Wednesday 6 January 2010

Kingdom Holding Company Issues Press Release on Capital Reduction

Kingdom Holding issued a press release which  provided additional details on its proposed capital reduction as well as announcing that Amir AlWaleed was donating 180 million shares of his personal holdings of Citibank to KHC.
  1. The 180 million Citibank shares represent an immediate profit for KHC of some SAR2.24 billion (roughly US$597 million).
  2. The capital reorganization is designed to "enable KHC to distribute dividends to the Company’s shareholders".  Earlier post here, he says while patting himself on the back vigorously.
Both moves are portrayed as evidence of commitment to KHC and as steps that will enhance its borrowing capacity.

On that latter point ---

When AA labored in the DCM field, we focused on the total of shareholder funds and  the quality of the amounts therein.  We weren't really all that fussed about the balances in the individual equity accounts unless these affected our legal rights as lenders.

Reducing paid in capital and offsetting accumulated losses in retained earnings are just bookkeeping entries - moving money from account "A" to account "B" within equity.  The total amount of equity stays the same.   While it helps shareholders get dividends,  I can't see that it does anything  to strengthen the lenders' position. 

Perhaps, this move is for local banks?  Of for those "bankers" who believe in implicit guarantees?

Tuesday 5 January 2010

A Dubai Carol - Stave V - But Not Quite the End of It

"A remarkable boy! Do you know whether they've sold the prize Turkey that was hanging up there -- Not the little prize Turkey: the big one?"
The FT reports that various law firms, accountants and sundry other advisors mouths are a-water at the thought of US$100 million in fees associated with Dubai World's restructuring.

We are taking nominations for the role of "founder of the feast".  Submit your entry via a comment.

And so, as Tiny Tim observed, God Bless Us, Every One!

If not every one, then at least the successful firms who will feast on the restructuring.  Certain folks always come out ahead in restructurings.

Omani New Income Tax - Effective 1 January 2010

Rupert Bumfrey has a post on this topic.

Here are some commentaries by accounting firms.  BDO Jawad Habib (soon to change its name to just BDO).  And Deloitte.

The major change is a reduction in the rates paid by foreign owned companies, though there are some other modifications, outlined in detail in the BDO Jawad Habib piece.

Saudi CMA Approves 41% Reduction in Kingdom Holding Capital

The Saudi Capital Markets Authority has approved an approximate 41% reduction in the paid of capital of Kingdom Holding Company subject to approval by shareholders at an  Extraordinary General Meeting.  Securing shareholder approval won't be a problem as Amir AlWaleed owns 95% of KHC.

The proposal is to reduce the number of shares from 6,300,000,000 to 3,705,882,300 and the capital from SAR 63,000,000,000 (US$16,8 billion) to SAR 37,058,823,000 (US$9.9 billion).

As per information at the Saudi Stock Exchange, KHC's shareholders' equity has decreased from SAR51.2 billion (US$13.7 billion) at 31 December 2008 to SAR22.3 billion (US$5.9 billion) at 30 September 2009.

A bit of hopefully informed speculation:  The reduction is an accounting exercise designed to eliminate negative retained earnings.  KHC will move roughly SAR 26 billion from the paid in capital account to the retained earnings account.   The transaction has no economic effect.  It is designed to have a legal effect.

Why would KHC want or need  to do this?

While I don't know the corporate law in Saudi, I assume that there are restrictions on the payment of dividends by companies with negative retained earnings.  As well, it could be a matter of optics.  It's hard to sell shares in a company with negative retained earnings - the growth story is less believable.

Global Investment House - Denies Deal With Arab African International Bank

GIH issued a press release on the Kuwait Stock Exchange to deny reports in the local press that it had concluded a deal with Arab African International Bank Egypt (in which the KIA owns roughly 50%) to sell its Egyptian real estate subsidiary to AAIB.

First, it rejected the idea that the sale was part of a "quid pro quo" for AAIB agreeing to join the rescheduling.  It also noted that AAIB had told one of the Egyptian newspapers that the transaction was not related.

Second, it noted that discussions were in a preliminary stage and that no deal had been concluded.

As part of the restructuring, GIH is selling assets to repay its debt so this transaction is expected.  What would be interesting to know is whether these negotiations are the result of a bidding process that AAIB won or AAIB is the only interested bidder.  Or if AAIB is a preferred bidder.  If the latter, then there may be something to the "quid pro quo" story.

The KSE announcement (Arabic text only) is below.

[9:0:57]  ِ. ايضاح من (جلوبل) بخصوص ما نشر في احدى الصحف المحليه ‏امس
يعلن سوق الكويت للأوراق الماليه انه قد ورد اليه الان من شركة
بيت الاستثمار العالمي (جلوبل) انها تود أن توضح بخصوص ما نشر في ‏
احدى الصحف المحليه امس حول تخارج بيت الاستثمار العالمي (جلوبل) من ‏
حصته في بيت التمويل للتمويل العقاري المصري تود الشركة ان توضح ما يلي:‏
ِ1- ان تخارج (جلوبل) من شركة بيت التمويل للتمويل العقاري لصالح البنك ‏
العربي الافريقي الدولي ضمن تسوية ديون هو خبر غير صحيح .‏
ِ2- ان المفاوضات مازالت في مراحلها الاوليه .‏
ِ3- في تصريح لجريده مصريه نفت مصادر بالبنك العربي الافريقي الدولي وجود
اى علاقه بين عملية الاستحواذ و تسويه المديونيات المستحقه للبنك على
شركة (جلوبل) .‏

Stehwaz (Istiwath) Holding Company - Shareholders' Legal Complaint Against Board and The Investment Dar


AlQabas reports that 47 shareholders of Stehwaz Holding Company -شركة استحواذ القابضة  - have raised a legal complaint against the board of directors, the auditors and the parent company, The Investment Dar ("TID").  As its name implies, Stehwaz is involved in mergers and acquisitions as well as pre IPO transaction.  The company has some 5,000 shareholders.   TID and Efad Group are the major shareholders.  Efad is also a major shareholder in TID.

AlQabas describes this as an "unprecedented" action by shareholders against a Kuwaiti company.

These 47 shareholders' allegations (and note that word) consist of the following:
  1. After undertaking the increase in the company's capital to KD 250 million, TID caused the company to enter into a series of contracts for its benefit allowing it to take most of the capital of the company.
  2. One example is the sale of Madar Investment Company - which allegedly resulted in a KD 50 million profit for TID and no benefit to Stehwaz.
  3. Another item in the list of complaints is the company's lending activity.  The shareholders allege that it is unclear if  KD 3 million obtained by the Board is loan or another type of facility.
  4. Exaggeration (overstatement) of goodwill in the amount of KD 50 million.
  5. A pattern of conducting real estate transactions solely with related parties - reaching an amount of approximately  KD 300 million.  Stehwaz supposedly conducted these with  just three related parties  from among the founding shareholders.  The complaint specifically raises the point that no real estate transactions were undertaken with other market participants.  The thrust here seems to be a concern over purchases of real estate.  That logically would be one of overpayment.   AA:  In 2007, Stehwaz had KD 450 million in total assets.  The company has not released its 2008 financials.
  6. Funding provided to TID via wakala and tawarruq transactions - a major issue given the constrained financial position of TID.
The complaining shareholders are requesting guarantees from those parties who benefited from the transactions described.  That is the first step in seeking to impose personal liability on  member of the board of directors.  An initial (statutory) fine of KD5,001 is also being requested as well for the decline in share value to KD 20 fils.

The Court is to hear the case 11 February.

Some observations.
  1. Another bit of bad news for TID in securing creditor agreement to its rescheduling proposal, particularly in light of the charges made in this complaint.  Without full details and noting that this is only a complaint and not a legal judgment against TID, these are the sort of activities that could be behind the Central Bank's delay in approving TID's financials as well as some of the content of the restructuring proposal.  Earlier post here
  2. As well, this suit is reminiscent of some of the issues that the Ministry of Commerce and Industry is pursuing with respect to related party transactions. Earlier posts here and here
It's important to re-iterate that these are unproven allegations at this point.  The Kuwaiti Courts will determine if they have legal merit and if sufficient evidence is provided to substantiate them.  In any case this is not good news for TID, particularly at this critical juncture.

    Burj Khalifa

    AlphaDinar has an interesting article on the surprise naming of the Burj and the economics of the new building.  Well worth a look.

    This is similar to donors to universities having buildings named after them.  And in some cases a big enough contribution gets the donor's name attached to a school. 

    Shaykh Khalifa is only lending US$ 25 billion to Dubai so it's just his name on the Burj.   At least for now.

    Saad Group: Al Sanea Resists Deposition

    The National reports that Maan AlSanea's lawyers are resisting his giving a deposition in Saudi Arabia in connection with a lawsuit against him by AlGosaibi.

    Wouldn't an elegant solution be for the Court to ask him to visit New York to give the deposition?

    Theater of the Absurd – The “West” End

    From the US "liberal" site "Talking Points Memo".

    First, a quote that is too good to pass up from TPM's daily email. "As Sen. Schumer (D-NY) calls for stronger security measures at foreign airports, his colleague, Sen. Kerry (D-MA), is denied entrance to Iran." AA: Unclear if the two are related.

    Second, a more detailed quote from Senator Schumer: "You don't have to be Albert Einstein to realize that flights that originate in foreign countries pose a greater danger," said Schumer, who also added: "What's crucial is that we immediately send many more of our TSA agents to the airports to check on their compliance." AA: I believe all the aircraft hijacked on 11 September 2001 were domestic flights.

    BSEC Firing on All “Cylinders” – Another ABS Auto Deal



    BSEC announced another automobile related ABS deal. This time for Bassoul & Heneine.

    This is the second ABS for B&H – "Cylinder II".

    The structure is a mirror image of Rymco. And again the issuer is holding Tranche B.

    Here's the earlier press release on Rymco Drive 1.   And earlier post.

    Cylinder II has been terms - lower price and longer tenor.  This is probably reflective of a combination of things:  better market conditions and the fact that Rymco Drive was a debut issue.

    BSEC also has issued some interesting publications on securitization and related issues in Lebanon.

    Kudos again to the fine folks at the BEMO Group and the even finer distinguished banking family of Obegi.

    Monday 4 January 2010

    When the Going Gets Tough, The Tough Unilaterally Reinterpret Their Contracts

    Article from The National here on Mashreqbank's unilateral change of base rate on mortgages.  Spoiler: it's not a decrease.

    I believe the relevant technical term is chutzpah.

    But wait there's more - perhaps technically rising to the level of egregious chutzpah
    Mr Beckett said. Mashreq has waived refinancing fees until the end of March so customers can take their business elsewhere if they choose.
    Yes, indeed.  Banks in the UAE are falling all over themselves to make new loans for more than the value of the property.

    Sunday 3 January 2010

    New Addition to Links - LSE / Kuwait Programme on Development, Governance and Globalisation in the Gulf States

    A new addition to the roll of Interesting Blogs and Other Links:    Kuwait Programme on Development, Governance and Globalisation in the Gulf States.

    This looks to be an excellent source of information on a variety of topics concerning the GCC.

    And as Kristian Ulrichsen noted in a comment to my earlier post, they also offer seminars in London.  BTW in addition to co-ordinating academic content, he is also a post doctoral fellow who seems to specialize in GCC security matters.

    Here's a link to their "Events" page.

    And finally a tip of AA's virtual tarboush to the Kuwait Foundation for the Advancement of Sciences who is the "founder of this feast".

    2-1 !


    HH Shaykh Mohammed Bin Rashid AlMaktoum - Anniversaries

     
    This week marks two important anniversaries for Shaykh Mohammed.  Accession to the throne.  And election as Vice President of the UAE (5 January).

    A variety of tributes and celebrations have or will take place.

    Here are some of the customary homages.  And here as well.

    There is more information at the Shaykh's website.   If you read his poems (Nabati style), the original Arabic is preferable to the English translation.

    SAMA Governor Denies Saudi Bank "Settlement Deal" with Saad

    In an interview with the Saudi Newspaper, Al Iqtisad, HE Dr. Mohammad Bin Sulayman Al Jassir, Governor of the Saudi Arabian Monetary Agency denied that there had been any settlement among the Saad Group and Saudi banks.

    Continuing he noted that since AlGosaibi and Saad were commercial enterprises SAMA had not right of supervision - either directly or indirectly.  Thus, it had to rely on the banks for information.  They told SAMA that they had offset the collateral they held against their loans.  The article does not  contain any comment on how much of the exposure was collateralized/offset.   Governor Al Jassir noted that this was something that foreign banks had been doing as well.  His point being that offsetting collateral is a normal banking practice.

    He also said that the uncovered portion of both local and foreign banks' exposure remained a problem and that as far as SAMA knew there had been no settlement between Saad and its creditors.

    Some observations:
    1. Banks get to choose on what basis to lend their clients:  secured or unsecured.
    2. Lenders with security (and properly drafted legal documents) have the right to take possession of and realize the security upon the occurrence of certain defined events.
    3. It may be that Saudi banks were relatively more collateralized then foreign lenders.  As a side note, one of the interesting patterns in lending is that often foreign lenders impose fewer conditions on borrowers than local lenders.  Generally, those foreign lenders, often Western, justify this by their greater sophistication in underwriting and their more developed risk management skills.  Of course, competition plays a role.  Pricing and requirements are the two ways to compete for a borrower's business.

    Saturday 2 January 2010

    LSE Study on Nationalism in the GCC

    This is part of the Kuwait Project on Development, Governance and Globalisation in the Gulf States being undertaken by the LSE.   The report is available here

    Here is a description of the Kuwait Project.

    There are more interesting publications from the Project available here.

    And more to come judging by the list of proposed and in-process papers listed.

    This looks like an excellent source of information and analysis on the GCC.

    Dubai: Jailed Businessmen Buy TVs for Inmates

    Some businessmen jailed for financial crimes in Dubai bought flat screen televisions for inmates as the prison management refused to replace old non functioning models. 

    Friday 1 January 2010

    The Investment Dar Wins Lawsuit (Administrative Court) Against Central Bank of Kuwait for Non Approval of Financials

    The 1 January 2010 edition of AlQabas carries the news that TID has won a lawsuit in the Administrative Court against the CBB for its refusal to approve TID's 31 December 2008 financials.  The Court  abrogated the CBK's decision to refuse to approve TID's  financials and awarded provisional compensation KD 5,001 (US$ 17,500).  The competence of the court to hear the case was challenged by one of the parties (unstated, but presumably the CBK.) and this matter was referred to the Circuit Court  (?) #10 who are expected to review the matter on 28 January 2010.

    Most of the article - roughly three-quarters - consists of a letter that TID says it sent the Central Bank on 14 July 2009 (and which appears to be part of the  documentary evidence submitted for the case).  The letter states that the financials were fully prepared and signed by both auditors, though the auditors stated that they were unable to give an opinion (in accountant-speak a "disclaimer of an opinion").   TID argues that the auditors had no issues with the company's assets, did not find any violations of law, etc.  and so the disclaimer does not mean there are any of these sort of problems.  TID states (in the letter) that CBK asked for the removal of the disclaimer.  TID pointed out that the auditors had the "first and last" word on their opinion and that the company could not compel the auditors to make a change and that to do so would be to violate Kuwaiti law.  The letter ends with a statement that CBK's refusal is causing serious damage to TID and its shareholders.

    Some reactions to the news story:

    Global Investment House released its financials on 26 April 2009.  These contain an audit disclaimer.  If the disclaimer in TID's report is broadly similar to that in GIH's, it is hard to understand why the CBK would approve GIH's financials but hold TID's.   Unless there were other serious factors involved.  The alternative explanation - that the CBK is engaged in a vendetta against TID -  doesn't seem credible to me.

    As a side comment, GIH's audit opinion is dated 3 February.  The release date suggests that the CBK required roughly three months to content itself with GIH's financials.  

    What might those factors be?  And what might be some signs? 
    1. GIH's financials were submitted fairly quickly to the CBK.  The presumption is shortly after the auditors signed off on them - 3 February 2009 - and GIH's board approved them.  TID's took a bit longer.   TID explained this as the need for "additional reporting requirements" in April 2009
    2. At the request of creditors, the CBK appointed a special monitor at TID.  It did not at GIH.
    3. As a result of negotiations with creditors, TID appointed a Chief Restructuring Officer.  Creditors at GIH did not require this.  The two creditor groups are not exactly the same so this may reflect their different composition.   Or there may be another reason. 
    4. TID's restructuring agreement - as described by AlQabas - contains strong statements about increasing transparency and strengthening corporate governance.   There is also what might be a telling condition:  All asset sales to be undertaken on a sound basis (sahih), legally done, at market prices and not to related parties.  Without direct knowledge of the negotiations between TID and its creditors it's not possible to know what motivated this requirement.  One might infer that a provision of this sort is designed to prevent the recurrence of an event.  Then again creditors often impose "silly"  or "belt and braces" conditions given the dynamics of restructurings.
    5. Similarly, the restructuring agreement gives the creditors' committee power over the company's financial statements - that is, creditors have the right of approval over financials.  Again there is no way of knowing for certain why this was included.  One might infer that this reflects some creditor concern about the quality/integrity of the financials.  And then again it might simply be creditor "overkill" in imposing conditions.
    6. Finally that same report said that TID was submitting its financials to the CBK for approval.  It may be that with progress in the restructuring negotiations the auditors were willing to remove their disclaimer (no opinion).  Or perhaps there were some changes to the contents of the report.  As outsiders it is difficult to know.  However, auditors are generally reluctant to stick their necks out.  And in difficult situations like a restructuring, their natural caution increases. I would expect that until the definitive legal documentation for the restructuring were signed by all parties, the auditors would be cautious about issuing a "clean" audit opinion.  One compromise could be a "matter of emphasis" opinion - in which they put their concerns into a note to the financials.
    It seems to me that there is more to the delay than just the auditors' disclaimer.  I don't have the impression that the CBK is capricious or vindictive.   It would seem to have some questions or concerns about TID's financial position.  But we will have to wait to see what happens when TID's financials are released. 

    Jawad Bu Khamseen - Follow Up to Yesterday's Post


    Mr. Jawad BuKhamseen - Picture Copyright AlQabas Newspaper

    AlQabas ran an article today which consists of a letter from Mr. Bu Khamseen's attorneys (the Law Firm of Abdul Hamid AlSarraf, a very well known and respected law firm) in which Attorney Ahmed Tawfiq AlRashid makes the following points:
    1. There has been no bankrutpcy or insolvency legal ruling made against Jawad Bu Khamseen.
    2. The Court has ordered him to pay a certain sum to settle his deferred payment share trades.  AA:  Presumably those remaining from the Suq Al Manakh.
    3. The judgment is not final but is subject to appeal which is what they are doing on his behalf.
    4. By publishing the article AlQabas has violated certain laws and has impugned the good name of Mr. Bu Khamseen.  AHAS law firm will be taking the necessary legal action to seek redress for these violations.
    At the end of the article there is a single sentence attributed to the Editor of AlQ:  "What we published yesterday was an official letter from the Ministry of Finance to banks regarding the necessity of implementing the judgment". 

    Thursday 31 December 2009

    New Year's Celebrations Cancelled At Suq Al Mal - And Just in Time!

    Luckily I just saw this article in Gulf News.  I had just enough time to cancel Nancy Ajram's performance.  Hopefully, she can get a last minute booking in Bahrain.

    Anyways, as you all know by now, if I read it in the Gulf News,  I know it has to be true.
    "There must be a zero-tolerance policy towards any parties or celebrations marking the new year as they are against religion and the law," MP Mohammad Al Hayef said.
    Since GN is from Dubai, it omitted the good MP's full name, Mohammed Al Hayef Al Mutairi.  And he represents the good folks in the Fourth District.

    I hope all of you out there will take Brother Mohammad's words to heart.

    AA will be spending the evening shortening the hem on his virtual thaub.  You would be well advised to do the same.

    End of Year Protocol #2 - Words of ?


    Copyright 2003 David Monniaux

    Another contribution to the year end protocol of media retrospectives. 

    This one not in the wisdom category but somewhere between incredible and bizarre.
    1. "Something is unusual. We have never had such a high number of people involved in corruption," Dhahi Khalfan Tamim, who also heads the Dubai government's budget committee, told Reuters. 
    2. Tamim said police had drawn "a list of more than 60 people mainly from government-linked companies" who are under investigation, adding no-one on the list was from a government department.
    It's hard to understand this surprise.  

    After all, what possibly could go wrong with US$ 60 billion of hot and easy money rocketing through the Emirate?  With contracts being let left and right for billion dollar projects?  And ignoring for a moment the regional history of commissions,  Philip Thorpe's observations in 2004 or the corruption trials at the beginning of 2008, who in their right mind might have guessed there was an increased potential for corruption?  Or that it was occurring?

    As a distinguished Capitaine once put it "I'm shocked, shocked to find that gambling is going on here".

    End of Year Protocol #1 - Words of Wisdom

    The end of the year is a traditional time for reflection in the media - retrospectives on the year, best and worst of the year lists, etc.

    As a newbie blogger, here's my first entry in that exercise, a link to an article by Richard Thaler of The University of Chicago on the efficient markets hypothesis.

    Yes, the italics are deliberate.

    Like all economic theories  the EMH is an opinion.   In economics one hopes for informed opinions, but opinions they remain.  Not scientific laws.  Nor Divine revelations.

    Often the most profound thoughts are the simplest.  And perhaps the most obvious.

    4-1!



    I see my earlier request to increase the first number has been granted. But to avoid any appearance of greed, the second number can remain at zero.

    On to Sunday.

    Adeem Investment Company - The Work Continues

    Boston Harbour Tunnel watch out, Adeem Investments is gaining on you.  Or for those with a taste for more local references - the street project in central Sana'a.

    Yes, AIC's webmaster is still hard at work to better serve you.

    Kuwait Stock Exchange Suspended Companies - And Then There Were Six

    As we close out the last day of 2009, here's the final list of companies suspended from trading by the KSE:
    1. Lu'lu Real Estate Compay (Pearl Real Estate) - شركة لؤلؤة الكويت العقاريه (لؤلؤة)‏
    2. Safat Global Holding - شركة الصفاة العالمية القابضة
    3. Shabka Holding - شركة الشبكة القابضة
    4. The Investment Dar - شركة الدار للاستثمار
    5. International Leasing and Investment -الشركة الدولية للاجارة والاستثمار
    6. Villa Moda - شركة فيلا مودا لايف ستايل
    As before they are suspended for failure to provide financials.  With the use of  Western numbers in the press release, you can see which reports are missing. Safat and Shabka share the dubious distinction of also being suspended for failure to pay their 2009-2010 listing fees.

    Arabic text of the KSE official announcement below.

    [7:53:37]  ِ.الشركات الموقوفه عن التداول
    يعلن سوق الكويت للأوراق الماليه بأنه تم وقف تداول اسهم بعض الشركات وفقا
    لما يلي :-‏
    اولا: الشركات التي لم تقدم بيانات 30-06-2009 و30-09-2009 :- ‏
    شركة لؤلؤة الكويت العقاريه (لؤلؤة)‏
    ثانيا:الشركات التي لم تقدم بيانات 31-03-2009 و30-06-2009 و30-09-2009:- ‏
    شركة الصفاة العالمية القابضة(صفاة عالمي) ‏
    شركة الشبكة القابضة (الشبكة) ‏
    ثالثا: الشركات التي لم تقدم بيانات 31-12-2008 و31-03-2009 و30-06-2009 ‏
    و30-09-2009 :- ‏
    شركة الدار للاستثمار(الدار)‏
    الشركة الدولية للاجارة والاستثمار (د للاجارة) ‏
    شركة فيلا مودا لايف ستايل(فيلا مودا) ‏
    رابعا: الشركات التي لم تسدد رسوم الاشتراك السنوي لعام 2009-2010 :-‏
    ِ شركة الصفاة العالميه القابضه (صفاة عالمي) ‏
    ِ شركة الشبكه القابضه (الشبكة) ‏

    Aref Investment Group - Chairman Resigns

    Aref Investment Group Kuwait announced on the Kuwait Stock Exchange that its board met on 30 December 2009 to accept the resignation of its Chairman, Dr. Ali Fahd AlZami'i, (both from the Board and as Chairman) and the appointment of Mr. Ibrahim Abdullah AlKhazaam, as Managing Director effective 1 January 2010.

    The market had been rumoring a major change as evidenced in this earlier post.

    This year there have been more than the usual changes in boards and management of financial companies in Kuwait - some of which I've commented on - reflecting the difficult situation of many companies there.  You will also recall that Aref has been identified as one of the companies opposing The Investment Dar's restructuring proposal.  The question is whether this change is at all related to any change in approach by Aref on that topc.  My guess is not and that the two are not related.  But as Umm 'Arqala can testify from years of experience AA isn't always right.

    You can access earlier posts on both Aref and The Investment Dar by using the respective labels on SAM's home page.

    Here's the KSE announcement (Arabic text only).

    9:44:3] ِ.استقالة رئيس مجلس إدارة مجموعة عارف الاستثمارية وانتخاب عضو منتدب ‏
    يعلن سوق الكويت للأوراق المالية بأن مجموعة عارف الاستثمارية أفادته ‏
    بأن مجلس إدارة الشركة قرر في اجتماعة بتاريخ 30-12-2009 قبول ‏
    استقالة الدكتور / على فهد الزميع من رئاسة وعضوية مجلس إدارة المجموعة ‏
    اعتباراً من نهاية دوام يوم 31-12-2009 واختار المجلس السيد / ابراهيم ‏
    [عبدالله الخزام عضوا منتدبا اعتباراً من يوم 1-1-2010 .‏

    Global Investment House - Shareholders' OGM to Approve Restructuring

    GIH announced on the Kuwait Stock Exchange that it would hold a shareholders' ordinary general meeting on 12 January to approve the following in connection with its recent restructuring agreement:
    1. Transfer of all its non real estate assets to Global Macro Fund in Bahrain.
    2. Transfer all its real estate assets to Mushaa Islamic Real Estate Company (Kuwait)
    3. Approve the pledge of all assets to the lenders.
    As discussed below, this will be a critical meeting as this is the last key (legal) step to finalizing  the restructuring agreement struck by GIH with its creditors.  Failure by the OGM to approve these items would be a serious set-back to the restructuring.  One that I don't think is likely.

    Here's the KSE announcement (Arabic only).

    [8:30:16]  ِ.اجتماع الجمعية العمومية العادية لبيت الاستثمار العالمي (جلوبل)‏
    يعلن سوق الكويت للأوراق المالية بأن الجمعية العمومية
    العادية لشركة بيت الاستثمار العالمي (جلوبل) سوف تنعقد
    يوم الثلاثاء الموافق 12-01-2010 في تمام الساعة 12.30‏
    ظهرا في مقر الشركة حيث سيتم خلالها مناقشة ما يلي:‏
    ِ1- الموافقة على تحويل ملكية اصول الشركة من استثمارات غير عقارية
    مملوكة بشكل مباشر او غير مباشر للشركة الى صندوق جلوبل
    ماكرو فند المؤسس في مملكة البحرين والمملوك بالكامل لشركة
    تابعة مملوكة بالكامل بطريق مباشر وغير مباشر لشركة بيت
    الاستثمار العالمي (ش.م.ك.مقفلة) جلوبل وذلك طبقا لاتفاقيات
    اعادة هيكلة ديون الشركة.‏
    ِ2- الموافقة على تحويل ملكية اصول الشركة من استثمارات
    عقارية الى شركة مشاع الاسلامية العقارية (ش.م.ك.مقفلة)‏
    والمملوكة بالكامل بطريق مباشر وغير مباشر لشركة بيت
    الاستثمار العالمي (ش.م.ك.مقفلة) جلوبل وذلك طبقا لاتفاقيات
    اعادة هيكلة ديون الشركة.‏
    ِ3- الموافقة على رهن اصول الشركة من استثمارات عقارية
    وغير عقارية لصالح دائني الشركة وذلك طبقا لاتفاقيات اعادة
    هيكلة ديون الشركة.‏
    علما بأن هذه التوصية تخضع لموافقة الجمعية العمومية والجهات المختصة.‏

    This news item confirms the earlier AlQabas article.  Relevant post here.

    This announcement also confirms earlier comments on the restructuring - that it is a fairly tight agreement which means a fundamental change in GIH's business.  Basically GIH has mortgaged its "shop" to the creditors.

    Also the requirment for the OGM is reflective of general legal practice in the GCC - enusring that shareholders agree to fundamental business decisions.  This prevents a later legal challenge from a shareholder.   

    What this means is that technically the restructuring is not yet finalized.  There is a small probability that shareholders may refuse to agree.  In which case a very key element of the deal - the collateral -  is overturned.   That, I suspect, is a small probability.  But one to watch nonetheless.

    Jawad Bu Khamseen - Assets Ordered Transfered in re Suq Al Manakh

    Headline edited based on subsequent information.  See post here.
     
    A story highly relevant here to Suq Al Mal - given our masthead and "mascot" picture.

    Today's AlQabas reports that banks in Kuwait have received formal notification from the Office for the Clearance (Settlement) of Deferred Sales Shares Transactions informing them that judgment against Mr. Bu Khamseen in favor of the Office had been issued by the Court that he was to pay KD14,707,833.208 plus legal interest of 7% p.a. from 26 December 2002 to date of payment.

    The Court order is final and there is no appeal.  In the subsequent post you will see that Mr. Bu Khamseen's lawyer challenges that assertion.

    Accordingly, the banks were instructed to inform the Office of any of his assets in their possession, not to release any of these to him, but rather to pay any amounts immediately to the Office's account at Burgan Bank.

    Jawad is one of the major punters in Kuwait.  He was one of the four or five "Fursan Al Manakh" ("Knights of the Manakh") responsible for the majority of the postdated check issuance during the Suq Al Manakh ("SAM") scandal.

    The SAM was a "curb" or parallel market to the Kuwaiti Stock Exchange.  Most of the companies traded therein were not Kuwaiti.  And many if not all were paper companies with no assets or real businesses.  Transactions were settled with post dated checks.  Investor A would buy stock from Investor B against a check to be cashed in the future.  Investor A hoped to sell the shares to Investor C and cover his original check before "maturity".

    As is common in many GCC countries, writing a check without cover is an offense punishable by imprisonment.   Hence the use of the post dating.   However, there was no legal bar to a holder submitting a check prior to its date.   The market took off.   In late 1982 investors started to get nervous and  one or more post dated checks were cashed.   Punters couldn't cover them which led to more checks being presented.  The market collapsed in a tremendous implosion in 1982 (1983?).   The wreckage was much more than the current declared debt of the Emirate of Dubai.  US$98 billion.   As noted above, 4 or 5 "investors" were responsible for most of the checks. 

    Many of the banks in Kuwait - save for the flinty eyed bankers at National Bank of Kuwait - were involved in financing transactions in the SAM.  Loans based on the collateral value of the SAM shares.  That is, loans made against paper profits (where the underlying companies were paper shells).  No focus on cashflow.  A familiar story.  And one that has repeated itself since the SAM.

    All the Kuwaiti banks save - NBK - were bankrupt and rescued by the Kuwaiti Government who bought their duff debts after the ejection of Saddam Hussein.  Take a look at Note #8 in the 2003 Gulf Bank annual report.  Or Note #7 in the 2003 Burgan Bank annual report.  You'll see that Burgan Bank was a major player.  Banks in other countries were hammered as well.  There was a region wide stock market mania - with IPOs being massively oversubscribed. 

    Overnight I'll be approaching one of my early bosses to ask for a bit more color as the SAM crisis took place on his watch.  If I get anything interesting I'll post it.

    It's the least we can do for those who inspired this website.  They were of course not the first temporally, but they were the first in terms of amounts of wealth destruction in the area.  And still hold that distinction though I believe that currently there is a strong challenger.

    The Power of the Blackberry?

    In today's fast paced wireless world of business, one's office can be in one's pocket.

    Ex-chief of Deyaar accused of taking bribes while in jail.

    Islam Guarantees Women Their Dignity

    Saleh is of course correct.

    Sadly, the courts in many "Muslim" countries do not.

    AlArabiyya Loses Case for Not Showing "Royal" Interview

    There is an old saying "Justice delayed is justice denied".

    I suppose the Dubai Court has updated this to "Interview delayed is an interview denied".

    I believe that the plaintiff's own words describe the harm caused him.  And there is really no need to say more.

    The claimant's lawsuit said: "The defendant's failure to broadcast the televised interview inflicted emotional, moral and social damage on the prince's status as a royal and academician. His fame was affected before his family, students and the social circles to which he belongs. According to article 293 of the Civil Procedures Law, the claimant is entitled compensation because the defendant damaged his reputation and social status."
    The Prince of a fellow had claimed Dh500,000 in "moral and financial" compensation.   There is a reason they call it lese majeste. 

    The Court in Dubai granted him only DH100,000 but admonished AlArabiyya for breaching the "media code of ethics".

    AlArabiyya has lodged an appeal with the expected decision date 12 January.

    Gulf Finance House Bahrain Makes US$300 Million Provision for Dubailand / Legends Project

    GFH issued a press release earlier today in which it advised that it had made a US$300 million provision for its investment in the Legends Project - part of the multi billion US dollar "Dubailands" complex.

    GFH was one of the pioneer developers of mega real estate projects in the GCC - Bahrain Financial Harbour - benefiting it is said from business relations with important personalities.  From Bahrain it quickly spread its wings across the MENA region with similar projects and then beyond.  It's specialty was what it billed as "infrastructure development".

    The business model was the typical "Islamic" banking mark-up model and GFH generated some 80% of its income from these projects.

    Before the global problems of 3Q08, the bank was beginning to try and diversify away from over dependence on real estate.  Since then, the bank has been struggling to develop a new business model.  This is evidenced by the comment in the press release on Dubailand.  When a firm starts talking about the disposal of "non core assets", it's a pretty good bet (though not 100% certain) that there are problems in the business model.

    That being said, it successfully raised US$300 million in new capital this "2 November/October", a US$100 million convertible murabaha transaction with Deutsche Bank 15 November, plus an earlier sale of the bulk of its shares in QInvest (Qatar) plus an planned $100mm convertible murabaha with Macquarie.

    As a result the bank has increased its liquidity, though it faces debt maturities of US$350 million in 2010, US$100 million in 2011 and US$175 million in 2012.

    Recent changes in management are probably related to the change in strategy as well as strengthening of the management team.  The previous CEO was only in place five months before departing.  It's  probably worthy of comment that his successor though as Acting CEO,  Ted Pretty, was previously with Macquarie.  Here's his bio from his earlier appointment.

    Wednesday 30 December 2009

    Provision of Bahrain's Anti Money Laundering Law Ruled Unconstitutional

    Bahrain has a fairly strict AML/CFT regime, including a tough law.  The CBB AML/CFT regulations for conventional banks are here.  There is a mirror law for Islamic banks.  And separate rules for other types of financial firms.

    Bahrain is also the headquarters for the Middle East North Africa FATF organization - MENA's regional organization under the FATF.  For those who like techspeak, it's "our" very own FSRB.

    More information from Bahrain's Ministry of Interior Financial Intelligence Unit website.

    Here's a recap of some of the provisions of Decree Law #4 of 2001.
    1. Offenses include not only actively participating in money laundering but as well failure to undertake reasonable AML procedures, obstructing an investigation, or informing a person that they are being investigated.  Examples of the first would be failure to conduct proper due diligence at the initiation of a relationship, failure to monitor customer accounts and transactions, follow-up on suspicious transactions, etc. (Articles 2.1, 2.2, and 2.6)
    2. The authorities do not have to prove that the funds are the proceeds of criminal or illegal activity to prosecute or obtain a conviction.  (Article 2.3)
    3. There is no statute of limitations.  That is, regardless of when the offense occurred one can be prosecuted.  (Article 3.6).
    4. Fines are up to a maximum BD 1 million (US$2.65 million per offense) and up to a maximum seven years in jail.  (Article 3)
    5. The law also allowed the authorities to not only confiscate the violator's assets to satisfy the fine but as well those of his spouse and minor children. (Article 3.2).
    It is this last provision which has been struck down by Bahrain's Constitutional Court as per this article in the Gulf Daily News.

    This action, which may be reconsidered, does not really diminish the other strong aspects of this law.

    Saudi CMA Levies Fines

    The Saudi CMA announced regulatory actions against five individuals.

    You may have seen headlines about "fines" of US$1.1 million equivalent.  I believe that the what has happened is that press reports are including return of illegal profits as part of the total.  My reading (or more precisely translation) is that the fines were only  SAR 600,000 (US$160,000) and the remaining amount SAR 3,133,824 (US$835,686) represents return of illegal profits.  The Arabic text is not crystal clear (and is, as well, perhaps my own mind) but it seems unlikely that the CMA would levy odd amounts as fines.

    1. Accused of irregular transaction in the shares of 17 companies (!) between 11 Feb 08 and 27 Sept 08
    2. Return of profits of SAR 2,693,114
    3. Fine of SAR 450,000
    4. Banned from working in Saudi securities industry for one year
    5. Banned from any trading in securities in Saudi for one year
    1. Accused of irregular transactions in shares of National Company for Co-Operative Insurance
    2. Fined SAR100.000
    3. Both banned from working in Saudi securities industry or any trading for one year
    1. Accused of irregular transactions in shares of Fibco (1 Sept 2007 through 12 Sept 2007)  and Saudi Group  (4 Dec 2007 through 15 Dec 2007)
    2. Return of profits of SAR 200,171
    3. Fine of 50,000
    4. Banned from both working in Saudi securities industry and any trading for one year
    Fourth, Amal Bint Abdulrahman Al Man'i
    1. Return of profits of SAR 240,539 - Mr. AlHadif was her agent
    2. The CMA announcement of the judgment against her is included in Mr. AlHadif's announcement above
    Recently the Saudi CMA has been "cracking down" on market manipulation and other violations of its rules to "enforce its rules and to protect market participants from illegal practices" (as each of the above announcements ends).  You'll recall that earlier this week it revoked the license of two securities firms for failure to abide by its regulations.   Here's a link to an article from Maktoob business with a bit of background on this issue.

    Tip:  Foreign financial firms offering securities or securities related services  in the Kingdom would be well advised to read carefully the CMA's regulations on these activities.   The CMA regulations apply not only to securities issued by Saudi entities but also securities issued by foreign entities.  The regulations also govern both the requirements for offerings (definition of types of offerings, their required content and regulatory approvals) as well as authorized persons (types of licenses and registration/approval requirements).   Note the authorized person regulations outline the registration/approval requirements to undertake a variety of roles - principal, agent, underwriter, manager, custodian, advisor, etc.  The regulations also stipulate when a local office is mandatory.

    The Arabic text is the governing text. NOT the English translation.  Even the one on the CMA website.   A couple of years ago the "official" English translation of the regulation on offerings had an error in the section on exempt offerings.  It still may.

    The Saudi Stock Market (Tadawwal) dwarfs all other GCC markets in terms of value.  If I'm not mistaken, the Tadawwal has a larger market cap than all the other GCC bourses together.  The next largest market is that in Kuwait.

    Moody's Downgrades Abu Dhabi Commercial Bank

    Here's a news item with some quotes from Moody's press release on the downgrade.   And another here.

    You can register for "free" to read the original press release at www.moodys.com.  

    After the downgrade, ADCB's ratings are still respectably within "investment grade".

    Kuwait Stock Exchange Requires Global to Get Shareholder Approval of Asset Transfers

    AlQabas has a news item that the KSE has sent an official notice to Global Investment House that it must hold a general shareholders meeting and obtain shareholder approval to the transfer of the firm's assets to the fund created in Bahrain before the KSE will give its approval.  The establishment of the fund in Bahrain is part of the restructuring agreement and will hold all GIH's equity/financial investments.  Another fund will be created in Kuwait to hold real estate assets.  More details on the restructuring agreement here.

    Readers of this blog will know that GIH has already begun the re-registration process of certain of its assets  - GIH's shares in Global MENA Financial Assets.  Earlier post here.

    Tuesday 29 December 2009

    New Dubai Law on Financial Fraud - Big Fish in the Net as Well?

    A follow-up to my earlier post of the day based on a Gulf News article.

    The following quotes caught my eye and raise the hope that perhaps more than "SR the Canadian" may be visiting the Court.
    1. Self-seeking individuals have caused serious damage to the national economy and affected the government by bringing heavy debt liabilities on public companies and exposing them to great losses, he [Ahmad Humaid Al Tayer, Governor of DIFC] added. "These people have amassed illegal wealth at the cost of public funds. The law has given them the option to amend their ways and hand over the public money they have embezzled through illegal means."
    2. According to Al Tayer, there have been instances where corrupt officials established bogus businesses to conceal the money they had diverted from the government coffers.
    3. "There is no one above the law. The law will have no exception and everyone who has embezzled government money will be punished severely," said Dahi.  [Lt. General Dahi Khalfan Tamim, Police Chief of Dubai]
    As I've posted before, the sheer scale of the projects in Dubai afforded opportunities for massive commissions and other diversions of funds.   Up in Qatar, Philip Thorpe is probably too civilized to be saying "I told you so", but perhaps he's thinking it.  Remarkable that it took so long for this discovery to be made.  A rising tide not only lifts all boats but apparently closes a lot of eyes.

    There will of course now be speculation about every senior level change in Dubai Inc - particularly those involving nationals.  Stay tuned.

    "What we read in the Quran is not what we see in practice," said Ms Zaid.

    باسم الله الرحمـٰن الرحيم

    وَمِنَ النَّاسِ مَن يَقُولُ آمَنَّا بِاللَّهِ وَبِالْيَوْمِ الْآخِرِ وَمَا هُم بِمُؤْمِنِينَ

     صدّق الله العظيم

    Story here.  Sad story.

    (Translation: "Among the people are those who say "We believe in God and the Last Day" but they are not believers".   Sura AlBaqara Aya 8.  SAA)

    Gulf News Journalistic Standards - The Wider Picture

    A tip of my virtual tarboush to Aqoul for bringing this news item to my attention.

    The attempt to control or influence  the news is a fairly widespread phenomenon. It's not just GCC rulers who can be "tetchy". 

    There are a lot of very sensitive and fragile CEOs out there.  Mike Mayo was a victim.  Thomas K. Brown  another.  Many a negative analyst has found himself suddenly dropped from the information flow by a peeved company.  Or the recipient of senior management guidance after a customer has called in at "the top".

    That's one reason why there has historically been a strange anomaly in ratings: more "buy" recommendations than "sells".

    It seems that AA is in "good" company as he applies Gulf News journalistic standards to his blog.

    New Dubai Law on Financial Fraud

    Shaykh Mohammed has issued a new law imposing prison sentences of between 5 to 20 years for financial fraud - involving both public and private entities.   Those convicted under the law can reduce their sentences by making full restitution.  The law provides that while in prison, convicts will be allowed to conduct external communications necessary to retrieve funds.

    The timing of the issuance of this law suggests senior level recognition of the extent of the problem with financial crimes.

    Those who know their UAE history know this is not a new story.  Two high powered Brits  hired to give credibility to the DIFC were abruptly fired in 2004 because they questioned  the letting of contracts for the construction of the "Gate". 

    As a side note, the Torygraph indirectly focuses on what is apparently not only a keen interest of the British press but also what would appear to be an interest of national importance for the country:  "The centre is a key part of plans by the Maktoum brothers, the leading members of the Godolfin racing syndicate, to diversify the emirate's sources of income as its oil runs out. However, the sackings will raise serious questions about its credibility."

    It's not immediately clear to me if the Torygraph is worried about the credibility of British racing or the DFSA.

    Saudi Capital Markets Authority Regulatory Actions

    The Saudi CMA announced the following:
    1. Talal Abu Ghazaleh Financial Consulting Company – Revocation of license to arrange and advise on capital markets transactions for failure to comply with relevant requirements. (Arabic text here)
    2. Alpha Team – Revocation of license to arrange and advise on capital markets transactions for failure to comply with relevant requirements. (Arabic text here)
    3. Addax Securities Saudi Arabia – At Addax's request agreed to the cancellation of its license to act as a principal, underwriter, agent, manager, arranger, advisor and custodian on capital market transactions. (Arabic text here)
    4. Saudi Pioneers Securities Company – At SPSC's request agreed to the cancellation of its license to act as a principal, underwriter, agent, manager, arranger, advisor and custodian on capital market transactions. (Arabic text here).
    5. According to AlRiyadh newspaper, the CMA also fined National Company for Industrialization SR 50,000 (US$13,333) for failure to promptly report the resignation of its SVP for Investments and Finance. He resigned on 1 November 2008 but formal notice was only given on 15 September 2009.
    The first two appear revocations are for violations of regulations, while the second two were at the request of the company.

    Kuwait Ministry of Commerce and Industry Takes Action Against Abuse of Related Party Transactions

    Earlier AlQabas had reported that the Kuwaiti Ministry of Commerce and Industry (MOIC) had discovered material violations in related party transactions undertaken by Kuwaiti companies. Earlier post here.

    AlQabas now reports the Department of Shareholding Companies has written a general circular to a number of companies in which it requires that they return funds withdrawn from their companies for certain transactions described as related party transactions. Or that they provide a firm undertaking to do so. Both to be accomplished this year. The penalty for failure to comply is that the MOIC will refuse to allow these companies to found new companies.

    The MOIC took this step after it discovered that companies were withdrawing funds under the pretext of related party transactions. An action described as "fraudulent" (tadlis) and hiding the true position of the companies from their shareholders. The financial crisis was offered as an explanation for companies abandoning sound principles for related party transactions.

    One particular prominent set of violations were intercompany loans between parent and related companies. It was noted that many of these were now in the process of regularization through settlement via transfer of ownership of shares. Another violation mentioned was that by investment firms who extended loans from funds they managed for other parties. The article closes by noting that these excesses (literally exceeding proper bounds) give rise to suspicions that there was collusion for benefit among companies, members of boards of directors or members of executive management.

    Taking the AlQabas story as accurate there are a few conclusions we can infer:
    1. The pattern of "looting" companies to benefit another is sufficiently widespread and/or the amounts involved are sufficiently substantial. Otherwise the MOIC would deal with a small problem much more quietly.
    2. Unspoken is if there will be recourse to the public prosecutor. Perhaps, the intent is to allow the companies an opportunity to put things right.  If they do so, no prosecution.  And if not, then ...
    3. The reference to investment companies "raiding" funds they manage to lend to themselves is intriguing. There is only one public instance of this that I am aware of: the very substantial sums of money advanced by Global MENA Financial Assets to Global Investment House. And just recently the last remaining obligation was agreed to be settled by a share swap. Earlier posts here and here and here and here and here.

    The Old Ways Die Hard – Though Perhaps Not as Frequently Following the Ban

    Saudi Gazette marks the passing of a venerable tradition – celebratory machine gun fire at weddings.

    "The north Najrani tribe of Al-Al-Qashaneen has imposed the ruling on all its members to stop machine gun fire at weddings in efforts to reduce the number of injuries and deaths at otherwise happy occasions. The tribe's sheikhs are to ensure that signs are put up at the relevant spots to ensure that guests also refrain from unloading their weapons above the heads of wedding crowds. Fines, a tribal member said, would go to a special tribal fund which provides assistance to needy tribal members in, for example, providing hospitality to guests or funeral expenses."

    The fine for infractions of the rule is SR5,000 (US$1,333.33).

    Monday 28 December 2009

    Public Service Message: Baldness in the Gulf

    David Roberts over at the Gulf Blog has published this important bit of health related news  about one of the hazards to males of living in the GCC.

    Consider yourself warned.

    Bottled water may be an acceptable "solution" (in a manner of speaking).

    UAE Extends Charitable Hospitality to Indigent Businessmen

    With Gulf News redefining journalism in Dubai and providing important lessons for all of us in the media, including bloggers, it's time to begin spreading the word.  And thus hopefully the practice.

    Here's a rather negative article from The National in Abu Dhabi.  "Debt Ridden Developers Face Prison or Flight".

    How much better if the writer had stopped his Emirates bashing and looked at the positive side to this story.

    Here's a more uplifting story based on the sound journalist principles in use at Gulf News, the newspaper of record in Dubai.

    UAE Extends Charitable Hospitality to Indigent Businessmen

    Abu 'Arqala
    Last Updated: December 28. 2009 5:12PM UAE / December 28. 2009 1:12PM GMT

    Despite heroic efforts, the wise political and economic leadership of the Emirates have been unable to shield the UAE fully from the global economic crisis caused by imprudent and unwise actions of foreign financial markets and financial firms.  If that foreign malfeasance weren't enough, there is sadly foreign perfidy.   Many local businesses have suffered financial reversals due to the foreign media spreading unfounded and unjustified rumors about the local economy.

    In this atmosphere, where can a businessman - particularly a foreigner - turn in times of trouble?

    The story of the Emirate's assistance and charity is truly remarkable and one hopes an inspiration to other countries around the world.

    While there are many cases, this article will relate just a few - the most touching stories.

    There's Dirk Sassen, a German citizen who had been a successful real estate developer.  His business suffered and he ran out of money, demonstrated by the fact that he was unable to settle several checks.  Is Dirk out on the street as he would be in New York, perhaps living in the subway?  Remember that the New York subway is not as clean or modern as Dubai's Metro!

    No he's not living in the subway or washing car windshields in Manhattan with a dirty squeegee. Currently he's a guest of the Emirate of Sharjah, which is providing him accommodations.  But that's only part of the story.  While a guest of Sharjah, Dirk has seen a dramatic improvement in his health.  He's lost over 10 kg as part of the health regime offered by his hosts.  A new haircut and sartorial style - just the ticket to prepare for a job interview.  Access to the telephone for those all important calls to headhunters.  Not only that, but he's been made part of a twenty-seven strong support and networking group sponsored by the Emirate.   And no doubt making new friends and business contacts to help him get back on his feet.

    With the global crisis being of such a magnitude that it may take decades for business to recover, who is providing businessmen with assurance of basic support during this period?  Certainly, not the UK where even the most sacred of institutions, bankers' compensation, seem to be under unrelenting attack.

    But the story is different across the UAE.

    The Emirate of Dubai has guaranteed Peter Margetts twenty years fully paid accommodations courtesy of Shaykh Mohammed.  Yes, you read that correctly, Peter need not worry about where he will rest his head for the next two decades!  And he too will be given opportunities similar to Dirk's to make new friends and contacts.

    Ras Al Khaymah has ensured that Frank Khoie will have a place to stay for the next three years.  What a relief not to have to worry about housing when one's mind is pre-occupied with rescuing one's business!

    These three accounts prove that the tradition of bedouin hospitality remains intact to this very day.  And one might say even flourishes in the United Arab Emirates since as you will notice three different Emirates have extended helping hands to those less fortunate.  What's remarkable here is that all three are foreigners.  What other country would show such solicitude to foreigners down on their luck?

    Dubai Financial Market Provides Unrivaled Liquidity - Passes All Tests

    Frankly, when I read this article in the Gulf News, I was more than a little dismayed.  It seems perhaps that not everyone has gotten the editor's memo yet.  I suppose one excuse is that this is a guest columnist .

    Here's just one example of the unjustified negativism in this article:
    "The most important thing to keep in mind at this time is that the market trend of both the Dubai Financial Market General Index (DFMGI) and Abu Dhabi Securities Exchange General Index (ADI) continues to be down. There is high risk of further declines both in the near and medium term."

    Well, aware not only of the Gulf News editor's memo but possessed of a keen civic spirit, I've taken it upon myself to write the article as it should have been written.

    Dubai Financial Market Provides Unrivaled Liquidity - Passes All Tests

    Special to GulfNews:  Abu 'Arqala  December 28. 2009

    "The most important thing to keep in mind at this time, particularly in the light of the unjustified negative campaign being waged against Dubai by the world press, is that the Dubai Financial Market  ("DFM") is thriving and reaching new pinnacles of success.

    Under the wise political and financial leadership of the Emirate, the DFM has been providing unrivaled access to liquidity to investors wishing to rebalance their portfolios from equities to cash.  As part of this process, the DFM has repeatedly not only tested its lower support levels, but also in keeping with the spirit of Dubai has surpassed every test.  And thus broken through every barrier placed in its way.

    At the present time we can expect this trend to continue, demonstrating yet again that the Emirate is motivated not only by a sound vision but excellence.  And while it may seem a bit self-centered, the DFM can truly claim to have set not only the tone but also the trading pattern for other regional markets as well.  This is after all Dubai - a model for the GCC.

    As the Dubai market consolidates at these new levels, it is positioning itself for a renewed period of explosive growth."

    The Investment Dar - Adnan Al-Musallam (Chairman/CEO) Interview



    AlQabas published a summary of Mr.Al-Musallam's interview in Dubai with AlArabiyya.

    Here are the main points:
    1. TID never requested that a reduction ("haircut") in principal from its creditors. 
    2. The restructuring agreement that 2/3 of the creditors have agreed to ensures them their full rights of repayment.
    3. Full repayment is embodied in the transfer of assets to a creditors' committee whose agreement is required for the sale or any other dealing in the assets and as well their safe keeping/preservation.
    4. TID's problems occured because at the onset of the crisis creditors refused to rollover/extend debts, shareholders were unwilling to provide more funds and asset sales were not possible.
    5. He noted that these difficulties occurred even though TID had diversification in its sources of income - no one source was more than 8%.  TID also had a similar diversification in its use of funds.
    6. Liabilities range between KD950 million and KD 1 billion.
    7. The 1/3 of creditors who have not agreed are composed of those who are (a) waiting for board meetings to make a final decision or (b) those who refused completely.  And those (presumably the latter group) are very small not worthy of comment.
    8. He called for all creditors to join the restructuring or those entities regulating those creditors to agree to the restructruing to achieve their rights because "every contract that TID entered into is subject to the Shari'ah".
    9. Those who go to court will wait 3 to 5 years to obtain their rights and won't earn any profit.
    10. Therefore, it's in everyone's interest to sign up.
    Some comments in the article:
    1. His comments indicate that TID does not have a binding restructuring agreement on all its creditors.  Those who have not agreed retain their rights to sue in court.   To the extent that they believe the restructuring fundamentally affects their rights they may sue to have it overturned.  And may be successful.  Certainly, the transfer of all of the company's assets to a segment of creditors would appear to be a preference of one group over another.  In other words, talk that "TID has struck a deal" is kalam faadi. (= empty talk)
    2. It's unclear to me what is the full import of his comment about Islamic contracts and lack of profit for those who pursue legal means.   Is the Islamic rule that in a court case interest does not apply?  But that would contradict with International Investment Group's lawsuit with the Islamic Development Bank where interest was granted by a local court.  If there's anyone out there who  can explain this,  please post.
    3. The comment about supervisory authorities is unclear.  Is this a reference to central banks?  To Shari'ah boards?  It seems to be an appeal over the heads of the creditors.
    4. For a group not worthy of mention because it's so small, Mr. Musallam is making a fairly strong pitch - which again suggests to me that despite the brave talk of having struck a deal, TID has not.  And, thus, is trying to find a way out of  a difficult place.
    As of today, it appears that TID has still not cleared its fiscal 2008 financials through the Central Bank of Kuwait.

    And as a final note, if someone out there has a contact at TID, would you be so kind as to suggest they tidy up their website a bit.  The 25 December press release needs some editing attention.  And the 2007 earnings announcements are a bit out of place.

    Nakheel Corruption Case: The Iceberg Just Got Bigger

    Seems that six individuals have been accused of improriety not just one as mentioned in my earlier post.

    I think though that we're still in the shallow end of the pool with the goldfish.

    Follow-Up on Earlier Tie Your Camel Post - The Trusting Lawyer

    Here's the latest news on an earlier post.

    Wouldn't you expect an investor, particularly a lawyer, to check the Commercial Registry to learn a bit about the company before plunking down BD50,000?  In Bahrain the MOIC CR is just a mouse click away.