MEED MENA Real Estate Report

حقل الأحلام الكويت

If you build it, he may not come after all.

 

AlQabas has a summary of a recent Middle East Economic Digest ("MEED") report.

Pretty much the report can be summarized in the table below.

CITY	Median Office Rent Per Square Meter	Average Commercial Vacancy	Median Residential Monthly Rent
Abu Dhabi	$51	3%	$3,500
Amman	$16	10%	$   800
Cairo	$39	0%	$   800
Doha	$50	20%	$3,000
Dubai	$38	38%	$1,900
Jeddah	$25	10%	$1,000
Kuwait	$42	40%	$2,000
Manama	$24	10%	$2,000
Muscat	$23	5%	$1,110
Riyadh	$33	20%	$1,500

 

As mentioned in the article, it's important to remember that these are median rates for a city. There may be more than one market in a city. So, for example, Shaykh Zayed Road may be booming in Dubai with strong occupancy and rental rates, while other areas are really depressed.

On that latter score, I'd invite my Arabic reading audience to comment if I've translated the terms معدل and متوسط correctly. I'm reading these to be Arabic for the statistical terms "mean" and "median" respectively.

And finally anyone who'd care to comment about the rental rates.

HSBC: “No Provision Relief for Kuwaiti Banks Until 2012”

AlQabas published a summary of a recent HSBC research report in its Sunday issue.

Here's a quick summary of the main points:

1. HSBC notes the dramatic growth in distressed loans at Kuwaiti banks – from 5.3% in 2008 to 9.7% in 2009. 
2. And predicts that the banks will continue to make substantial provisions this year and next only reaching a normal level of provisions in 2012. 
3. That being said, there should be a recovery in ROE for 2010.
4. Banks in Abu Dhabi and Kuwait were the worst affected among GCC banks. However, Kuwait has average provisions equal to 10% of total loans while Abu Dhabi only 4%. 
5. A concentration on loans to real estate, construction, and investment companies is responsible for the decline in the value of Kuwaiti bank assets. 
6. Real estate exposure:  Given the absence of Kuwaiti government spending on infrastructure or development projects during the boom years (2005-2008) credit was to the private sector largely to individuals and unlisted companies. The focus was on commercial, residential and investment real estate. Listed real estate companies only account for 13% of the total of such loans. 
7. Investment firm exposure:  Loans to investment companies were KD2.8 billion with KD1.2 billion to conventional firms and KD1.5 billion to "Islamic" firms.  The loans granted were largely used to fund investments in real estate and regional stock markets (thus increasing the lenders' total exposure to these sectors). 85% of investment companies' assets are in the GCC as per the IMF. Since the crisis hit, banks have seen their loan security drop by at least 50% as per HSBC's estimates, though it does note that in the absence of transparency the true impact is not known. 
8. Consumer loans:  These extensions of credit are believed to be of better quality because  they are secured by rentals and salaries. HSBC notes that most Kuwaitis are employed by the Government, the implicit presumption being that their incomes are secure.
   

There were two interesting tables accompanying the article, which I've reproduced below.

First, Kuwaiti bank exposure to real estate as a percentage of shareholders' equity.

Amounts in KD millions.

Bank	Real Estate & Construction ("REE")	Shareholders Equity	REE % of Equity
NBK	1,450	1,871	78%
CBK	733	440	167%
Burgan	976	422	232%
KFH	1,591	1,537	194%
Gulf	1,495	391	382%

Second, Kuwaiti bank exposure to investment companies.

Amounts in KD millions.

Bank	Exposure	% of Total	Shareholders' Equity	Exposure as % of Equity
Gulf	486	18%	391	80%
Burgan	190	7%	422	45%
CBK	269	10%	440	61%
NBK	216	5%	1,871	12%
KFH	944	34%	1,537	61%
Others	658	26%	----	----
Total	2,763	100%	----	----

 

From the above one can draw some conclusions on relative business models and underwriting standards.  

Of course without knowing the details of the loans and in particular the security obtained, these can be only preliminary. 


As usual, the pattern seems to be repeating itself.  One bank is distinguished by its prudence.  And some of the same names seem to be pushing the envelope. 

2 -3

Arggh!   Or should I say "nutters"?

Presssure on Rent Levels in Bahrain -If You Build It, They Might Not Come

The Gulf Daily News reports that rentals have fallen across the board in the retail, residential, office and industrial sectors.

Martin Cooper of DTZ Middle East is quoted as saying:

"The region has woken up to the fact to only give the people what they can afford and not recklessly invest in projects they cannot afford or those which are of no use," he told the GDN.

Often one wakes from a nightmare only to fall back asleep again.

Nakheel: CDG Lawsuit Will Not Delay Deal with Trade Creditors

Nakheel has issued a press release (to Reuters) stating that CDG's lawsuit will not delay its reaching a settlement with trade creditors.  It also said that it expected to prevail against CDG noting that it disputed the entire claim and had counterclaims of its own against CDG.

Nakheel said it has approximately 85 percent of acceptances, by value, for its restructuring deal and is "well on target to achieve its 95 percent acceptance of all payables and claims within the near future," according to the statement sent to Reuters late Tuesday

Mashreqbank v AlGosaibi - Al Sanea's Forum Non Conveniens Motion Successful

Above Main Entrance to NY Supreme Court

Looks like Mr. Al Sanea is continuing his run of victories in the NY Courts.  

As you'll recall when Mashreqbank filed suit against AHAB in the NY Supreme Court, AHAB had Mr. Al Sanea added as a third party defendant.

July 29 Judge Lowe of the NY Supreme Court ruled in favor of Mr. Al Sanea's request that due to forum non conveniens he and Awal Bank be removed as third party defendants. 

While Mashreqbank is appealing, based on the pattern of judgments in the NY Supreme Court, their chances of obtaining a reversal of the ruling would appear to be somewhere between slim and none.   Wonder if AHAB will now find NY an inconvenient forum and file a motion.  There seems to be lots of precedents for this.

(As before, the email notification from the NY Supreme Court is a bit late in arriving.)

You can find earlier posts on this topic by using the label "Mashreqbank".

The NY Supreme Court Case Reference # is 601650/2009.

4-1

Some victories are particularly sweet.

Al Ahli Bank of Kuwait v AlSanea & Saad Trading - NY Case Dismissed Forum Non Conveniens

A Rather Inconvenient Place After All

Judge Richard Love III of the Supreme Court of the State of New York decided last July that New York was indeed a forum non conveniens and so dismissed ABK's suit against Mr. Al Sanea and Saad Trading, Contracting and Financial Services Company.

(In case you're wondering why the delayed posting, while the judgment was electronically filed 11 August, I didn't get an email until today).

I suspect the new venue will turn out to be much much more convenient for Mr. Al Sanea.  Under AA's law of the conversation of legal energy, that may make it much much less convenient for ABK.  Such is life.

You can find the judgment as Document #28 at the NY Supreme Court's website under Case # 602487/2009.

If you use the tag "Al Ahli Bank of Kuwait" you will find earlier posts on this topic.

Al Safat Investment Kuwait - More Detail on 1H10 KD1.1 Million Loss

Additional detail on ASIK's 1H10 financial performance via an article in Al Watan quoting ASIK's Vice Chairman Mohammad Ali Al Naqi.

While the Company did indeed have KD4 million in profit on the sale by one of its subsidiaries of an investment (in the PRC), this was overwhelmed by mark to markets on Kuwaiti shares.  The VC noted the significant decline on the KSE in 2Q10 as well as KD2.48 million of precautionary provisions on   أرصدة مدينة  .

I'm translating these as "debit balances" and presume they relate to receivables of some sort as opposed to investments.   And I'd certainly welcome any comments from readers who either would like to confirm or amend that translation.

Earlier post on ASIK's 2010 performance here.

月餅

When the moon is full, mankind is one.

It's that time of year again.  Though for some of us it seems more like mid Summer than mid Autumn.

Note to the authorities:  AA's mooncakes have no hidden messages.

The Investment Dar - Dubai Creditor Meeting

TID held a creditors' meeting in Dubai 21 September.  Both Al Watan and Al Qabas have accounts.

The Al Watan (Taamir Hamaad) article is fairly bland - no fireworks.  Adnan Al Musallam  is quoted as reiterating TID's firm desire to repay its debts, adding that the reality of the financial crisis made it incumbent  on everyone the obligation to work together to reach the restructuring.   

He also proposed the formation of a holding company capitalized at between KD300 million to KD400 million - to be administered by the banks and investors - as the vehicle to settle TID's debts.  The rationale appears to be to ensure compliance with the Central Bank of Kuwait's new rules on investment companies.  Apparently to shift the debts off TID's balance sheet along with the assets - thus  improving TID's performance under the CBK's  three ratio tests.  He said that he had requested the executive and legal management of the Company to study this matter.

On the other hand Al Qabas (Mohammad Sha'baan) has a more fiery story (not unexpected) of creditor "anger".  In the Al Qabas version, some creditors are on the verge of a confrontation with TID and its Board over the following:

1. A belief that parties outside the formal management/Board structure of TID are really making the decisions
2. That the Company is deliberately stalling progress
3. That the creditors have been overly patient during the past two years but have gotten nothing from the Company
4. Board Members are deliberately missing meetings with creditors and provoking confrontations in order to evade responding to creditor requests.  A central point is the creditors' demand that they be kept fully in the picture as to what is going on at TID, including efforts to comply with the Central Bank's new regulations for investment companies
5. That some creditors are prepared to bring legal action against all parties - including against the Creditors' Coordinating Committee,  if there is an attempt to impose the restructuring plan without 100% creditor acceptance or acceptance by an absolute majority of creditors.   AA:  This is a puzzling statement.  It's pretty clear by now that all creditors are not going to accept the plan.  And equally that the whole point of recourse to the FSL is to cram down dissident creditors.  Al Qabas' informed sources may be less informed than they claim.
6. That TID has apparently stopped its program of salary reduction for senior management and that the salary scale has reverted to what it was in the boom years.  AA:  This is similar to the earlier theme about creditor anger over a raise and bonus for a member of senior management.  A neat way of attempting to finesse this is to eliminate a reduction and say that technically the fellow is not getting a raise but rather his salary is being restored to what it was prior to the reduction.  Unclear if this is what is going on. 
7. That some Board Members through related companies they control, companies which are partners with TID in certain assets, are gaming the realization of assets.  AA:  This is the fundamental creditor fear - that asset disposals will be gamed to reduce the banks' realization proceeds.  Not an unreasonable fear in the land of egregious related party transactions.

Two quite different accounts, though it should be noted that Al Qabas is speaking about creditor discontent which might manifest itself in the future not battles raging at present.

There's a creditors meeting today in Kuwait for those creditors who missed Dubai.  Hopefully, more detail will be forthcoming.

It's no surprise that creditors' patience is wearing thin.  It's been over two years.  The Central Bank is still reviewing whether to allow TID to use the FSL as cover for its rescheduling.  TID has yet to release any 2009 financials - either quarterly or fiscal year 2009.

Lenders Selling Saad Group Loans

Remedial Lending Class

Asa Fitch at The National reports on some loan sales by Saad lenders.

This makes perfect sense. 

It's highly unlikely that Saad or AHAB, for that matter, are suddenly going to settle their debts.  It's likely that there will be considerable more time before a deal is struck.  And then repayment is likely to be painfully slow over a long period.

It makes perfect sense for lenders with modest sized tickets to exit now.  End the uncertainty.  Devote resources to other more productive efforts than negotiating a rescheduling and then tracking the performance of a weak credit.

The sad thing is that bankers have ADD so that any lessons learned are remembered for only a short period making the cost of tuition not effective.

DFSA Calls for Audit Improvements

Apparently heeding the comments of  The Rageful Cynic on this blog,  Paul Koster, CEO of the DFSA called for improvements in local auditing as reported by Tom Arnold at The National.

“Are auditors doing enough in that respect? I don’t think so,” said Mr Koster. “I think one of the key areas where auditors right now can gain momentum in the level of trust they provide to the financial market is to increase the level of scrutiny and scepticism in regard to the judgement of management in valuations.”

There's the usual commentary as well about the  need for auditors to get more training so they can understand complex financial instruments.

But the most telling quote of all is at the end of the article.

Auditors speaking to The National have previously accused Gulf companies of using similar accounting practices to mask bad assets and called for greater safeguards to avoid such methods.

Accounting in the GCC is based on IFRS which is a principles and not a rules based approach (the latter being the system in the USA).

Under a rules-based system, the accountant and auditor merely ticks the boxes.  If enough boxes are ticked, the transaction passes the test.  Form may over rule substance.

Under a principles-based accounting system, accountants and auditors are to look behind the form of a transaction to the substance.  The Lehman Repo 105 was a very clear scheme to get around the rules.

That local auditors are whining about violations and doing nothing to stop their clients is a very clear indication that the problem isn't training.  It isn't greater skepticism (or scepticism).  It isn't a lack of scrutiny.  

Very simply put, it's a lack of professional ethics.

Construction Delivery Group Files AED49 Million Suit Against Nakheel

Bradley Hope over at The National reports that CDG has filed an AED million suit against Nakheel at the special Dubai World Tribunal at the DIFC.

Here's an extract from the claim filed by CDG (Dubai World Special Tribunal Case DWT-0008-2010).

The DWT website is at www.dubaiworldtribunal.ae.

1.The Claimant claims against the First Defendant and/or the Second Defendant and/or the Third Defendant  damages, monies due, interest, legal fees, costs and expenses.

2.The Claimant's contractual and non-contractual claims arise out of and in connection with a contract (PJ-338) and/or contracts for the provision of Facilities Management Services (comprising Mobilisation Phase Services and Operational Phase Services in respect of 1,224 villas and 114 “Canal Cove homes” located on the Palm Jumeirah, Dubai) between approximately March 2007 and January 2009.

3.The Claimant Claims:

(i)  AED 24,514,464.49  Mobilisation Phase: unpaid fees to 31 January 2009
(ii) AED 2,608,347.75  Mobilisation Phase: loss of profit 01 February 2009 – 30 June 2010 
(iii) AED 6,001,899.58  Operational Phase: unpaid fees to 31 December 2008
(iv) AED 1,369,200.00 Operational Phase: loss of profit 01 January 2009 – 31May 2009
(v) AED 4,097,925.00 Operational Phase: Maintenance Services; fixed running costs for villas exceeding 400;  01 June 2008 - 31 December 2008
(vi) AED 982,534.00 Loss and damage: office, plant and equipment
(vii) AED 103,235.69 Loss and damage: emergency stores
(viii) AED 1,095,149.87 Loss of main office overhead contribution
(ix) AED 679,023.69 De-mobilisation costs on wrongful termination
(x) AED - To be advised  Loss of the use of the Claimant's Performance Security (AED 1,569,460.00) for the period 10 February 2009 – 07 October 2009

Interest pursuant to Articles 88 and 76 of Federal Law No. 18 of 1993: the Claimant claims compound interest on the above amounts at 12% per annum from the date such sums accrued to the date of payment, alternatively at such rate and for such period as the Tribunal deems fit.

As Bradley notes the process and outcome of the case will be closely watched to see how the Special Tribunal works.  As well, whether the ST gives smaller creditors a way around the rescheduling.  It would seem that CDG perhaps does not intend to contract with Nakheel again.

Al Safat Investment Kuwait: 1H10 Loss KD1.1 Million

Al Safat Investment issued its 1H10 financials on the KSE today (as usual Arabic only text which is below).

The headlines:

1. A loss for the 1H10 of KD1.1 million and for 2Q10 a loss of KD2.3 million.
2. Comparable figures for 2009 were KD0.05 million for 1H09 and a profit of KD2.0 million for 2Q09.
3. Shareholders' equity stood at KD109 million versus KD136.5 million a year earlier.
4. Current Assets KD56.9 million
5. Total Assets KD177.1 million
6. Current Liabilities KD56.6 million (Positive working capital!)
7. Total Liabilities of KD67.9 million.
8. Total Equity of KD109 million.
9. Don't have an explanation for the KD154,300 difference between Total Assets and Total Liabilities plus Total Equity.  Treasury Shares?

What's interesting is that earlier ASIK had announced  that one of its subsidiaries had concluded a successful exit from a holding in the PRC which would give a profit of KD4.25 million  which would be reflected in ASIK's 2Q10 results.  That suggests that there were total expenses of at least KD6.55 million in 2Q10, assuming no other revenue. Mark-to-markets or provisions, pehaps? 

[9:8:50]  بلغت (خسارة) (الصفاة) (1) مليون د.ك لل6 أشهر المنتهية في 30-06-2010‏
يعلن سوق الكويت للأوراق المالية أن شركة الصفاة للاستثمار (الصفاة)‏
حصلت على موافقة بنك الكويت المركزي على بياناتها المالية المرحلية للفترة ‏
المنتهية في 30-06-2010، يوم الخميس الموافق 16-09-2010 ،
وفقا لما يلي:‏
البند     ال3 أشهر المنتهية في 30-06-10     ال6 أشهر المنتهية في 30-06-10‏
الربح (خسارة)(د.ك)           (2.283.982)               (1.052.962) ‏
ربحية(خسارة)السهم (فلس كويتي) (2.95)                       (1.36) ‏
اجمالي الموجودات المتداولة                                56.860.414‏
اجمالي الموجودات                                          177.095.485‏
اجمالي المطلوبات المتداولة                                 56.566.959‏
اجمالي المطلوبات                                           67.979.802‏
ِ اجمالي حقوق المساهمين                                   108.961.399‏
بلغ اجمالي الايرادات من التعاملات مع الاطراف ذات الصلة مبلغ 342.017 د.ك
بلغ اجمالي المصروفات من التعاملات مع الاطراف ذات الصلة مبلغ 162.545 د.ك
الفترات المقارنة:‏
البند     ال3 أشهر المنتهية في 30-06-09     ال6 أشهر المنتهية في 30-06-09‏
الربح (خسارة)(د.ك)            2.008.551                    49.797 ‏
ربحية(خسارة)السهم (فلس كويتي)  2.60                          0.06‏
اجمالي الموجودات المتداولة                                66.093.906‏
اجمالي الموجودات                                          210.284.340‏
اجمالي المطلوبات المتداولة                                 38.250.324‏
اجمالي المطلوبات                                           73.726.219‏
ِ اجمالي حقوق المساهمين                                   136.532.947‏
وعليه سوف تعاد الشركة الى التداول بعد عشر دقائق من نزول الاعلان .‏

Go for the Kill: 1-1

Go for the kill.

To the Football Jinn:  I'd like to point out that I kept quiet for the canonical first three games.  It isn't supposed to work like this.

Emaar - Investment Opportunity of a Lifetime

I see on the DFM this morning that Emaar's Board has decided to sell its 200,000 treasury shares.  

You'd better jump quickly before this opportunity passes you by.

Unlike the postman, Opportunity only knocks once.

Update:  Shares sold 20 September at AED3.84 per share.

Update - Republican Senate Candidate Admits to Dabbling in Witchcraft

If you're worried, don't be.

Luckily the Republican Governor of Louisiana is a home-schooled exorcist.

Idiocy Knows No Borders: Mice with Human Brains

Hidden Camera Picture from Inside NIH Laboratories

Well, just when you thought you'd heard everything, something new pops up.

The Republican candidate (who else of course) for Senate from the great state of Delaware apparently rang the warning tocsin of a manifest danger to our nation back in 2007.  Sadly though it appears no one heeded her:

"They are -- they are doing that here in the United States. American scientific companies are cross-breeding humans and animals and coming up with mice with fully functioning human brains. So they're already into this experiment."

Now I suspect many of you out there are wondering if this could possibly be true.  I'd point out that Ms. O'Donnell made her remarks on Bill O'Reilly's show.  And if that doesn't settle the issue for you, I'm not sure what other arguments would.

One thing we can be sure of from this story though is that we have pretty conclusive proof that scientists have been successful in their efforts to cross-breed humans with mice brains.  I think Ms. O'Donnell's words speak for themselves.

You may also be wondering who "they" are.  I'd tell you but I'm pretty sure I can here the very faint "whump, whump" of the black helicopters circling overhead   I did ask the real estate agent if we were outside the range of the UN spy satellites.  She assured me we would be.  But I guess she didn't know or, perhaps, may have been in on the plot.  

 Outside my window, right now.

Additional posting may be delayed today.  I'm going to nip out to the local store.  While I did line my enormous tarboush with tin foil last week, I think it's time I put tin foil on the walls around the area in which I blog.  One can't be too safe. 

If  I don't post again, well you'll know what happened. 

And for God's sake keep your eyes open for mice on bicycles!

Damas - Board Undertakes Further "Progress" in "Enforcing" Enforceable Undertaking

Actual Cascade Agreement.

Look closely for the water.  

DIL shares in green.

 

Damas' Board announced on NasdaqDubai further developments related to the Abdullah Brothers and the DFSA mandated Enforceable Undertaking.

Damas is getting ready to sign a Cascade Agreement with the Flying Abdullah Brothers and their two companies Damas Real Estate LLC and Damas Investments Limited. as well as these entities' other lenders. 

Under the proposed CA Damas will agree:

(a)   not to enforce its rights under the settlement agreement dated 10 October 2009 between, amongst others, the Abdullah Brothers and DIL; and
(b)  not to enforce its rights under the share pledge (the "DIL Share Pledge") granted by the Abdullah Brothers on 31 October 2009 in favour of DIL in respect of 350 million shares in DIL (the "DIL Pledged Shares").

I presume that DIL is just agreeing to forbearance on its rights above.  That is, it has not renounced these rights nor is it sharing the DIL Pledged Shares with the other lenders.  This sort of inter lender agreement is fairly common.  The operative presumption being that if one creditor moves to exercise its rights it could bring the debtor down thus hurting all the parties. So it's an agreement among the lenders to move in tandem.

It's probably a safe bet that the FAB were consistently "wise" investors.  Thus, they probably used the loans from other lenders to finance similar "great" investments in real estate, etc. as they ones they made with the money they stole, excuse me, "withdrew without proper documentation" from DIL.  Which suggests that the cash flow may well be as depicted above.  In such a case one wouldn't want to be at the tail end of the cascade.

Not much that could be done.  They say (and they are so often right that I don't even bother to contradict them anymore) that Mar Jude is the Patron Saint of Bank Loan Workout Groups.  Where's Amos Yaqub when DIL needs him? He's got a special "in" with Mar Jude.

Dubai: More Pain to Come

Tom Arnold over at The National has an article on the pain likely to come from Nakheel and Dubai Holding restructurings.

As well as a few quotes from the ratings downgrade of ADCB.  Sounds like Brother Eiraqat already needs more than two 1000 mg Dolgit.

A Chance to Make a Difference

 

One mouse click away and you can make a difference.

Discovery Gardens: Where Wonders Never Cease

Discovery Gardens' Residents Cool Off

Seems the folks at Discovery Gardens had another unhappy discovery of late.  No air conditioning.  

A Palm District Cooling System official said the “company is addressing the problem that arose due to technical problems. About 14 buildings in Discovery Garden are having problems and we are trying to rectify it soon.”

It seems the manifold through which the money flows isn't working.  Unclear if it's a problem with the manifold or a lack of money.  PDC engineers are reportedly on the scene though.

They say that there are three things important in real estate:  location, location and location.

Of course, when "they" say that, they're assuming that basic infrastructure and services are in place.

There's no substitute for dealing with first class firms!

International Investment Group - Denies "Success" in Repaying Debts

This morning IIG announced on the KSE and BSE that the news in this morning's Al Watan about it successfully paying some US$18 million in debt was in error.

It seems success is not only fleeting, but sometimes it doesn't occur at all.

Threat to Capitalism Warning Notice: Regulatory Overkill Again

No sooner had I begun to relax than I read of another manifest danger.  No, it's not ill-conceived regulations of the financial sector as one concerned bank CEO calls them.

It's regulatory overkill for offshore drilling.

In today's FT the Lex column thundered:

Regulatory overkill after BP's drilling accident has understandably soured the mood.

I've boldfaced two words from the quote.  A "drilling accident".  Sounds benign.  A company dedicated to "best practice" and with a highly environmentally friendly logo is drilling and for some unexplained reason there's an accident.  Probably not their fault at all.  Hard to see what all the fuss is about.

On the front page of the FT in an article hysterically titled "BP Cited for Safety Lapses on North Sea", I did learn that the newspaper had filed a request under the UK's Freedom of Information Act and learned that:

"All but one of BP's five North Sea installations inspected in 2009 were cited for failure to comply with emergency regulations on oil spills, raising questions about the company's ability to manage a disaster in the area."

Now some of you cynics out there might use this information to criticize the good folks at BP.  You might say the instead of describing the Gulf of Mexico as an accident, this bit of information suggests criminal negligence.

I for one look at this last bit of news with a less condemning eye.

1. If there's an accident here, it's likely relating to the one out of the five wells in the North Sea.  BP has a pretty consistent record.  Besides preparation for disasters is a waste of shareholder funds, because in well managed operations disasters never occur.
2. BP's disaster management abilities (or lack thereof) have been pretty well demonstrated and documented.  There's really no need to raised questions now to which we already have the answer.  The information obtained by the FT is therefore not explosive (at least in a news worthy sense).  

It's high time that pointy-headed bureaucrats in Washington and in London get off the back of the financial and oil industries.

They've demonstrated a remarkable rhetorical capacity for imaginary self-regulation.  It's time to end regulatory overkill.  Next thing you know there could be crackpot schemes for food or mining safety!  All this could wind up killing our very way of life.  That is, of course, if you're able to continue living after an economic and environmental collapse, assuming you didn't die from food poisoning first.

Global Investment House - Al Madina Wins Appeal Against Global

"You're it!"

Today Al Madina Finance and Investment announced (on the KSE and the DFM) that the Appeals Court had overturned the earlier judgment in Global's favor which was rendered by the MOCI's Arbitration Tribunal.

Under that earlier judgment (last April), Al Madina had been ordered to pay Global:

1. US$10,011,224 dollars principal of a loan plus
2. US$300,000 in compensation

If you remember the history, at that time, Al Madina noted that the  judgment was only preliminary and not final and that it would appeal.

Today it noted that on 8 September the relevant court had voided the MOIC Arbitration Tribunal's judgment and had referred the case to the Department of Experts for study.  Al Madina noted this meant that any steps taken by Global to enforce the Tribunal's judgment would be void.

For its part, Global retorted on the KSE (text Arabic only below), that the court judgment was preliminary and not final. And that Global would appeal.

In effect, the game of tag continues.

[12:39:50]  ِ.ايضاح من (جلوبل) بخصوص الدعوى رقم 2010/1675 ‏
يعلن سوق الكويت للأوراق المالية عطفا على اعلانه السابق بتاريخ 04-04-2010 ‏
والخاص بمنازعة التحكيم رقم 2010/41 والتي صدر فيها حكم من هيئة التحكيم ‏
التجاري فى غرفة صناعة وتجارة الكويت بالزام شركة المدينة للتمويل ‏
والاستثمار (المدينة) بان تؤدي لشركة بيت الاستثمار العالمي (جلوبل) ‏
مبلغ وقدره 10,011,224 دولار امريكي قيمة اصل الدين ،ومبلغ 300,000 دولار ‏
امريكي على سبيل التعويض .‏
تفيد شركة (جلوبل) بانه صدر فى الدعوى المذكورة ‏حكما بجلسة 08-09-2010 ‏
والذي جرى منطوقه حكمت المحكمة: ‏
ِ1-ببطلان حكم التحكيم الصادر عن مركز الكويت للتحكيم التجاري بتاريخ1-4-2010‏
لدعوى التحكيم لسنة 2010/41 .‏
ِ2-‏وفى موضوع الدعوى :باحالتها الى ادارة الخبراء ‏
كما افادت شركة (جلوبل) بان هذا الحكم ابندائيا تميهديا غير منهي للخصومة و
ليس نهائيا وانه سوف يتم الطعن عليه بالاجراءات القانونية المناسبة فيما ‏
اذا صدر فى غير صالح شركة بيت الاستثمار العالمي (جلوبل) ‏

All in the Family: UGB to Seek Central Bank of Kuwait Permission for Additional Three Months to Buy Burgan Bank Shares

(Readers are invited to select the photo they believe 
most appropriate in the context of this news item.)

You'll recall that motivated by impeccable almost geometric logic, UGB had decided earlier that it was a wise investment indeed to acquire a large chunk of Burgan Bank's shares. (Additional posts can be accessed using the tag "UGB").

UGB had obtained Central Bank of Kuwait approval which expired  4 September. It now reportedly will seek a three month extension as we learn from Al Watan citing informed sources.

To help the two parties consummate this "marriage", KIPCO will manage the contract which could include it kindly selling some of its own shares to UGB or "collecting" shares (presumably from the market).

There are no values like family values. 

International Investment Group - Succeeds in Repaying Some Loans

Update:  Apparently, Al Watan's sources were less informed that thought.  Or perhaps success is fleeting.  In any case IIG denied any "success" in repaying loans.  Such is life.

Informed sources have told Al Watan newspaper that IIG recently "succeeded" in repaying US$15 million to one of the Emirati banks and US$3 million to the holders of its sukuk.     As to the latter I didn't see any announcement on Nasdaq Dubai.  US$3 million is the amount of the periodic profit distribution (or  what we here at Suq Al Mal call "interest").

In any case an interesting definition of "success": meeting one's contractual obligations.   In other words, doing what one is expected to do.  Based on that definition, I've had a remarkably successful day today.  I personally had repeated successes in posting on this blog.  I also successfully consumed breakfast, lunch, and dinner today with intermittent successful cups of tea and coffee at other times - both of which, I will add, I successfully prepared. 

The source of liquidity is reported to have been the sales of (a) some shares presumably local, and (b) some real estate and non real estate assets outside the local market.

The article ends with a discussion of how the bulk of IIG's 2009 losses were its share of losses of subsidiary and affiliated companies as if this made some sort of difference.

DIC Asks for More Time

According to the Khaleej Times DIC has asked the lenders on its US$1.25 billion facility to extend the maturity until the end of November. Earlier it had been extended from the end of June until the end of September.  The article also states that the Company has circulated a draft rescheduling plan that envisions asset sales over a five to seven year plan.  

“They [DIC] are buying some time because markets go in cycles and currently assets are stressed and below their value,” said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.

“We are on our way to reach a new cycle as soon as the fourth quarter...when we will see valuations and share prices expanding,” he said. DIC had already extended the $1.25 billion loan, which matured in June, to September 30. 

Sadly we learn that markets often undervalue assets from their true value (the value imagined by the holder) for long times.

And equally sadly, while it appears the Obama Administration's stimulus plan is working, it seems that tangible effects won't be felt until after the November elections.

Earlier post here.

JPMorgan's Dimon Excoriates Hedge Funds Lack of Intelligence

Unnamed Senior Managing Director at Undisclosed Hedge Fund

JPMorgan's Chairman and Chief Executive Officer, known primarily for his "Fortress Balance Sheet", is also known for his suffer no fools, take no prisoners candor.

They say that many a senior officer of JPMC has been reduced to embarrassed impotence with a curt "If I want your opinion, I'll ask for it.  Just give me the facts".  Though to be fair, "they" are reported to say a lot of things.  Some of which others say are not true.

Today in characteristically blunt fashion, Mr. Dimon assailed Hedge Funds and their staff. 

Commenting on the new financial regulations (which his firm approves in principle but apparently not at the pesky level of implementation), Mr. Dimon was quoted by the Financial Times:

“It is highly ill-conceived, doesn’t reduce risk at all. As a matter of fact, it probably complicates it for some [customers]”.

He said hedge funds and other derivatives users would have to deal with two separate legal entities depending on the type of securities they trade.

As usual the most vulnerable members of our society are made to pay the price of poorly thought out rules.

As we have documented right here on this blog before, most employees of financial firms, including the most senior and highly paid, are really bad with maths. 

That seems to be the least of their problems.  Today we learn that they have trouble distinguishing between legal entities.  What might seem to those not familiar with the financial world a rather critical skill when buying bonds or equity.

It's unclear what shameful shortcomings are yet to be revealed.  Memory problems?  How does one remember which firm to call when there are so many?  Morgan Stanley, JPMorgan - is that one firm or two? Goldman Sachs, Sachs Fifth Avenue - one for socks, one for stocks, but which one for which? 

"I want to trade a bond. Do I call Goldman, Morgan or JPMC?  Or Staples?"  And imagine the plight of those poor souls who still have the Bear or Lehman on their speed dials.  Spending hours listening to the ring tone as they patiently wait for the answer that never comes.

To the many heartless critics who ascribed problems in the financial sector to greed. I hope you're ashamed of yourselves.  It turns out after all that these problems are all due to a lack of skills.  Rather basic skills.

1. Excessive bonuses.  A case of greed?  No.  The chap who calculated  them messed up the transformation of the bonus percentage to a decimal.  "Do I move decimal point two spots to the right or the left?   Must be to the right because who but a socialist or worse would go to the left?" "From each according to his ability, to each according to his cupidity" turns out to have been a simple math error.
2. The Great Recession (almost a Depression).  Again it was a question of not understanding the maths.  "You mean a guy with zero income can't pay back a loan?  Who'd have thought?  I figured that 20 years x 12 months x 0 equaled the loan principal plus interest."

Now, while Sarah Palin isn't my President yet, I have written her pleading that her Administration make its first priority doing something for the most vulnerable among us:  those who work in finance.  I call it the "No Banker Left Behind" Act.