial Institutions Law of 2006  ("CBBFIL") provides that three cases under which the CBB may place a licensee under Administration.:

1. "If the Licensee becomes insolvent or appears most likely to be insolvent.  
2.  If the license is amended or cancelled pursuant to the provisions of items (1) and (3) of paragraph (c) of Article (48) of this law.  
3. If the Licensee continued to provide regulated services which resulted in inflicting damages to financial services industry in the Kingdom." 

Presumably, the reason for the CBB's action was the first.  But note that Article 133 of the CBBFIL of 2006 defines insolvency as "A Licensee is deemed to be insolvent if his financial position becomes unstable and he stops paying his due debts other than administrative fines and whatever type of tax."

Financial Analysis

Since Awal was not traded on any exchange, it is not required to publish its full financials.  It did, however, release financial highlights: balance sheet, income statement, cashflow statement and statement of changes in equity - all consolidated.  3Q08 and 4Q08 reports are here.

Without detailed footnotes, the following analysis is somewhat limited.  Admittedly, it raises more questions than it answers.

Let's focus on the balance sheet changes between 30 September 2008 and 31 December 2008.  This would be the first critical period after the financial crisis hit but before the full force was felt.

1. Between these two periods, total assets declined US$1.8 billion dollars. 
2. Equity is only US$25 million lower between 3Q and 4Q08 (the change in YTD net income between the two periods). Therefore, we can say that in effect liabilities accounted for the entire change.
   
3. Every liability category declined:  long term debt US$779 million, due to non banks US$605 million, repos US$227 million (probably greater haircuts by counterparties), due to banks US$141 million, and other liabilities US$46 million. 
   
4. This reduction of liabilities (a negative cashflow) was funded by reductions in assets.   Cash and cash equivalents decreased US$1.429 billion  (from US$2.2 billion to US$785 million).  loans US$630 million, equities and options US$366 million, Funds US$315 million, and interest bearing securities US$49 million.  Partially offsetting these were increases of  US$841 million in Investment Properties and US$125 million Other Assets.

What does this all mean?

Without notes to the financials it's hard to tell, but here are a few observations.

1. A substantial outflow of cash --19.25% of the entire balance sheet -- occurred during the last quarter of 2008.
2. Investment properties (illiquid) increased while more liquid instruments (at least presumably more liquid) equities and options as well as funds declined.
3. Due to non banks declined roughly 45%.  Due to banks only 6%.  Were these contractual maturities?  Or did non banks have a greater insight into credit?  Or inside information?
   
4. Long term debt declined 43%.   It would be very interesting to see the notes to the financials to confirm this was a scheduled payment and not a prepayment.  LTD decreased over the year from US$2.373 billion (31 December 2007) to US$0.867 million (31 December 2008).

Conclusion

As far as the public reports I've seen, there was no payment default.  Rather Awal announced its decision to initiate debt rescheduling with its creditors.  One might expect that if there had been any sort of significant payment default, it would have become public fairly quickly.  Here's the CI downgrade and withdrawal of ratings report.  It does not mention a payment default.

That leaves a more classical balance sheet insolvency as the likely cause of Awal's problems: assets worth less than liabilities.

At 31 December 2008, Awal had US$7.6 billion in total assets supported by US$4.9 billion in liabilities and US$2.7 billion in equity.

That means a drop of at least 35% in the value of assets to reach insolvency.

The recent instruction by the Central Bank of the UAE to its banks to provide 100% for their exposure to Awal supports that view. 

As you'll recall from my earlier post on this topic, the CB UAE Governor is reported to have said that the provision requirements were in line with regional and international supervisors.  A 100% provision implies no recovery - which implies that Awal's assets are worth zero or close to zero (administrators, lawyers, and accountants always feast first on the estate of the bankrupt).

Dubai - Supplier Financing Being Pursued for Transport Projects?

Another rumor - Dubai is looking for supplier finance for transport projects.

Usually one looks for supplier finance when the usual credit sources (banks and bonds) are reluctant.

If true, not a good sign for Dubai Inc. 

But with so much debt to refinance, how do you get financing for new projects?  You lean on every source you can.

On the topic of involuntary supplier credit, you'll recall there was a very public (and very uncharacteristic) complaint by Japanese contractors about late payments on various projects in Dubai including the Metro.  Earlier SAM post.

Shakeup in Dubai Inc

Dr. Omar Sulayman is out at DIFC.

He is therefore out at Investment Corporation of Dubai ("ICD").

As are the following also out at ICD:

1. Mohammed Gergawi at Dubai Holding  (He just gave a speech this week at World Economic Forum Global Agenda Meeting in Dubai, which was optimistic to put it mildly).
   
2. Sultan Sulayem at Dubai World
3. Mohammed Al Abbar at Emaar

FT analysis here.  Khaleej Times here.

I think there are three motives:

1. Despite the "humming" you're told you can or should hear from Dubai, the financial situation is not good.
2. "New faces" to put in front of the bankers.   Sober new faces not associated with the old policy.  Guys who are going to use both sides of the Xerox paper.
   
3. Cover for Dubai Inc.  Those responsible have been dealt with. 

Markaz Kuwait: Unusual Trading in Agility Shares Prior to Annoucement of US Court Action

The sharp eyed analysts at Markaz have detected what they believe is an unusual pattern of trading in Agility shares on the KSE prior to the announcement of the US trial.

The article goes on to say that Agility issued news of the court case to the Dubai Exchange before the KSE. 

And that there have been calls to the KSE for an investigation.

Here's the report.  Arabic only.

Changes at DIFC? Bin Sulayman Out?

Rumors in the market.  Stay tuned.

Kuwait Stock Exchange - 9 Suspended Companies - Length of Delays in Financials

You'll recall that earlier the KSE suspended 13 companies.  Here's the previous post.

Four have provided their financials:

1. Aref Investment Group (Investment Company) - See post on Aref's financials here.
   
2. Aayan Leasing and Investment Company (Investment Company)
3. Al-Madar Finance and Investment Company (Investment Company)
4. Safwan Trading and Contracting (Services Company)
   

And here for the earnings of Aayan, Al-Madar and Safwan.

Looking at a  KSE announcement from 19 November, we can analyze the remaining companies by the length of delay in their financials. (You can find the text - Arabic only - as described in the previous post above.  It's the 7:59:38 post on the 19th).

First, those only past due for their 30 September 2009 financials:

1. Industrial Investments Company (Investment Company)
2. Salbookh Trading Company (Industrial Company)
3. National Ranges Company (Services Company) a/k/a "AlMadayen"
   

Second, those past due for 30 June 2009 and 30 September 2009 financials:

1. Pearl of Kuwait Real Estate Company (Real Estate)  a/k/a Lu'lu

Third, for 31 March, 30 June and 30 September 2009:

1. Safat Global Holding (Real Estate)
2. Network Holding Company (Services Company)  a/k/a "Shabka".  Shabka is also suspended for failure to pay its listing fees on the KSE for 2009-2010.
   

Fourth, for 31 December 2008 and 31 March, 30 June and 30 September 2009:

1. The Investment Dar (Investment Company)
2. International Leasing and Investment Company (Investment Company)
3. Villa Moda Life Style (Services Company)
   

Company type corresponds to KSE classification.

Clearly, the longer a firm's financials are not provided the stronger the sign of financial distress.  As mentioned before, banks and investment companies' financials must be approved by the Central Bank of Kuwait.  When there is a delay in release of a financial report for one of these parties, it often signals that the CBK and the company are having a disagreement.  That is not a sign of financial strength as the CBK does not frivolously hold up finalization of interim or annual reports.

Kuwaiti Companies Report Earnings - Aayan, Safwan, Madar

Here are the results.

First, Aayan who announced too late on the 16th to avoid being suspended.

1. Net loss of KD7.1 million for the three months ending 30 September 2009 and KD27.5 million for the nine month period.
2. Capital funds down to KD71.2 million from KD126.3 million on 30 September 2008.
3. Aayan's auditors have issued an "emphasis of matter" comment regarding the company's ability to continue as a "going concern".

Second, Madar who also announced too late on the 16th.

1. Net loss of KD1.4 million for the three months ending 30 September 2009 and KD8.7 million for the nine month period.
2. Capital funds down to KD47.8 million from KD67.2 million on 30 September 2008.

Third, Safwan who announced on the 17th.

1. Net profit of KD0.4 million for the three months ending 30 September 2009 and KD1.0 million for the nine month period.
2. Capital funds up to KD8.2 million from KD7.5 million on 30 September 2008. 

All three of these companies' shares have now resumed trading on the KSE.

Tie Your Camel First, Then Trust in God - Part II

In this article the tie your camel injunction (make sure there are utilities) applies not only to builders but also to buyers.

Previous "tie your camel" post.

A Fair Day's Wages for a Fair Day's Work - Follow-Up to Hadith Qudsi #21

A follow-up to my earlier post, two articles from GulfNews Dubai.  A bright one here and one not so bright here.

The next step is making sure the wage paid is fair.

"A fair day's-wages for a fair day's-work:" it is as just a demand as
Governed men ever made of Governing. It is the everlasting
right of man.

Thomas Carlyle

Kuwait on the Brink

Picture Copyright AlQabas Newspaper Kuwait

Friday's AlQabas first page headline - largest word "Fauda"  = Chaos.  

Most likely next we'll see a resignation by the government.    Then the Amir will call "recess".

Fish From Tubli Bay - Dead or Alive - What's the Difference?

On a fair day, one can smell the bay.  Tubli Bay that is.

Frankly I wouldn't eat a live fish caught in Tubli's "fair" waters.

What's the old saw?  Give a man a poisoned fish and he gets sick.  Teach a man to harvest poisoned fish and ....

But to the meat of the article and "bidun ta'liq":

Public Commission for the Protection of Marine Resources, Environment and Wildlife fisheries and marine resources director Jassim Al Qaseer said he had not heard of any such complaint.  But he said dead fish in Tubli Bay was "normal" due to the chemicals in the water.

"There is no need to worry because when it comes to Tubli, seeing dead fish is a normal occurrence because of the chemicals in the water," he said.  "But selling the fish to people is dangerous because it can pose serious health risks and people can get ill.  "I doubt that these people are selling the fish to the general public - it would be most probably to their friends."

UAE Central Bank Implements Basel II

Лучше поздно чем никогда

Article here.

S&P Predicts Bank Merger Activity in UAE, Kuwait and Bahrain

Article here.

The key issue is the market for corporate control.  Many local private investors would prefer to hold the majority in a "samak saghir" (small fish) than a minority position in a "huut" (whale).  And in  the merged entity there is sadly only one chairman.  And it is hard to let go of control.

Perhaps, the sting of corporate distress coupled with regulatory encouragement can do the trick.

Zain Share Price and KSE Decline - What are the Implications?

There has been a lot of analysis about the decline in Zain shares and the implications for the Kuwaiti market.  Usually along the lines of the importance of Zain's volume.  Here's one from AlphaDinar.  A good explanation of the key role played by the blue chip Zain.

What I'd like to do is look at the implications of a prolonged decline in Zain's share price and in the KSE  on local borrowing and debt service.

First an introduction to set the stage.

Anyone familiar with the term "Kuwaiti investor" also knows that this term is generally associated with the terms  "capital appreciation", "OPM",  "leverage",  and "collateral".   And only rarely with the concept "cashflow from operations".

Let's deal with these one by one.

1. Capital Appreciation - The typical Kuwaiti investor has a unique "appreciation" for the strong potential of his assets to increase in value.   Cashflow is generally a secondary consideration if at all.  The belief is that in the not-too-distant future one will be able to sell one's assets to another party at a substantial premium. A trade sale.  A primary market sale or IPO.
   
2. OPM - Other Peoples' Money - especially bank debt - is always preferable when funding investments. If something unexpectedly goes wrong, one has not committed one's own capital to the  full entry price.
   
3. Leverage - The more that one can lever one's investment the higher the IRR.   And the more one can lever one's equity into multiple investments, the richer one can become  Also, if as is typical one's investments have no appreciable cashflow,  the ability to secure additional borrowings is a lifesaver when it comes time to pay the interest on the original loans.  As you'd expect, this works really well in a rising market.  The lender believes it has extra collateral and so can extend another loan.  Local lenders  too share the appreciation of capital appreciation.   In a small overbanked market like Kuwait, it is also difficult to get new customers.  A bank grows with its existing customers - one way or another.  And what bank does not want to grow its bottom line and balance sheet?  But a key risk is overlooked:  cash funded debt is being based  primarily on paper increases in value  - which are subject to negative as well as positive investor sentiment.   
   
4. Collateral - The way to get leverage is to pledge one's assets.   And to the extent that the same asset can be used to support more than one loan the higher one's leverage.   As the asset increases in value, one gives a second lien to another hungry banker and then builds a whole new pyramid of investments. And this brings us back to another virtue of using OPM:  in the event of a problem  with an investment, the investor (borrower) can simply walk away surrendering the asset to the lender. 
   

The result is an inverted pyramid of investments fundamentally supported by growing debt.

Second, now to the analysis.

What could go wrong?

1. In 4Q07 the Central Bank of Kuwait tightened the calculation for 80% loans to deposits ratio moving from a month-end basis to a daily average basis.  (Page 36 here).  In 1Q08, in an effort to control inflation, the CBK pushed banks to lower commercial and consumer lending.  The money tap was turned to a trickle.
2. In 3Q08, the global financial crisis hit.  Foreign banks began restricting loans.  As the tide of liquidity flowed out, asset values declined.  
3. A double barreled effect.  Not only were new funds cut off.  But as asset values declined, collateral values for existing facilities eroded.  Lenders began demanding reductions in principal of loans.  And banks might demand that interest actually be paid.
   

Where to get the cash?

One turns to one's best asset.  One that actually generates cashflow.  For example, Zain.

Plan A was to try to sell off a division or two (initial focus Africa).  Sales proceeds could be dividended to "needy" shareholders. 

That didn't work out. 

So Plan B is to sell a stake to a strategic investor.  Recently Zain shareholder(s) announced the sale of 46% of existing shares to a collection of  Indian investors "Vivasi Group".   Note:  Zain is not issuing new shares to fund expansion.  Existing shareholders are cashing out to get needed cash.

The problem is with Zain's share price down to KD0.960 (Market Cap KD3.93 billion US$13.8 billion - down 50+%) Plan B gets more difficult.  Just this week, BSNL announced that it saw the need to renegotiate the price.  As you might guess, they're not offering to pay more.

The problem is further compounded because as the market drifts lower more investors' collateral is worth less.  Lower collateral cover is generally accompanied by higher banker anxiety and demands for additional collateral or cash.  This affects not just individuals but corporate entities - like the investment companies.  Or the "industrial" companies in the country many of whom only had profitable years in the past because of their investment portfolios.   Let me emphasize that point to make sure it's clear:  their actual business operations did not turn a profit.  They only made a profit because of   (paper) investment income.

With that as background the import of the decline in Zain and the KSE is outlined in stark fashion.

Aref Investment Group Kuwait Releases 3Q09 Financials - KD55.1 Million Loss for First Nine Months 2009

You'll recall that Aref was one of the firms whose trading was suspended this Monday for failure to file its 3Q09 financial report with the KSE.

On 18th November it announced its results:

1. KD17.1 million loss for 3Q09 and KD55.1 million loss for the first nine months of 2009.  In 2008 those figures were respectively KD12.1 million profit and KD39.6 million profit.
2. Total shareholders' equity stood at KD245.1 million versus KD329.5 million at 30 September 2008.
   

From the wording of the KSE announcement, it's clear that Central Bank of Kuwait approval was holding up release of the financials.

You can find the KSE announcement on its Arabic language page under AlBayanat AlTarikhiyya and then under 'Ilanaat AlSuq AlTarikhiyya for 18 November 2009.  There's a problem with the English page formatting.  In any case the announcements there are all Arabic language.  There are no English translations.

BTW Aref is now trading again.  

Reported AlGosaibi Settlement Offer to Creditors: 11.4%

At a meeting with creditors earlier this month, AHAB reportedly offered creditors SAR 3 billion (US$ 800 million) of assets against debts of some SAR 26.3 billion (US$7.0 billion).

The Maktoob article above refers to an effective 8.6 cents on the dollar offer.   A similar article from AlQabas.

I'm at a loss how this translates into 8.6 cents on the dollar.  When I divide SAR3 billion by SAR $26.3 billion, I  get 11.4% not 8.6% - unless there are a range of offers with 8.6 the lowest.

In any case this is probably just the first round of negotiations.

AHAB probably figured out that their creditors weren't going to bid them down.  So what better place to start than low.

And starting at this level may well frame the negotiations to their advantage by shocking creditor expectations for recovery downwards.  If creditors now get 22% or 23%, they will have doubled their recovery. 

UAE Central Bank: US$2.9 Billion in Exposure by UAE Banks to Saad and AlGosaibi

The Gulf News (Dubai) reports that CB UAE has disclosed that 13 national banks and 7 foreign bank branches in the UAE (20 banks in total) have exposure of US$2.9 billion to the AHAB and Saad Groups.

The article also reveals the identity of the bank that asked for and received a court freeze on Saad Group assets in the UAE:  Abu Dhabi Commercial Bank, which has reported exposure to both AHAB and Saad at some US$609 million.

Qatar Income Tax Clarification: Tax Rate Reduction (Foreigners) But New Tax on Local Firms

Qatari authorities have issued another clarification.

What seems to be happening is that there are two tax related initiatives:

1. Imposition of an income tax on both local and foreign companies at a rate of 10%
2. Tax relief for foreign corporations who previously were subject to 10-35% tax rate.  In effect a tax equalization so that companies both foreign and domestic pay the same rates.
   

Unless there's another clarification, this appears to be the final story.

Investment Dar Bank Website Now Password Protected - Adeem Investment Company Website Down for Maintenance/Upgrade

From time to time I like to follow up on my earlier posts to see if there have been any developments. 

So I decided to check today to see if indeed Mustafa Ibrahim AlSalih had resigned his board directorships at Investment Dar Bank Bahrain and Adeem Investment Company Kuwait as had been rumored in AlQabas, a Kuwait newspaper.  For the record:  I have seen no further news confirming that press account.  One would expect that both websites would note the resignation of a board member as significant news.

Investment Dar Bank's website is now password protected.  And the previous link on The Investment Dar Kuwait's website has been removed.  The links to TID's other two banks:  Bahrain Islamic and Boubyan are, however, still there.

In an interesting coincidence Adeem Investment Company's website is also down for unscheduled maintenance so they can upgrade their systems to improve service.  

Transparency International Publishes 2009 Corruption Perceptions Index - How Did the GCC Do?

By now you've probably seen other reports on the rankings of the GCC countries in TI's 2009 CPI.  Before we turn to the numbers, a few words.

First, how does TI itself describe the CPI?

Here are their exact words:  "The Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is a "survey of surveys", based on 13 different expert and business surveys."

A few points to emphasize:

1. The second word in the name says it all.  It is a Corruption Perceptions Index.  It is the perception of the level of corruption not necessarily the reality. 
2. It is public sector corruption only.
   
3. It is based on surveys (there are a universe of 13 different surveys).  Not all surveys use the same methodology.  Not all cover the same set of countries.  Usually, countries are ranked using 5 or 6. 
   

Despite these factors, the results are set forth with apparent Cartesian precision.   New Zealand is the least corrupt with Sweden two places below.  Not three.  Not one.   Similarly, at the other end of the scale, Somalia is more corrupt than Afghanistan.  Really?  How do they get to this fine a level of distinction?  Are the same set of respondents doing business in both Somalia and Afghanistan?

I commented on this phenomenon before and so I will turn to the rankings.

GCC states CPI ranking (best to worst):  World rankings follow the country name.

1. Qatar             22
2. UAE              30
3. Oman             39
4. Bahrain          46
5. Saudi Arabia  63
   
6. Kuwait           66
   

Qatar Sovereign Bond Successful - US$7 billion + Long Tenor

Qatar's sovereign bond offering was a roaring success:

1. US$3.5 billion Maturity 2015 Margin 185bps
2. US$2.5 billion Maturity 2020 Margin 195bps
3. US$1.0 billion Maturity 2040 Margin 215bps

Note the 30 year maturity on the last tranche.

There have been some press reports which have noted that this bond is now the largest US$ bond issuance by an emerging market investor as it surpassed the US$6.1 billion in bonds issued by the PRC's Ministry of Railways back in November 2007.

But, let's look at the details of that issue to see that more than size matters with Qatar.

The PRC issue consisted of and were priced as follows:

1. US$1.2 billion 7 year bonds at 5.38% (fixed rate)
2. US$3.5 billion 10 year bonds at 5.6% (fixed rate)
3. US$1.4 billion 15 year bonds at 5.75% (also fixed)

Much longer tenors.