Dubai World To Offer 60% On Debt?

 

Business Maktoob reports that Dubai World is considering two rescheduling proposals:

1. 60% of principal over 7 years with no interest but with a sovereign guarantee from the Emirate of Dubai.
2. 100% of principal over 7 years:  60% apparently in cash and the rest in Nakheel assets with no government guarantee.  It is unclear if this offer also is without interest. 

Some reactions.

The substantial haircut in the first offer is actually larger than it seems.  Assuming equal annual principal payments and an annual 5% discount rate, on a present value basis the "generous" 60% turns out to be something more like 49.6% of face value. Loading repayments towards the back end of the maturity schedule or increasing the discount rate obviously reduces the net present value of the debt. For example, increasing the discount rate to 10%, leads to a 41.7% recovery - again on a NPV basis.  And it's probably a safe bet that the principal repayments will be back ended.  So let's say an effective 40% recovery is probably a good working assumption.

In the second proposal the banks are offered Nahkeel assets in settlement.  Presumably, these are assets that Nakheel believes it cannot realize during the next seven years at a  reasonable price.  Otherwise, it would hang on to them.  So, of course, it makes eminent sense to let the banks have a go.  After all, they've already demonstrated quite a high level of competence in selecting investments.  And a track record of financing them. Seriously, the only reason the banks would rationally consider taking these assets is if they want to pretend that they're not taking the haircut.  That will assume that someone will be willing to put a cosmetic value on the assets for financial statement purposes.

So here's how I see this working out to everyone's benefit.  There's that big piece of  undeveloped land on the seacoast which if I'm not mistaken serves as "security" under one of Nakkheel's "Islamic" financings.  It's an ideal spot for a new addition to the wonders of Dubai Land.  

Like Dubai World I have two proposals:

1. "Bankers' and Investors' Folly City".   A multi-billion dollar city devoted to Great Moments in Investing and Financing.  I know just the guy in Bahrain to flesh out the concept.   I see a recreation of the Chunnel,  a replica of Enron's Headquarters,  SubPrime Acres, etc.  And rides too, the Bernie Madoff  Rollercoaster,  The Dot Com Boom,  The Implicit Guarantee.   All life size. This is after all Dubai.  It's good this is a very large piece of land because there are many many more great moments in banking to choose from.  
2. Or perhaps a Burj al Balaaha (برج البلاهة) twice as tall as the BK.  Each floor designed around a financial disaster theme.  But with the observation deck in the basement.  When one has the right sort of vision, one doesn't need to be on the 124th Floor to see the glorious horizon.

On a more serious note.  It's unclear if these two proposals are really serious or are merely the opening positions in what will be prolonged negotiations.  Positions designed to "frame" the debate.  Scare the banks with an effective 50%  to 60% haircut (present value basis).  Then when they settle on a 30% haircut they will feel they've gotten a great deal.  And no doubt brag about how clever they were in negotiations with the borrower. 

In any case, with this sort of opening bid, I expect that negotiations are going to be prolonged.  This may explain in part the delay in the standstill request.

Finally, at recovery levels like these the banks should seriously consider putting the two subsidiaries into liquidation and taking ownership.  With a bit of luck and some patience, there should be a good chance of a much higher recovery.   After all  if you're willing to wait 7 years for 50%  (or less) of your money, why not stretch it out to 10 or 14 years and get back much more?  Also the threat of taking over the assets could be quite salutary in getting the owner to rethink his offer.

Esam Janahi - AlQabas Analysis of His Career

 

Sunday's AlQabas has a long article dissecting the career of Mr. Janahi since 1999 (the year he burst on to the GCC financial scene) under the headline "From Sparrow to Peacock Back to Sparrow". 

As you might surmise, this is not the usual puff piece about a visionary leader and financier.  

Rather it postulates that Mr. Janahi's success was due more to skillful media relations, including expenditures, than substance.  It also claims that substance was rather short: that after announcing grand projects Mr. Janahi did not see them through to completion but jumped  to announce new billion dollar projects.  Потёмкинские дере́вни if you will.

There is also additional commentary by the lawyer of Mr. Khalid Bin Ahmad AlSuwaidi about the lawsuit he brought against Mr. Janahi.  Obviously, Mr. AlSuwaidi's lawyer is not neutral in this matter.  The new data offered here are Mr. AlSuwaidi's allegations (note that word)  that Qatar Energy City was his idea, that he and Mr. Janahi were supposed to be equal partners in it, and that Mr. Janahi set up a company in Bahrain which he controlled (registered in the name of his brother Rashid) and then illegally transfered assets in the original company (founded by both parties) and thus took control of the project.

The publication of this article seems to mark the official "fall from grace" of Mr. Janahi as this sort of article has not appeared before. 

GFH In Another Round of Debt Restructuring Negotiations - US$100 Million

The Gulf Daily News reports (presumably based on an announcement we'll see published Sunday when the Bahrain Stock Exchange opens) that GFH is involved in negotiations with the holders of its US$100 million facility to push forward next month's US$50 million maturity - presumably again the request is for at least six months.

GFH has engaged the Bahrain-based Liquidity Management Centre to help it in negotiations with the lenders, who are reported to be four regional Islamic banks.  

LMC is an Islamic financial institution whose mission is to help Islamic banks manage their liquidity in a Shari'ah compliant way.  It's  equally owned by four major Islamic financing institutions:  Dubai Islamic Bank, The Islamic Development Bank, Bahrain Islamic Bank and Kuwait Finance House.   Wonder if any of them are creditors?

Awal Bank (Maan AlSanea) 7% Stake in Global Investment House "Disappears"

Friday's AlQabas carries a summary of a weekly statistical report prepared by Noor Investments Kuwait.  The report notes that two major shareholders in GIH no longer appear:

1. Awal Bank (owned by Mr. AlSanea but under CBB Administration) no longer appears as a shareholder.  Previously, it held around 7%.
2. As does Tarek Khalid AlHumaidi and others associated with him who once held 8.9%.

GIH's shares traded at roughly US$0.29 per share today.  At today's price that would make Awal Bank's stake worth something between US$25 million to US$27 million.  And Mr. AlHumaidi's between US$32 million and US$34 million.  If I'm not mistaken AB bought shares several years ago.  In those more happier days, GIH's shares traded for roughly 10X what they do now.  You can figure out the loss both parties sustained.

If you're like me, you probably wonder what happened.  It's unclear if all the shares were sold or just enough to cause the remaining shares to fall below a reporting threshold - perhaps 5%.  It would also be interesting to know who acquired these shares.  Have one or more new major shareholders  emerged?  Or an existing shareholder dramatically increased its position? Unfortunately, I can't find Noor's report to try and answer that question.  Nor can I find any reports at what I assume the source is - Maqasa.

If anyone out there can post a link to the report or the source data for the report, I'd be most appreciative.  Arabic language is fine.  If I get something I'll post a follow-up.

Gulf Finance House: S&P Downgrade More Info Than Just the Downgrade

You've probably seen the news that Standard and Poors has downgraded GFH to SD (Selective Default) based on its failure to pay the full US$300 million due on 10 February.

Interestingly, GFH's website still shows it with an investment grade rating (BBB-) from Standard and Poors.  You may recall that S&P downgraded GFH on 26 November to BB+, 14 January to B+ and 3 February to CC prior to the very recent downgrade to SD.  That's what we in the "Islamic" banking game call an example of  كلام شريف

The rationale for the downgrade?  S&P considers the US$100 million for six months to be a distressed debt exchange and not a voluntary new facility.  

But there are three other items in the press release worthy of comment.

First, that GFH is in discussions with other lenders for a similar partial payment extension on another  US$100 million facility.  I think this is due in two equal tranches in 2010 and 2011.   Unfortunately, GFH's 3Q09 interim financial is silent on the pattern of upcoming maturities of debt. 

Second, the US$100 million announced 10 February was apparently not a new facility but the extension of maturity of part of the amount of  the existing facility. S&P comments that  GFH achieved the partial extension by executing the facility's "deed of extension" clause.  

Yet in its 10 February press release GFH said: "GFH has replaced its $300m syndicated facility with a maturity date of 10th of February with a new $100m murabaha which has a tenor of six months, having repaid $200m on the initial due date."  

Referring to this as a "new facility" sounds much better than an extension of maturity.   A refinancing always has much better connotations than a rescheduling.  If S&P is correct (and for some strange reason they have more credibility at SAM than GFH does), this is what it was - a rescheduling.   كلام شريف

Calling it a rescheduling may also sound better from an Islamic standpoint, though one presumes the Shari'ah Board will look closely at the "new" and/or "extended" facility.  

Third, S&P said that after the second rescheduling is accomplished, it will look at GFH's credit again and anticipates that it could upgrade them to CCC.  That I suppose is comfort.  It will represent an increase over the CC level assigned them on 3 February.  It will, however, leave them in "high yield" territory.

Gulf Finance House Denies AlQabas Article

In response to a letter from the Bahrain Stock Exchange, GFH has replied with with this letter published on the BSE.

Two things from this exchange:

1. GFH is clearly still on the "watch list".  The BSE wrote to them immediately this morning.  Maybe I have  reader at the exchange?  
2. Interestingly enough most of the article was a repeat of GFH's press release.  The only item that diverged was the bit about asset sales.  GFH has publicly announced that it would be selling "non core" assets.  So is the denial that it will be selling assets, hopes to sell up to US$400 million, hopes to sell 40% of its Syrian bank, hopes to do that by an IPO.  Or is this like its earlier denial that it was in discussion with WestLB for a new Sukuk of US$50 million to partially fund the 10 February repayment.  You'll recall that it received a US$100 million sukuk from the syndicate.  All of which goes to prove that many (but not all)  "Islamic" banks play by different rules than conventional banks.  As we say, "God knows".

Boubyan Bank - Capital Raising Follow-Up

It really does pay to think carefully about things, especially if one writes for a prestigious blog like this one.

There was another solution open to Boubyan Bank as Thursday's AlQabas reveals.  One that a moment or two of reflection should have occurred to at least one self proclaimed financial expert:  extend the subscription period.

Here are the main points from a press conference held by the Chairman of BB, Ibrahim alQadi (as reported by AlQ):

1. BB raised over 85% (apparently just enough to be over).
2. All the major shareholders participated:  NBK (40% shareholder); Commercial Bank of Kuwait (20% shareholder) [You recall that there are legal cases ongoing involving CBK, The Investment Dar, and Kuwait Finance House - with the latter two disputing CBK's ownership.  Acquired or not acquired as a result of a default by TID on a repo transaction involving the BB shares,   And, of course, depending on the view of your learned counsel and perhaps as well your own economic interest]; the Social Insurance Institution (4% shareholder) and other unnamed large natural person and legal entity shareholders.
3. But since BB has over 80,000 shareholders many with holdings less than 2,000 - less than 15% of the shares offered were not subscribed for.
4. According to the approval at the previous ordinary general shareholders meeting ("OGM"), the unsubscribed shares were to be offered in a public auction but the Government Department of Fatwa and Legislation refused to allow this.  The Department is I believe part of the Kuwaiti Finance Ministry. If anyone out there knows the reason for this, please post a comment.  Is it designed to protect shareholders' rights - even if they're too "lazy" to exercise them?
5. So the plan is to hold another OGM and extend the subscription period for shareholders registered as of 21 January 2010.  Presumably the dates will be set by the OGM and the price will remain KD0.255 per share.  The Board met yesterday and formally approved recommending  this course of action to the OGM.   No timing for the OGM is mentioned in the article.

Gulf Finance House - 5% Margin on US$100 Million & Plans for US$400 Million in Asset. Sales

Two articles provide some additional information on GFH's situation.

The first is from Zawaya which reports that the margin on the US$100 million six month murabaha from the WestLB-led syndicate is an eye popping 5%.   How does that compare to what they were paying on the US$300 million facility that matured today? Sadly, there doesn't seem to be any disclosure in GFH's financials about the profit rate on the "old"  US$300 million WestLB facility that this "new" one partially replaces. A non Shari'ah compliant bank would be required to give that sort of disclosure in its financials, but apparently Shari'ah compliant banks follow a different, if not necessarily higher, standard.    However, we can make an estimate as to the previous margin by reference to GFH's DB-led Sukuk.  The profit margin on that facility is currently 1.75% (after the 0.5% step up due to the recent ratings downgrade).  Using the Sukuk as a proxy, the new facility is paying somewhere in the range of 2.9X to 4.0x the earlier WestLB margin.  Probably at the higher range because the WestLB facility was granted in much happier times.  When one considers that the margin is 5% for a six month facility, the effective multiple is even higher.  Ouch!

The second is from Thursday's AlQabas and deals with asset sales.  It has the headline "GFH Compelled to Relinquish Assets". 

The first paragraph quotes Acting CEO Pretty as saying that GFH hopes to raise US$400 million from sales of its shares in financial firms and real estate.  The plan is to sell 40% of its interests in a bank in Syria via an IPO within six months.   

This seems an unfortunate time to be engaged in asset sales much less IPOs.  It's not clear to me that  there is any significant demand out there.  Especially for Syrian assets given all the recent saber rattling between Israel and Syria.  As well, prices are likely to be less than stellar, particularly because  potential buyers know that GFH is a "motivated seller".  This asset sales plan is reminiscent of the  Hail Mary Pass in American football.  Throw long.  Hope someone from your team catches it.  And scores the winning points.  It works sometimes: Staubach to Pearson.

One intriguing thought that comes from AlQ's headline:  Did GFH have to commit to crash asset sales as a condition of the US$100 million loan?

The rest of the article goes on to repeat items from the press release along with the standard refrain of companies in trouble that they are selling "non core" assets.  The latter particularly caught my attention.

Whenever I read the phrase "non core assets", a series of scenes flashes in front of my eyes.  Various scenarios to explain how and why these assets were ever acquired.  Scenarios that need not be mutually exclusive I'd add.

Did they know they were "non core" assets when they bought them?   I imagine a board meeting or perhaps the risk committee of the bank getting together to approve a "non core" asset purchase program.  "We've got lenders eager to lend.  Why don't we buy some 'non core' assets?  Definitely don't have enough of them."    What's even harder to understand is that usually the purchases are for rather substantial amounts.  The kind that could bring down the firm if they went bad.   You'd think that in pursuing something "non core" you wouldn't bet the proverbial ranch.  Rather you would be spending those precious borrowed funds on your main lines of business - what you might call your "core business".

Or were they just willy nilly buying assets and then later decided that some were "core" and some "non core"?  Abundant and cheap liquidity often has the same effect on judgment as خمر.  Metaphorically, one wakes up with a splitting headache the next day,  opens one's eyes and "Oh, no, how in heck did that get here?"  Struggling for a while one remembers that one thought it looked pretty good last night and brought it home.  But not now, especially  in the daylight.

Or did the assets turn into "non core" assets?  Like the  yogurt you bought two weeks ago at Jawad's but didn't eat.  One day you open the refrigerator and there it is festering in the back.  Maybe having grown a  small beard.   If it's been in there long enough, perhaps even scurrying about a bit. Or at least stirring. One hopes not ominously.

Zain: A Pro-AlBarrak Article from The National

The National has an article in favor of Dr. AlBarrak's stewardship.

The problem is not at Zain.  

The fundamental problem is simply that some of its Kuwaiti shareholders have characteristically overextended themselves and now need cash.  Typically what would have happened in the past is that  the "investor" would go to a "wise" local bank who would lend him additional money based on what might be charitably described as an optimistic collateral valuation.  No cash flow on the assets  of course but really good assets nonetheless.  Really good.  The Central Bank of Kuwait stopped this game of charades over a year ago by imposing additional lending restrictions.

So now all that's left to the "investor" is to raid his good investments to bolster other "wise" but less profitable investments or to repay maturing loans.  

And so value that was created in Zain will be destroyed.

What's a bit sad is that one (at least I this one) doesn't usually think of MAK Group as being a typical Kuwaiti "investor". 

That isn't to say of course that Dr. AlBarrak made all the right decisions at Zain or that Zain's strategy was necessary flawless.  But what does a telecoms company in a small market like Kuwait do to build value?

A couple of other things from the article:

1. An absolutely brilliant quote from Saad:  “There will be peace with Israel before there is an independent regulator in Kuwait,” he once said in a magazine interview.  Of course unlike the old joke about Gorbachev and God, he did not address when the regulator would be effective.
2. Another quote this time from The National:  "Kuwait’s practically unregulated stock market does not require investors to disclose their total holdings in a company, including shares controlled by related parties."  Another charitable comment.  There is precious little disclosure required on most topics.  A glance at the websites of listed companies in Kuwait would confirm this.  And for all those out there who advocate less regulation and allowing the market to police itself, there could be no more compelling example of "success" this approach will bring than the KSE.
3. And another:  "In the past decade, Vavasi has announced a number of multibillion-dollar projects, including a pan-Indian mobile network, an advanced silicon manufacturing facility and an aircraft manufacturing joint venture. None has materialised."   That this ever was taken seriously is a testatment to the truth of yesterday's post Stage #4.  In any case, later this week  we may be announcing Vavasi's participation in the US$1 billion build out of Suq Al Mal.  There will be exciting new features and an overall improvement in your experience here at the site.  And an even more dramatic improvement in Abu Arqala's lifestyle.  Or at least AA hopes so.  With this dramatic change in fortunes imagined, it may be time to submit that loan request to my favorite banker in Kuwait.  Well, actually no, I think Abu Shukry is liable to turn me down.  Luckily, there are "wise" lenders in Kuwait who may not.  And as demonstrated by my postings here, I can take either conventional or "Shari'ah" compliant financing. 

Dubai World to Submit Standstill Request During February

 

 

According to an article in today's Al-Ittihad Newspaper quoting an unnamed lender, DW will submit a formal standstill request this month.

The article states that DW has spent the period since its 21 December meeting convincing its lenders that its assets were good and that prospects for a successful restructuring were high.  

However, it's really hard to buy this.  I can't imagine why lenders would not agree to a standstill:

1. If they think there is no hope for a successful restructuring, wouldn't the wise thing be to take the DFSF money and pull the trigger later?  At least they will get the interim cash flow. 
2. If they're not sure, take the DFSF money and spend the next six months doing the most rigorous of due diligence.   And make a decision then with a bit of cash in one's pocket.
3. If they procrastinate in coming to a decision, there is a danger that the cash flow will dry up - unless the Government changes its mind about continuing to pay (often negotiating positions are just that) or there is a miracle in DW's operations (miracles do happen but sadly not often enough to be a reliable credible second way out).
4. Another highly motivating factor is that more than just a few of the lenders have very significant sums at stake.  Thus, a good number of creditors have a very strong incentive to "extend and pretend" regardless of whether the rescheduling has a low, medium or high probability of success.

So, what could account for resistance to a standstill?  

1. A group of lenders determined to make such a nuisance of themselves that they get taken out - maybe by those larger banks with so very much more at stake.  
2. Stupidity and or incompetence (a sadly not uncommon occurrence).
3. Failure to submit a standstill for other reasons.  And that could be a "client" issue rather than a Aidan issue.  That is, he is giving advice but the decision process is stalled.
4. Other issues.

On that last topic, you'll recall that another reason has been given for the delay in submitting the request:  negotiations over the terms on which the Dubai Financial Stability Fund would provide funding to DW to enable it to continue operations and to pay interest.  Press reports suggested that the DFSF was looking for collateral.  Since lenders are only being paid interest what that would mean is that the lenders would be effectively "mortgaging" their future principal repayments to get interest now.  On an economic basis cash inflow is cash whatever one calls it.  However, on an accounting or regulatory basis there could be consequences.  I'd have to vote for this as being the impediment.

Business Maktoob has an article today based largely on the Al-Ittihad article which offers another explanation, though I don't find this in Al-Ittihad:

"It's difficult to coordinate an agreement with so many banks...the process has been slow," said one Dubai-based banker, who asked not to be identified.

It's not uncommon that there are many creditors in reschedulings.  That's why  lenders form a steering or creditors committee to facilitate communication and negotiations.  On that latter point the rescheduling process is a "negotiation" as opposed to a "dictation".   One side proposes something.  The other side may not immediately accept it.  And then a solution - often but not always a compromise - is worked out. 

Professional advisors in the business understand that there is a particular psychology involved in restructurings and that reaching a deal requires accommodating oneself to this dynamic.  Looking at it from the  borrower's advisor's point of view, the first step is getting the client to realize that he has gone from hero to zero notwithstanding the  earlier creditor talk of a "relationship'".  That creditors now aggrieved are likely to want revenge for the borrower's "faithlessness".   The wise borrower then makes a sacrifice or two.   Often the first step is a bit of blood in the form of sacking someone in management: throw a handy virgin or senior manager into  the volcano.   Undertake some perhaps needless  but symbolic cost cutting (which is completely irrelevant to the prospects for recovery) so that creditors can see one is not only contrite but also suffering as they themselves suffer.  Another way is to give  some tactical victories to the other side during negotiations.  Propose more than one wants so that the lenders can reject it and score a victory.  Later around the syndicate campfire the bankers can tell stories of their bravery and cunning and how they faced down the borrower and forced him to bend to the inexorable wills.  And conveniently forget the original underwriting decision that got them into this fix.

Let's say one wants a six month standstill.  The banks may not wish to go that long.  One proposes a six month period knowing this.  The banks balk offering only three.  One then reluctantly proposes a three month standstill that is renewable for a further three months crying at how cruel and unreasonable the banks are being.  Sensing blood in the water, the banks pounce.   One has one's six month standstill or close enough so that one has gotten what one wants.

GM of Lu'lu (Pearl) Real Estate Kuwait Resigns

Lu'lu Real Estate announced the resignation of its GM, Mr. Ahmad Muhammad Ahmad AlAjlan.  No word on replacement.

Below is the KSE announcement.

[10:12:0]  ِ.استقالة مدير عام شركة لؤلؤة الكويت العقارية
يعلن سوق الكويت للأوراق المالية بأن شركة لؤلؤة الكويت
العقارية افادته بأن مجلس ادارة الشركة وافق بتاريخ 9-2-2010‏
على استقالة السيد احمد محمد احمد العجلان مدير عام الشركة.‏

GFH Announces Payment of US$300 Million and Six Month US$100 Million New Debt

GFH announced today that it had reached agreement with the West LB syndicate on its US$300 million loan maturing today.  It will repay the full amount of US$300 million and has received a "new" US$100 million six-month murabaha facility from the lenders.  In effect, it will pay US$200 million in cash and the lenders are deferring payment on the US$100 million due today for six months.

GFH's press release touts this as a significant accomplishment  and a vote of confidence by its lenders.

However, I think there is a subtle message in the statement of West LB's Representative.

“We were pleased that we were able to act as a bridge between the syndicate and GFH in finding an acceptable solution to all parties within such a short period of time. We believe that the terms of the refinancing provide GFH with the necessary time to execute the comprehensive plan presented to the banks to return to profitability. The fact that GFH was able to secure unanimous support of the banking group is as a direct result of the pragmatic way in which all parties approached the situation,” added David Pepper, Head of CEEMEA Syndicate at WestLB.

First, his language is that of a problem solved:  "acceptable solution", "pragmatic way".  This is not the language of unbounded enthusiasm.  The banks were presented with two alternatives.  The first was to insist on full repayment.  This likely would have meant a default on the US$100 million.  All sorts of unpleasant consequences for the lenders (and for GFH) would have followed.  The second option was to extend and pretend.  From where I sit the decision seems quite an easy one.  As well in terms of  pragmatism it will be interesting to see the terms on the new facility and how they differ from the previous one.  Unless there is disclosure from GFH in the interim we will have to wait until the release of the 31 March financials for that data. 

Second, the extension is billed as providing "GFH with the necessary time to execute the comprehensive plan presented to the banks to return to profitability".  It is unclear how an institution with a fundamental problem in its business model is going to return to profitability within six months.  I certainly don't believe it's possible and frankly wonder if Mr. Pepper does as well.  Of course,  the banks had to give some justification for the six month tenor.

Saudi Capital Markets Authority - Corporate Governance Seminar in Partnership with Swedish Trade Council 9 February 2010

 

Copyright AlRiyadh Newspaper Saudi Arabia

Last December I had noted that the CMA had planned a corporate governance seminar for February in partnership with the Swedish Trade Council.

Here's the report and pictures from AlRiyadh Newspaper on the seminar.  Impressive list of speakers and good topics.  Summary here.  You can use this link to view additional information on the seminar.

Also here are the CMA's Corporate Governance Regulations (issued in 2006).  Definitive text here in Arabic.

Dubai New Oil Discovery - Just How Big?

 

Mubarak Offshore Field UAE Copyright Crescent Petroleum/Icethorn 

Here's one assessment - a repeat of an AFP news wire story in The Kuwait Times.  Essentially the message here is "not big enough to matter".

And here's the UAE Federal Government website page on Oil and Gas.

Just a note about the picture above, Mubarak Offshore Field belongs to the Emirate of Sharjah.  The picture is included to give a generic idea of what an offshore platform looks like.

GCC Secretary General Update: GCC Central Bank & EU-GCC Free Trade

Asharq AlAwsat reports on comments by Abdulrahman Hamad AlAttiyah, the Secretary General of the GCC, from a Qatari-Saudi business conference this Saturday.

1. The first meeting of the GCC Central Bank is scheduled for 30 March in Riyad.  The Governors of the Central Banks of Bahrain, Kuwait, Qatar and Saudi will attend.  Discussions will focus on legislative, institutional, and procedural aspects related to the currency union and the single currency.  More technical meetings will follow to continue the steps necessary to launch the single currency.
2. He remains optimistic that the UAE will join the single currency project and will be able to quickly catch up.
3. The EU has presented some new proposals in a bid to reinvigorate the stalled EU-GCC Free Trade negotiations (which began in 2008).  Their proposals have to do with a more flexible less time bound approach to the issue of customs duties, including those on exports.  The GCC is studying and will revert.

There were also some points on the GCC railway:

1. Project is in the detailed study/technical drawings after having obtained agreement in principle.
2. HQ for the organization to supervise the railway has not yet been chosen.  

And some news from the Qatar-Saudi businessmen's conference which 300 businessmen attended:

1. 2008 trade between Qatar and KSA was some SAR6.2 billion (US$1.65 billion).
2. The number of joint Q-KSA projects in the Kingdom through June 2009 was 16 with capital of SAR6.1 billion.
3. Various speakers called for increased co-operation.
4. Ahmad Al San'i (Saudi businessman) called for creation of a joint company in which the two governments should invest to promote business in Qatar and Saudi.
5. Picking up on that theme, Khalid AlMuqayrin, (another Saudi businessman) called on the SWFs of the two countries to invest at least 5% of the value of their holdings in the two countries so that "there would be a direct return to the two countries and their citizens rather than having all their investments far from the region which don't have a direct impact on citizens".

How the Mighty Fall and How Management Gurus Get Rich

A very good column today at the FT by Stefan Stern.

Interesting insights into the cycle of decline:

1. Hubris born of success - We can do no wrong.
2. Undisciplined pursuit of more
3. Denial of risk and peril
4. Grasping for salvation
5. Capitulation to irrelevance or death

In re my earlier post about the USA today and the Dubacle, I will leave it to you to decide which stage each of these parties is in.

The other interesting insight is that there is a market for management gurus and books apparently unrelated to success.  Perhaps, the most important lesson of all.

USA AAA Rating

The Treasury Secretary of the United States of America gave an interview with ABC this weekend.  He was asked about Moody's comment that the USA might lose its triple A rating.  He replied.

“Absolutely not,” Geithner said, when asked in an ABC News interview broadcast yesterday whether a downgrade is a concern. “That will never happen to this country.”

You notice that Secretary Geithner said "never".

When one thinks that the laws of gravity (physical or financial) do not apply to one, one is likely to be in for a surprising downfall.

And that leads into another issue.  Chairman Mao's  observation of the relationship between political power and guns is oft quoted.  Of course, guns cost money. 

Here's another perhaps cautionary tale from a land on whose Empire the sun never set.  And never would or so we were told.

Damas Appoints Chief Restructuring Advisor

Damas announced some senior management changes at Nasdaq Dubai today.  Most of these are interim appointments while the Board conducts a search for a permanent replacement.

But one appointment did stand out:  that of  Mr. Sanjay Manchanda, a Partner at PricewaterhouseCoopers,  as  Chief Restructuring Advisor.

Burj Khalifa - Observation Deck - 60 Stranded for Over One Hour Saturday

 

Image Credit: Karen Dias/XPRESS

Gulf News (Dubai) reports that a "minor incident" on Sunday is responsible for the close of the BK's Observation Deck.

Sixty people were stranded for over an hour at the top after an elevator apparently got stuck on the way up. A loud bang and cloud of smoke frightened those on the deck.  The passengers in the elevator had to climb up a ladder to get out.

Two views of the situation.

An American tourist:

"But there was a big lack of communication throughout the whole ordeal and it has certainly put me off going back up or taking visiting friends and family."

An unnamed "official".

"It is absolutely normal for a new building to face minor issues such as this, which involved one of the Burj Khalifa's elevators."

As I noted in an earlier post, often new buildings particularly skyscrapers have problems during their initial opening phase.  That's not the issue.  It is how any such problem is handled.   Pretending that they don't  exist isn't really the best way to go.

So it might be helpful to refer to this not as "maintenance" but what it really is "repairs" - fixing defects.  After only one month in operation, there hasn't been any significant wear and tear.

Gulf Finance House - Update on Rescheduling US$300 Million West LB Facility

AlAnba'a Newspaper (Kuwait) reported the following on 8 February:

1. The West LB-led syndicate had agreed to GFH's request to reschedule US$100 million of the $300 million due 10 February for six months.
2. GFH and West LB were in discussion about a US$50 million Sukuk with a two year tenor (maturity  June 2012).
3. Last week GFH was in discussions with various private sector parties in Kuwait and the Gulf seeking a US$100 million loan to be secured by real estate and shares.  (Note most of GFH's facilities are so secured). These were undertaken as a back-up to the West LB discussions. Status of these negotiations is unclear - whether they achieved anything and whether or not they are continuing.
4. Whether repayment of the US$100 million will come from GFH's capital increase last year or from expected profits from GFH's investments (which AlAnba'a says were US$500 million last year).

Today GFH issued an announcement in reply to a request from the BSE about the 8 February article denying that it was in discussion with West LB over a new US$50 million Sukuk.

Some thoughts:

1. First it's a pretty good assumption that GFH is on the "watch list" by the authorities.  A press report is published in Kuwait on 8 February.  The same day the BSE writes to GFH asking for a clarification.  This enhanced supervision is a major takeaway.  The regulators are concerned about GFH's situtation.
2. Second, it's probably not unreasonable to assume that if GFH were sitting on a pile of cash, the West LB lenders would insist on full payment of the amount due them tomorrow.  So where did that US$450 million go?  Well US$200 million is going on Thursday. No responsible institution is going to pay away all of its cash.   There are bills to pay.  GFH has been running about US$35-$40 million in operating expenses per quarter, though this will now come down as the US$200 million payment will reduce interest expense.  Balance that against cash inflows and you'll see the need to conserve cash:  revenues have pretty much dried up.  In 3Q09,  operating revenues were a paltry US$5.9 million.  And you'll recall I had raised earlier the perplexing fact that Deutsche Bank was converting its facility into stock in GFH.  Could that have been related to a cash outflow? When Fiscal 2009 financials and 1Q10 financials are released, we'll be able to understand better GFH's cash position and what the cash was used for.

Boubyan Bank Capital Raising - 85% Takeup Only

 

AlQabas reports that the recent share offer by Boubyan only received shareholder subscriptions for  495,257 shares which are equivalent to approximately KD127 million. (actually about KD126.3mm)   This is 85% of the amount offered.  That leaves  according to AlQabas 87,398 shares worth some KD20 million unsubscribed for.  

The offer was at KD0.255 per share (a KD0.155 premium over the nominal share value of KD0.100) and extended only to existing shareholders closing on 7 February 2010.   The privileged rights offering mechanism gives existing shareholders the right to subscribe for enough shares to maintain their percentage ownership in the company after the offer closes.    

My understanding is that 583,000 shares were offered - which would make ALQ's numbers above wrong.  Of course, there is another explanation - one which Umm Arqala might well suggest:  that AA is wrong.   Whatever the case, this is an attractive offering price as the shares currently trade around KD0.400 per share.

Al Qabas outlines several options to complete the offering:

1. Boubyan can offer additional shares to existing shareholders.  Any shareholder holding 5% or more would require Central Bank of Kuwait approval.  Absent CBK approval, an existing shareholder could subscribe to a 4.5% stake.
2. Shares could be offered to KIA.   

Personally I think this is not highly likely because KIA sold its  shares just about one year ago.  Earlier post with some background here.

It's more likely that an existing shareholder might buy an additional stake.  The article notes that National Bank of Kuwait (which currently owns 40% of Boubyan) has asked the Central Bank of Kuwait for permission to increase its shareholding to 60%.  And they would be a likely buyer.  As would another investor looking to secure a major block of stock.  NBK's interest is that  they are looking to establish an "Islamic window" to conduct banking operations and sensibly want to ensure that control is firmly in their hands.  At the present they have management control, but not an absolute voting control.   

The article closes by noting that other banks seem happy to invest alongside NBK as several banks had participated in the offering.  That is no doubt true especially since NBK has a good track record in running the businesses it enters.  But then again it just might be that these banks figure that as time passes NBK will  increase its stake in Boubyan and they will be well placed to turn a nice profit on their investment by selling it to NBK.  And would explain as well why a bank or other investor might be interested in the unsubscribed for shares.

Earlier posts on Boubyan including the legal battle between Commercial Bank of Kuwait, The Investment Dar and Kuwait Finance House over the fate of TID's shares can be accessed by using the label Boubyan Bank.

Ahmed AlSuwaidi v Esam Janahi - Update on Lawsuit

According to press reports, the Court of Cassation in Bahrain (the country's highest court) has overturned the decision of the Court of First Instance and the Appeals Court to reject Mr. AlSuwaidi's lawsuit against Mr. Janahi.  The Court of Cassation has remanded the case to another Appeals Court.

Mr. AlSuwaidi is seeking US$125 million in compensation related to "The Energy City in Qatar".  As per the article originally he and Mr. Janahi were parters in a Caymans registered company "Gulf Energy Company" which was to develop the Qatar Energy City.  It's not explained how, but Mr. Janahi acquired control the project which the article states cost several billion dollars and opened in March 2006.

Here's a report from AlKhaleej (UAE) and AlQabas (Kuwait).  

You're not likely to see anything in the Bahraini press given the constraints imposed by the Press Law (Law #47 of 2002).  And that's why in the Bahraini press the name of the former CEO of The International Banking Corporation was not mentioned in the article on his arrest.  Or why the Bahrain press will not publish the name of a businessman or company declared bankrupt by the court.

Burjbacle Continues

 

Pawan Singh / The National

When you're on a roll, you're on a roll.

Sadly, though sometimes it's downhill.

To be fair, when the Hancock Building opened in Boston, smart folks soon learned to stay at least one or two blocks away because the windows had the unhappy habit of popping out.   And of course there's the "Building of 1,000 ------" in Hong Kong whose unique porthole style windows were designed to deal with problems as well.

So the reference to "Burjbacle" is not to the problems as much as to the way they are being handled. 

The Market Speaks: SuqAlMal Blogspot Value Declared IPO Rumored to Be Planned

It's hard to put a value of the things one does.  And then self-valuation of assets is always a tricky thing and subject to all sorts of moral hazard.

Today someone pointed out to me that an independent source had valued Suq Al Mal.

As with all good leaders I "immediately sprang into action" to take decisive action to learn the value:  about US$175.20.

That may not seem like much, but as a good GCC investor I see the upside potential here.  

Under my downside case business plan at 84 million hits per day Suq Al Mal will be worth a cool US$20.2 million.  84 million would represent just 1.2% of everyone in the world visiting my site each day.

At my base case plan of just a modest 12% (clearly something quite achievable) SAM is worth US$202 million.

And finally the upside case  at 30% (I'm still the same old conservative AA) US$500 million.

Can an IPO be far away?  

Or perhaps a mudaraba with Rotana?  We can each contribute our assets and share 60:40 in the profits.

Global Investment House's Apologia for the Restructuring

GIH has also published a ten page brochure on its debt restructuring. 

The brochure begins by answering the natural question how did this happen.  It seems Global's misfortunes were a direct result of the Global Financial Crisis (no pun intended) and apparently had little to do with Global's conduct itself.   Sadly, after giving us this insight, the brochure doesn't explain why some other firms weren't affected by the International Financial Crisis.

But then precious space in the report had to be used to describe how GIH's management "immediately sprung into action" and dealt with the crisis.  A wise move when faced with the threat of imminent death.

Certainly, GIH deserves credit for its conduct during the rescheduling - though it is a very sad state of affairs when acting professionally and honorably is apparently so rare an occurrence that it  is remarkable and worthy of comment.  That being said, GIH knows better than I do the nature of the market in which it operates.  From where I sit I would agree that GIH's behavior was out of the ordinary.

However, the tone and whole point of the brochure seems a bit too self-congratulatory.  Especially in a case where the terms of the restructuring clearly indicate that GIH's business model did not work and is being abandoned.

So all in all the brochure seems to me the product of a delicate and apparently still troubled ego.  "It's not my fault".  "See what I nice person I was and how I acted so nicely".  "Many people said so (and I'll devote a page in my brochure to recording their accolades)".

In the world of business one has set-backs.  One addresses them.  One goes on.  If one does look back, it's at the lessons.  Self-justification and self-praise seem out of place.  But then again GIH knows the market it operates in better than I do.

Global Investment House - 2009 Earnings KD120 Million Loss?

Global has an announcement at the DFM today commenting on press reports that it lost KD120 million in 2009.   The announcement states that GIH's financials are with the Central Bank for its approval and until it receives the approval of the Central Bank of Kuwait, it cannot comment.

As of 30 September 2009, GIH had reported a net loss of KD105 million so a loss of KD 120 million would not be anything dramatic.  Operating expenses run about KD17 to 18 million per quarter.  There were probably some additional provisions required (as Ms. AlGhunaim has  hinted in interviews) and as well perhaps some expenses associated with the restructuring.

IMF Analysis: MENA Foreign Trade Constrained by Transport and Customs Clearance Problems

Rina Bhattacharya and Hirut Wolde of the IMF have analyzed MENA foreign trade and come to the conclusion that trade is some 86% below what would be expected given the characteristics of these countries' economies.  The non-oil exports of the MENA countries are significantly lower as a share of GDP compared to all other developing regions of the world.  Imports are also lower as a share of GDP compared to the same regions, with the exception of sub-Saharan Africa. This is documented in Figures 1-6 of the study.

The conclusion is that two factors are primarily responsible for trade under performance:

1. Transportation problems 
2. Customs clearance "inefficiencies"

While one might quibble about just how precise the conclusions are (Is it really 86%?  Or is it 83%?), the bigger picture of under performance is less subject to debate.   

And that really is the central message from the study - quite a disturbing one for an area facing a demographic "explosion" and the need to create new jobs.

Kuwait National Portfolio - A Slightly Different Take From Bader Al-Subaie

A slightly different take on the purpose of the National Portfolio from Bader Nasser Al-Subaie, Chairman of Kuwait Investment Company which is managing a portfolio for the Government.  Here's the KUNA account in Arabic and English.

From his reading of the founding documents of the National Portfolio concept, the primary focus is investment and investment returns with impact on the market a desirable secondary effect.  Of course in "providing liquidity to the market" the National Portfolio does support the market.  And that there was an entire package of steps - of which only two have been implemented.

Earlier post here.

DMCC Asks Dubai World to Remove Its Logo From DW's Website

The National (Abu Dhabi) reports that DMCC has asked DW to remove its logo from DW's website as it asserts that it was never owned by DW.

That's really not a vote of confidence in DW coming after all this time when apparently it either didn't notice or didn't care about the "mistake".  Funnily enough the Chairman of DMCC is the son of the Chairman of DW.

It would seem that not only were foreigners incapable of distinguishing between the Government of Dubai and companies owned by it but also it appears some Emiratis themselves.  And despite a very clear exposition from Abdul Rahman Al Saleh, Director General of the Dubai Finance Department repeated here in case you've missed or forgotten it. Or this one from Lt. General, Dahi Khalfan, Dubai Police Commander General and Head of the Dubai Government's Budget Committee.  Missing one admonition is sad, missing two (including one from the Police Chief) is just downright regrettable.

Take one implicit guarantee and call me in the morning if you're still confused.

"It's Unpleasant To Have A Rat In Your Flat"

 

Completely Unrelated Picture Courtesy of Joanne Servaes

Indeed.

Luckily the problem is solved.

Burj Khalifa Observation Deck Closed for Maintenance and Upgrade

 

Picture Courtesy of  Bu Jassem at the Buj Al Arab Blog

Gulf News reports that the observation deck has been closed for "maintenance and upgrade".  The National (Abu Dhabi) perhaps a politically less correct article given its first paragraph.

Luckily, it appears that the problems are only technical in nature:  "Technical issues with the power supply are being worked on by the main and sub-contractors and the public will be informed upon completion."

Of course, as with any building, one has to perform maintenance to keep it looking new and to repair any wear and tear on the building and its furnishings.   And one shouldn't wait too long to take steps to keep one's building looking "smart".

And one can often charge more rent in a building if one upgrades its facilities and decor.

0-2

 

Indeed we have to give Chelsea credit and then move on to the next game.

Kuwait National Portfolio Poised to Make Significant New Investments?

AlAnba'a Newspaper (Kuwait) reports that the Kuwait Investment Authority ("KIA") met with three Kuwaiti investment companies last week to hear their proposals for investing the remainder of the National Portfolio set up by the Government in 2008 to combat the effects of the global financial crisis on Kuwait's economy.  The NP was capitalized at KD1.5 billion, though only KD0.4 billion has been invested to date.  That has led to criticism from various parties for the need for greater speed, especially punters caught in the market downturn.  Not of course for concern for their own finances, but for the greater national self-interest, I am sure.

AlAnba'a reports that the NP earned 13% during 2009, a rather incredible return considering the overall KSE is down some 10% for the year. (More on this remarkable result below).  Furthermore the article notes that expectations are for a 30% return on the NP this year. 

For some reason, AlAnba'a expects that once a firm is chosen there will be a significant infusion of funds by the NP into the market - either all or a great portion of the remaining KD1.1 billion.  As you might guess from that comment, I have some doubts as to whether this can move forward in the next few days (" خلال الأيام القليلة المقبلة").  The Government still has to pick new managers for its portfolio and sign contracts with them.  Then funds have to be transferred.   Then one would expect a careful process of analysis and selection of stocks.    

According to the news article, the Government will apply the following criteria in selecting a new fund manager:  The firm should not have any financial weakness or be involved in any financial irregularities (an alternative translation would be crimes) and have good performance over the past five years. It's also "necessary" that it have a good reputation and possess both confidence (presumably in its abilities) and in its commitment.  That I suspect should quite smartly narrow down the list of potential new managers, though I suppose there could be local variants of some of these standards.  There is after all Australian Rules "footy".  And it works quite nicely I am told.

At the end of the article there is a precis of criticisms levied by the (Government) Audit Bureau ("ديوان المحاسبة") about the National Portfolio's performance in 2009.  The AB's report begins by listing a series of decrees by the Council of Ministers and the Finance Minister that the AB believes have not been implemented in the NP.  These have to do with maintaining conformity with certain ratios limiting the amount of the portfolio that can be invested in an industry or a single company within that industry.  What this means is that at least some the existing managers of the NP are running portfolios less diversified  than the Government regulations determined was appropriate.  The AB report also notes that the NP's goals also include improving the factors influencing trading on the KSE - to foster positive factors and eliminate negative ones.  And presumably there is a criticism implied here that the NP hasn't been doing enough in that area.

As a side note, it is a requirement of Kuwaiti law or regulations that when the Government owns 25% or more of a company that that company be subject to an audit by the Audit Bureau.  There have been some complaints raised that there are listed firms in which the Government has broken this threshhold but which have not been made subject to an AB audit.  And if you've been following the matter, some investors have raised a formal complaint with the KSE.  It is an old but wise truism to be careful what you wish for. 

Dubai Islamic Bank Signs Wakala with UAE Ministry of Finance

Dubai Islamic Bank announced on the Nasdaq Dubai today that "like other national banks", it had signed a Wakala Agreement with the UAE Ministry of Finance.  This is part of the UAE Government's program of providing funding to banks to strengthen their financial resources.  As with the other transactions, the UAE MOF may convert the Wakala Deposit and any accrued but unpaid profit distributions (interest in a conventional financing) to equity in the Bank.

Two intriguing things from this announcement:

1. The agreement was signed on 31 December 2009.  Yet the announcement was only made today 7 February.
2. Apparently, the amount of the Wakala Deposit is a minor detail which need not be disclosed.  At least at this point.

The date of the agreement (just in time for 2009 financials) suggests a pressing need at DIB for additional funds of a capital nature.  AA wonders if the deal was actually signed on 31 December 2009 or if it was signed "as of 31 December 2009".  In the latter case, it may have been signed sometime after 31 December 2009.  And that might explain that the apparent late disclosure was not late after all.  

DIB's Board will meet on 10 February to discuss the fiscal 2009 financials, perhaps another sign that ducks have only  recently been lined up, including this one.

And then again it may just be a case that disclosure standards differ from those AA is familiar with. 

Esterad Convertible Bond Offer Withdrawn

Further my earlier post, today Esterad announced on the BSE that it has withdrawn its Convertible Bond Offer due to "prevailing market conditions" and that BBK (the Collecting Bank) will return funds to those who did subscribe for the Offer.

As well, Esterad also announced that its ordinary general meeting of shareholders would be held on 30 March.  More importantly it disclosed that its Board had recommended against any cash distribution (dividends) for the fiscal year 2009.

That latter point is signficant, though not surprising.   

The company didn't pay dividends in 2008, a year in which it had a net loss of roughly BD 11 million (income statement) and a BD 14 million comprehensive loss.   For 2009, it had net loss of BD 3.8 million (income statement) and BD1 million in comprehensive loss.  The difference between net income or loss and comprehensive income is that comprehensive income  (or in this case loss) includes changes in equity, such as fair value changes,  that do not pass through the income statement.  

It should be noted that from at least 1975 through 2007, Esterad paid cash dividends each year with the latter years at a generous 45% distribution rate.

Lu'lu (Pearl) Real Estate Kuwait Delaying Resumption of Trading Pending Determination of Gulf Bank Legal Position on Derviatives Trades

AlQabas quotes informed sources that Lu'lu Real Estate Company is delaying the resumption of trading in its shares pending determination of Gulf Bank Kuwait's legal position regarding those firms who traded derivatives through it and caused the major losses (which led to a change in the Board at Gulf Bank and the KIA taking a significant stake).  And that Lu'lu (=Pearl) is apparently among this group.  The report states that Lu'lu is finalizing its 30 September 2009 financials (a pre-requisite for the KSE allowing it to trade again), but doesn't want to restart trading less Gulf Bank take legal action against it and cause its shareholders losses.

Some thoughts:

1. As I recall the story about Gulf Bank and the derivatives, these were largely foreign currency derivatives.  Many involving the Euro.  With allegations (not yet legally proven) that a good number of them were for related parties.
2. And that Gulf Bank's losses were caused when customers failed to settle their obligations.
3. It would seem to me that if Pearl (Lu'lu) were one of those customers, it might be reasonable for it to expect that Gulf Bank would expect it to settle up.  Just as if Pearl had a loan from GB, it wouldn't strain belief to expect that GB would want its money plus interest back.
4. You might be thinking as I initially did that Lu'lu's desire to pretend there wasn't a loss by delaying trading was a bit silly.   Losses don't occur when we open our eyes.  Or go away when we close them.  But, as long as no trading has occurred many parties will be valuing their Pearl stock at its last traded price.  And that could be very comforting for banks holding it as collateral for loans  who are adverse to booking provisions, for the borrowers themselves and for others ho don't want to recognize impairments in their own financials. 
5. As to resumption of trading, last time I checked (Thursday), Lu'lu owed the KSE financials for 30 June 2009 as well as 30 September 2009.  And shortly it will be past due on the year end financials.  It's intriguing to speculate if Lu'lu's delays are strategic in the hope that something good will happen before it resumes trading.
6. Finally, Pearl does have foreign projects at least one in Morocco and a hotel somewhere in the Eurozone - Germany or Austria.  So there would perhaps be some reason they might need an FX hedge.  One hopes that it was not among those many Kuwaiti firms who over the past few years found their core businesses less interesting than punting in the Kuwaiti Stock Market or making even wiser financial investments in markets on foreign shores.

Central Bank of Kuwait - Mandates Special Disclosure by Banks on Derivatives

This is a post from over one month ago (November 16 to be precise).  I made a small edit to it today and now it is on today's new posts lists.

About one year ago, Gulf Bank had a major loss arising from foreign currency derivatives undertaken for a customer who refused or was unable to settle.  Market speculation at the time was that the customer may have been a related party.  The loss was KD375 million requiring the recapitalization of the bank, including the Kuwaiti Government taking a 16% stake through KIA.

Today AlQabas reported that  the Central Bank of Kuwait ("CBK") issued instructions to local banks that they were to have their external auditors prepare a special audit report on their dealing in derivatives both for their own as well as customer's accounts. 

As per the press report, the CBK emphasized that the audit work and subsequent report should:

1. Review the sufficiency of the rules/principles of the system of internal control established and followed over this activity and its effectiveness
2. Examine extent of risks the bank might be exposed to, i.e., risk limits
   
3. Disclose the (financial statement) results of the existing position (of derivatives) as of 31 December 2009
4. Contain a statement outlining the development of the sufficiency and effectiveness of internal controls 
5. Compare the above points to the status as of the 31 December 2008 financials

The CBK warned that failure to provide this special report would be treated as a serious matter and would result in delays in the CBK approval of a bank's 2009 annual report.  Apparently the CBK wants to ensure that there are no more unwelcome surprises in the banking sector in 2009.

AlQabas believes that since Gulf Bank's 2008 problem, many local banks have closed their derivative positions or substantially reduced both volumes and riskiness of derivatives traded.

AlGosaibis File New Fraud Claim Against Maan AlSanea

  

The National reports that the AlGosaibis' attorneys have filed papers with the Supreme Court of New York arguing that the case be heard in NY and not Saudi Arabia.  More importantly the filing is reported to contain a variety of third party reports which seem intended to support the AlGosaibis' contention that they were the victims of a fraud perpetrated by Mr. Al Sanea.

This goes back to the comments by a reader on one of my earlier posts.

There are three cases before the Supreme Court of the State of New York.

1. Mashreqbank psc v Ahmad Hamad AlGosaibi and Brothers  #601650/2009
2. Mashreqbank v Yousef AlGosaibi and Partners #602171/2009 and
3. Ahmad Hamad AlGosaibi and Brothers v Maan al-Sanea 590643/2009.

Camel Burger

 

Image Credit: xpress/virendra saklani

One day a "beauty queen" the next a "patty".