Advisors on Dubai Inc Debt Announced and the Implications

Here's an article on Moelis and Deloite roles.

The clear message from this is that this exercise is not going to be just a six month payment delay.

The presence of financial as opposed to solely corporate restructuring advisors is also another sign of the likely direction this will take.  There will probably be haircuts as the debt repayments are matched to the companies' cashflows - either from operations or from asset sales.  

On that latter topic, I expect there will be an attempt to ring fence the good bits (Jebel Ali Free Zone, Dubai Ports) from the not so good bits.   Just as there is no government guarantee.  If there is no written Dubai World guarantee for Limitless or Nakheel, DW can similarly say to creditors to look solely to these companies for repayment.

Dubai Crisis - Humor

Three things caught my eye and I just couldn't resist commenting.

1. The Economist Intelligence Unit has an analytic piece whose headline uses the term "Dubacle" to describe the crisis.  That deserves a tip of the AA's virtual tarboush.
   
2. Shaykh Mohammed has pointed out that the "World lacks understanding of what is happening in Dubai"  There is a lot of merit in his statement, though this observer would note that perhaps more importantly the "world" particularly the financial world didn't show much understanding of what was happening in Dubai in the run up to the crisis.  If they had, the current problems of all those self-proclaimed sober bankers and investors now crying out for a bail-out could be much less.  But I suppose there's something to be said for consistency.
   
3. An article in GulfNews about the necessity of debt planning and management: "Manage Debt Before It Hurts You."  The problem is that a lot of these self help columns come out a bit late in the game.  But a wise caution to borrowers everywhere and  to every sort of borrower. - sovereign and non sovereign  (By the way, Lloyds Bank reportedly has somewhere around US$ 1 billion out to Dubai Inc so they are particularly well placed to draw on their own direct experience on this topic in framing advice).  Abu Arqala has already penned his advice column to would be bankers and investors as one of the many public services of this blog.
   

Dubai Sovereign vs Dubai Inc Debt

Today's Financial Times also has an article on the price differential between Dubai sovereign debt and that of its non sovereign companies.

The key point here is that market pricing  has reduced after the precipitous increases occasioned by the debt standstill announcement by Dubai World/Nakheel.   In response the markets reacted by treating all Dubai debt the same. 

A more careful subsequent look at the actual legal agreements (something more "advanced" bankers I am told are wont to do) and the Government of Dubai's clarifying statement that they would not be providing a post-default guarantee, more distinction in pricing occurred.  While Nakheel bonds are reported to trade at 50 cents on the dollar, sovereign Dubai debt trades at 90 cents.

It's important to know when looking at market prices for bonds (other than US Government bonds) and CDS that in general these markets are thin.  A relatively small number of transactions can affect price, especially if the prevailing sentiment is all one way.  The risk that the herd (of investors) is all running the same way.  So, it's natural that markets overshoot - as there is nothing more characteristic of "efficient" and "rational" markets than sheer unreasoning fear at the first whiff of bad news.

And no post of mine would be complete, I suppose, without a report of a sighting of that mythical financial instrument, the implicit guarantee.   Mythical in that the only guarantee that one can be reasonably certain about enforcing in court is one that is written down in carefully crafted legal language and signed by the guarantor before the loan goes bad. 

The FT article quotes a "banker" as saying:  "The question is whether this will spread to Abu Dhabi Inc and Qatar Inc." a banker said.   "If this shows that investors cannot trust an implicit government guarantee, we might see a wholesale credit repricing across the region".

You'll notice I've put the word banker within quotes. 

Just as I would if an individual claiming to be a chemist were explaining combustion by reference to phlogiston.

The fact that this chap seems to seriously believe in implicit guarantees calls into question (at least in my mind) the appropriateness of his calling himself a banker. 

UK Bank Exposure to Dubai Inc

The Financial Times today carried a story that UK banks held US$5 billion or so out of the US$40 billion or so at Dubai World.   That gives them the dubious distinction of being the largest foreign creditor group.

US$ 2 billion at Royal Bank of Scotland, and US$ 1 billion a piece at HSBC, Lloyds, and Standard Chartered.  The article also identifies BNP Paribas, Societe Generale, and Calyon as large creditors.

The article goes on to say that their exposure is focused on the "still functioning" parts of Dubai World e.g.,  Jebel Ali Free Zone and Dubai Ports World.

Thus, of the Dubai World debt which the government has to date announced will be rescheduled, their exposures are a more modest US$700 million (RBS) and US$350 million for Stan Chart.

Some thoughts:

1. It would be natural for big foreign banks to lend to what they perceived to be major companies.
2. It is usually the tenderfoots in the market as opposed to the grizzled veterans who are most likely to see Bigfoot or its financial equivalent the "implicit guarantee".   As I noted earlier the implicit guarantee is not worth the paper it isn't written on.
3. That being said some of the grizzled veterans in the market sometimes make mistakes.  It looks like the market and S&P are pretty much convinced that Abu Dhabi Commercial Bank, Emirates NBD have massive exposures.   Local banks especially those owned by governments often step up to lend government entities, especially when in cases like Emirates NBD the same government owns both the lender and the borrower.
   

NIG Carlyle Group - Guarantee Watch Day #2

As promised earlier, AA has been scouring the financial press looking for one of our respected financial journals to call upon Carlyle Group to guarantee CCG. 

I'm sure if we asked Abu Muhammad he probably had the impression that Carlyle wouldn't let its subsidiary down.  And I'll bet just like the Shaykh in Abu Dhabi Carlyle never said it wouldn't.   If it's good enough for the Financial Times with Dubai, it sure ought to be good enough with CCG. 

Come to think of it, Shaykh Khalifa never said he wouldn't guarantee CCG.  So maybe he should step up and accept responsibility for not doing so.

BNSL Puts Zain Deal on Hold

There's no joy in Kuwait tonight as some important people up there were counting on this sale to help them with urgent cashflow needs.

And even less joy if they read this account.  The parties to the sale might not be serious in terms of intent.  Even more disturbing some of them might not be serious players in terms of capacity.  AA once broke a  financially strapped client's heart by telling him that his rich Arab white knight had only one of those three attributes.

Why this sale is important for a variety of reasons in explained in my earlier post here.

Bahrain Sand Shortage: Help (Sand) is On the Way

Picture Copyright Gulf Daily News

Good news for the Bahrain construction industry.

Bahrain Women Lead the Way

And on a sirat salim.

Honors well deserved.

AlYaum AlWatany - UAE

It's the National Day of the UAE. 

Alf mabruk wa mabruk.

Dubai: When the Going Gets Tough, Yet Another Goat

A follow-up to my earlier post "Dubai:  When the Going Gets Tough, The Tough Find Scapegoats".

And another addition to my flock.

A few more goats and I may add the honorific Shaykh to my nom de net.

Here's one I hadn't thought of --  consultants.

I should have given what I've seen.

Of course, sensible people don't believe everything they're told.

And consultants are usually hired for the purpose of telling one what one already believes. 

Dubai and Banking 051

I had posted a bit earlier about Banking 101.   After reading the press the past few days, I've decided that this approach was wrong.  Banking 101 would be a freshman course.  As in our great universities these days, we often discover that the entering class is not yet equipped to take the freshman courses.  So we offer remedial courses.

Sadly, in our financial world, it is fairly obvious that bankers and investors weren't ready for the freshman courses.  How they passed to get to the check writing stage is an educational mystery.  

Today while reading a rather prestigious foreign financial publication printed on salmon colored paper as well as what is considered the best newspaper in the United States, I was struck by the manifest claptrap that was being peddled.  It's clear that our financial journalists also need a bit of remedial tuition as well.

Some of the assertions that caught my eye and prompted this post:

1. The existence of a new financial instrument:  the implicit guarantee.  Like Bigfoot, the implicit guarantee is discussed around the bankers' and investors' campfire at night.   As well in credit or investment committee meetings.  Often glimpsed from afar or perhaps just imagined.  But nonetheless apparently real.  Or real enough to serve as a "sound" foundation for an extension of credit.   One that no doubt sounded "sound" to credulous ears at the time.  Sadly, the implicit guarantee more often than not pays off with implicit cash.  And implicit cash is not much use for settling transactions unless of course you made an imaginary loan or investment.
2. A case of mistaken identity.  We thought Dubai World was the government, despite the fact that it is separate legal entity.  A small fact noted in its constituent documents.  Yes, but we know that the parent will always bail out the subsidiary to protect its good name.  This is a real howler to anyone familiar with lending to subsidiaries of multinational firms or holding companies.  But perhaps the financial press believes the punters were suffering from sun stroke - Dubai is after all a bit warm in the summer and the sun is mercilessly blinding.  It is so easy to get confused in foreign lands as well. Strange food. Unfamiliar dress.  Why in many of these countries they speak another language! And again no one told us we were mistaken.  So it's clearly not our fault.  It's the fault of some local chap or Shaykh who didn't say anything.  This is not only not polite, it's downright irresponsible.
   
3. Guilt by association.  Well, there's this rich Shaykh in Abu Dhabi.  We all thought he was the lender of last resort.  He sure looked like one.  He certainly never said he wasn't.  So it's his fault that we thought he was.  We never bothered to ask him or to confirm his obligation in writing because well that wouldn't be polite.  And it pays to be polite. 
   
4. "Toto, we're not in Kansas anymore".  You mean the legal system here is different from that back in [insert name of lender's home country]?  Quelle surprise!   Another howler.  There have been enough debt crises since the first cross border loan where local laws have proven problematic  that anyone who makes this statement should expect to be hooted off the podium.  Yet despite abundant and painful history, this is a mistake the lenders and investors make over and over.  Sadly, while the right time for rigorous due diligence is much earlier, there is a lot of Monday morning quarterbacking after the loan goes bad.  Then legal defects are noticed.  The economics of projects are scrutinized in detail.  It's even said that offering circulars are read carefully.
   

So, let's start the class.

Here are ten basic and quite timeless rules for good lending and investing.  You will not require an MBA to understand them.  Nor the assistance of Philippe Jorion, sophisticated mathematical models or a Cray computer to implement them. Those skills - while highly useful - will be acquired in the senior year or graduate level courses.

1. Develop a reasonably firm grasp on reality so that you may distinguish fact from fiction.   "What is" from "what is not".  Or what you'd like to be.  My own experience suggests that this critical faculty is highly useful in other aspects of life.  In finance, it is the basic precondition for intelligent decisions.
   
2. Understand the environment in which you propose to do business:  the legal system and the enforcement mechanisms, the robustness of both regulation and regulators, business ethnics, availability and reliability of information, etc.  If you can't get a fair shake, (or a fair shaykh) you probably shouldn't be in the market.  You  might try to compensate by adjusting your lending strategy:  smaller loans, more collateral (ideally offshore) and higher pricing.  But be aware that prophylactic measures don't prevent disease.  They merely lessen the chances of an infection.  Ask yourself if you can afford to get sick.
   
3. Know your customer and his business: legal status, ownership, business model, corporate culture, management competence, style and ethics and so on.  Adversity is the true test of character.  When the chips are down and your bluechip customer has become a financial cowchip, it's nice to have someone with integrity on the other side of the table.
   
4. Appreciate the relative (legal and business leverage) positions between yourself and your customer.  Sovereign borrowers are indeed different than non Sovereign ones.  Members of a local elite may have certain advantages.  And so on.  If you can't fight City Hall at home, you may have even less chance overseas.
   
5. Analyze the transaction and its economics.  Distinguish between productive and speculative transactions.  Basic Level Hint:  Speculative transactions are generally more risky.  Intermediate Level Hint:  Risky transactions generally have a higher incidence of failure than less risky ones.   Advanced Level Hint:  When projects fail, lenders and shareholders can get hurt.  Post Graduate Level Hint:  Speculative transactions are easier for a borrower to walk away from.  Rather abstruse and profound concepts it appears.
   
6. Make sure the primary way out is cashflow from the project not the assumption that a greater fool is going to refinance your loan or buy your investment.   Or that the government will step up with a post-default guarantee.  Have a second way out if possible.  And, no, looking for a bail-out or a hand-out after the problem occurs is not a credible second way out.   Transaction structuring can mitigate risk.  Many "advanced" financial thinkers suggest it is a wise idea to match the repayment on a loan to the cashflow of the project or borrower.  If there is no discernible cashflow, adjust your loan amount commensurately, i.e., reduce it to zero.
   
7. If you need credit support, the time to get it is before you write the check. As I am told one Saudi borrower said in 1984 to his lenders who were requesting he personally make them whole for loans they had made to his flagship company, "Gentlemen, the time to ask for the guarantee is when you initially negotiate the loan not after it goes bad". 
   
8. Take a lesson from the auditor's rulebook.  "If it ain't written down, it doesn't exist."  If you have a guarantee, you will have a piece of paper carefully drafted by your legal counsel and with the guarantor's signature on it.  If you don't, what you don't have is not worth the paper it's not written on.  If you have an implicit guarantee, you may be in the position of  attempting to use imaginary proceeds  from the implicit guarantee to pay off your real loan.  
9. Read the prospectus or offering circular or loan proposal.  Read it carefully.  If you don't understand the transaction or it doesn't make sense to you, pass.  Borrowers and great investment opportunities are like the Dubai Metro.  If you miss one, the next will arrive in no more than 15 minutes.
   
10. If after all the above, you are satisfied, make sure that the reward you're getting is commensurate with the risk.
    

And be sure you perform these steps before you commit to the loan and for heaven's sake before you cut the check.

Because while hindsight is 20:20, usually at the point it is clear there is a problem,  it is really difficult to undo a bone-headed decision.  Not to mention very, very costly.

Dubai: When the Going Gets Tough, The Tough Find Scapegoats

As is typical in a crisis, there is an urgent need to find those responsible.

If we can identify those guilty of creating this crisis, we can not only mete out suitable punishment for this sin but also in so doing prevent future transgressions.  And sins these are if one looks at the scathing rhetoric in the press about integrity, responsibility, maturity, and so on. 

It appears to be a general law of nature, at least of human nature, that  such inquiries are best conducted far from home.  There is nothing more comforting in the midst of tribulations than finding out that one's misfortunes are someone else's fault.  Discovering one's own role in the debacle would be to needlessly pile sadness upon disaster.  

So far the culprits have been identified as:

1. Misinformed journalists distorting and exaggerating a non-story.  It's really not a problem at all.  This elegant solution neatly simplifies the whole exercise. 
   
2. Panic prone investors. The over reaction theory.
   
3. Imprudent, incompetent, and perhaps even shifty borrowers.
   
4. Alleged sober bankers and investors who thought they had a guarantee from Dubai.  Titans of finance unable to distinguish between legal entities.  Who thought an imagined guarantee (implicit guarantee) was the same as a real one.
   
5. Abu Dhabi who these self-same sober bankers and investors were sure was the guarantor of last resort.  Well, the Sheikh there is rich and he's next door and never said he wasn't a guarantor, so he must be.
   

In this noble endeavor, one's ideology is often a  highly useful forensic tool in expediting identification of the culprit and his accomplices - both the witting and the unwitting.  The fellow travelers and the dupes.

Today I saw that a new suspect - Islamic banking - had been picked out of the line-up.   Here's one example from the less conventional press (Counterpunch).

The confusion as Sh. Mohammed might say is between the instrument and the person wielding the instrument.

A chap in a Saville row suit making a bone-headed loan or investment according to Western principles is no different than a chap in a thaub and ghutra doing the same thing according to "Shari'ah" principles.  A suit against the government in Dubai (and many other places) has probably the same probability of a decision against the government - whether the suit concerns "Shari'ah-based" or conventional financing. 

In any case, I guess we can take some small comfort that Acorn has yet to be blamed, though there is still time. 

Arab Banking Corporation - No Exposure to Dubai World or Nakheel

ABC disclosed at BSE today.

Arab Bank Ltd Exposure to Dubai Holding US$100mm

AlQabas reports that ABL issued a press release today disclosing that its exposure to Dubai Holding equivalent to US$100 million from its participation in an AED denominated syndicated loan.  The loan matures in June 2013.

ABL said that the loan was performing and had just made an interest payment.  It also noted that given its maturity, it would not be part of debts to be restructured.

The danger of course when a borrower restructures is that all debt eventually gets caught up. 

Islamic Financing & Restructuring Part III - Golden Belt Sukuk 1 (Saad Group)

This is the third installment in my series on Islamic Financing and Restructuring.

Today's it's the Saad Group's turn, specifically, Saad Trading Contracting and Financial Services Company (a limited partnership formed in Saudi Arabia) ("Saad") and Mr. Maan AlSanea.

Our "kit" is a bit lighter than our last excursion (TID Global Sukuk 1) as all I could find was the Offering Circular ("OC").   The OC is well done - no doubt a combination of Bahrain legal requirements and the professionalism of the parties involved in the transaction.  The Risks Section is  particularly robust and clear. 

Just in case, you left the AAOIFI principles behind on our last journey, here's another copy.

And before we start, just one disclosure.  While I watched Boston Legal carefully, I am not a lawyer so don't rely on this or earlier comments as legal advice.  What follows is based on practical business experience not legal training.  If you want Denny and Alan, you will have to hire them.   And probably for this transaction you'd be better served by Nigel or Neale.

Short details on the transaction:

1. US$650 million in principal.
2. Five year maturity with Periodic Distribution Amounts (in a non Shari'ah compliant transaction that would be called interest) paid every 15 May and November at Libor plus 0.85%.
3. Final maturity 15 May 2012.  Single bullet payment of principal on that date.
   
4. Islamic Structure:  Ijara (rent transaction).  Maan AlSanea as Chairman of Saad leases  (the Head Lease) certain land (ex buildings) in Saudi Arabia to the Issuer (a special purpose Bahraini company)  who in turn sub leases it back to Saad.  The net proceeds of the Sukuk issue (keep the word "net" in the back of your mind as it will come up again) are paid to Saad as the advance lease rental for the Head Lease.  A single payment up front.  This gets him his "loan" if we were using non Shari'ah financing. The payments under the Sub Lease are the origin of the debt service for the Sukuk.
   
5. Legal Structure:  Limited recourse certificates (Trust Assets only) with a Saad purchase obligation.  Under the Sub Lease Agreement, the certificates are redeemed at face value plus any unpaid Periodic Distribution Amounts.  See the OC Section 9 "Termination Sum" on page 38.  Such purchase can take place either at maturity (scheduled dissolution) or prior thereto in certain cases (unscheduled dissolution after the occurrence of dissolution events and a vote to terminate by holders of at least 25% of the sukuk amount).  In effect this is a form of guarantee just like the structure in TID Global Sukuk 1, though we won't call it that.
6. Governing Law:  English Law for the Head Lease, the Sub Lease, Certificate Purchase Agreement (agreement with banks who placed the deal), Service Agreement  (Saad to maintain properties including any major maintenance) and the Costs Undertaking (Saad to pay the various service providers, e.g., Ohad, Citicorp).  All these documents are part of the Trust Assets.  The Corporate Services Agreement (Ohad and the Issuer for Ohad's services) under Bahrain Law.   And finally Saudi Law for the Promissory Note and Note Issuance Agreement and each Payable Rental Promissory Note (for the next rental payment due under the Sub Lease).
   

Let's turn to the detail.

(1) The Trust Assets

As per the OC page 19 "Recourse to the Issuer is limited to the Trust Assets and the proceeds of the  Trust Assets are the sole source of payments on the Certificates. Upon the occurrence of a Sub-Lease  Termination Event which constitutes a Dissolution Event, the only remedy available to Certificateholders will be to require the Sub-Lessor (or the Delegate acting on its behalf) to invoke its rights against the Sub-Lessee to pay the Termination Sum due pursuant to the rights granted in favour  of the Sub-Lessor under the Sub-Lease Agreement."

So what are the Trust Assets?

Title to land parcels in Saudi?  No.  As per the OC page 26, the land parcels are recorded in the name of Mr. AlSanea.   And there they shall apparently stay.

As per the OC page 17  "The ‘‘Trust Assets’’ consist of all of the Issuer’s rights, interest and benefit, present and future, in, to and under the Head Lease Agreement, the Sub-Lease Agreement, the Promissory Note, each Payable Rental Promissory Note, each of the other Transaction Documents, all monies standing to the credit of the Transaction Account, and all proceeds of the foregoing." 

The investors' security then is in the strength of these contracts. 

(2) The Purchase Obligation

Under the Sub Lease, the Issuer may call upon Saad to redeem the certificates prior to maturity if there is a Dissolution Event and at least 25% of Sukuk holders vote to terminate.  OC Section 9.2 page 38.

Dissolution Events (in a non Shari'ah compliant financing "Events of Default") are detailed in OC Section 12 page 39.   These contain the normal non payment (7 day grace). as well as several others . This Section does not contain any general covenants on Saad nor any cross default language.   However,  Section 12 (c) contains reference to Sub Lease Termination Events also triggering a Dissolution Event.  Flipping to Section 3.5 pages 68-71 we find the usual event of default matters covered under Sub Lease Termination Events.

(3) Promissory Notes

To support the purchase obligation there is a note for US$650 million.  Note that is for the gross proceeds of the issue not the net proceeds.  It will become clear why I keep hitting this point later.

At the beginning of each rental period, Saad will execute an additional promissory note for the Payable Rental Amount which is the funding for the Periodic Distribution Amount (in a non Shari'ah compliant transaction that would be called interest).

This is a "neat" drafting approach.  In the event that Saad doesn't pay, instead of  hauling a stack of complicated documents subject to English Law into a Saudi Court, the intent appears to be to have a straightforward and simple document that clearly evidences Saad's obligation to pay.  Of course, the borrower would very likely try to get all the documents into court to prolong the case and seek whatever advantage he could. 

(4) Restructuring Issues

First, some background points from the OC.

(a) Page 25 - "The calculation of the Payable Rental Amounts is not directly linked to the value of the Land Parcels, and as a result should the calculation of the Payable Rental Amounts be challenged by the Sub-Lessee there is a risk that the Saudi courts may apply the principles of equity."  Recall that the rental payment is being reverse engineered.   We know where we want to get.  The investors want a return of Libor plus 0.85% per annum paid to them.  The borrower wants US$650 million.   This issue arises strictly because of the "Islamic" nature of the transaction.  There can be no interest, but the investors want a certain return.  The Promissory Notes are designed to overcome this issue in a Saudi Court by reducing the "case" to one of an unpaid debt acknowledged by Saad for a sum certain.

(b) Page 28-29 - There is a good description of enforcement of obligations in Saudi Arabia.  This is key because as the OC's Risk Section points out, most of Saad's assets are in Saudi Arabia.  The key sentence in this section is "The courts and judicial committees of the Kingdom of Saudi Arabia have the discretion to deny the enforcement of any contractual or other obligations, if, in their discretion, the enforcement thereof would be contrary to the principles of Islamic law."  An issue that faces every creditor whether he extends under Shari'ah compliant or non Shari'ah compliant structures.

(c) Page 30 -  Another key sentence:  "The concept of trust as deemed in common law jurisdictions does not exist in Saudi Arabian law."

(d) Page 45 Use of Proceeds - The net proceeds are estimated to be US$645,750,000 or US$4,250,000 less than the gross proceeds.  The difference is for the banks' placement fees as well as legal and other costs.

Second, as the Lease and Sub Lease are the heart of the security for the transaction, these would be a target for an attack.  Can a party overturn the Sub Lease contract on the basis of equity using an argument that the rental is not fair given the value of the land? If Saad is insolvent, can a creditor argue that the rental payments are a lesser obligation than that creditor's debt and that the creditor should be paid first.  Here again the Promissory Notes are a defense that the rental payment is just as valid a debt as the creditor's loan.

This is also where the difference between gross and net proceeds finally comes in.  The Promissory Note is for US$650 million.  But the amount Saad received was US$4.25 million less.  In Saudi Courts borrowers have been known to produce an accounting of all cash flows in an effort to reduce the amount they owe the lender.  The bank gave me a $100 loan and over the years I paid them back $100 (the borrower would list all payments to the bank irrespective of whether they were principal or interest).  Since the Shari'ah doesn't recognize interest, the Court could assume that all cash flows were principal.   Once a banker from a neighboring country told me that a borrower had pulled this ploy and the court ordered his bank to refund the overpayment!  That is, the bank wound up owing money to a non paying borrower.  If  Saudi courts still might  take this stance, then Saad could charge that he only received US$645.75 million not US$650 million -  and therefore there was something wrong with the Note and the transaction.  I think if the gross proceeds were desposited to Saad account and he paid the US$4.25 million in fees, there would be a stronger case than if  he only received the net.  This is not an issue particular to this transaction, even a conventional non-Shari'ah bond could run aground on this shoal.

(6) Other Interesting Points from the OC 

(a) OC page 14 Ownership of the Issuer.  AlGosaibi Investment Holding EC  Bahrain ("AGIH")  owns 99%.  Those of you who have been following the legal battle between AlGosaibi and Mr. AlSanea know that AlGosaibi has accused him of undertaking transactions in AlGosaibi companies without their knowledge.  It would be very interesting to know who at AGIH authorized this transaction.  Without that information, we can't draw any conclusions.

(b) OC page 22-23 Shari'ah Opinion.  The last paragraph gives an insight into the practical approach taken:  "The Shari’ah Board also took into consideration (i) the legal constraints under which this product is being developed; (ii) the need to facilitate and bring ease to the Islamic financial institutions and others who are determined to raise financing according to Shari’ah principles; and (iii) the prevailing conditions and a¡airs of the Ummah and the need to remove them from the shackles of riba. And Allah Knows Best."

For those interested there is a description of the Saad Group  as well as some now dated financials at the end of the OC. 

If there are any trained lawyers out there, I'd love to hear your thoughts on Golden Belt as well as on my previous post on TID Global Sukuk 1.  All without attribution and as well pro bono.

Moody's Estimate: Dubai Debt US$100 Billion?

Supposedly today in London Moody's gave out an estimate of Dubai Inc's debt as US$100 billion.

As well one of their senior staff reportedly described the Emirate as "high yield" territory.

If I find a link, I'll update this post.

HH Shaykh Mohammed Bin Rashid AlMaktoum Press Conference

WAM has just published a press release  relaying details of a press conference held by HH Shaykh Mohammed Bin Rashid AlMaktoum, Ruler of Dubai and Vice President and Prime Minister of the United Arab Emirates.

Here are some salient points from the release - though I encourage you to read it in its entirety.

1. Sheikh Mohammed sat in a chat session with the journalists to talk about so-called crisis of Dubai World and the media buzz around this problem, as well as the confusion and exaggeration in conveying the right image of this topic across a section of the media.
2. He asserted that he is not worried about the hype the media had created.
3. "(In fact) we wanted this reaction, which has proven that we are the difficult figure in the equation of the global and regional economies as I had said earlier. This is what makes us feel satisfied and proud that we work, and play an important, vital and positive role in the international economy, which has suffered a strong jolt as the result of the announcement of the restructuring of a company".
4. "People try to pelt stones or anything else within their reach at a fruit bearing tree. Then how it will be when we have seven fruit-bearing trees or more? It is natural that we are exposed to all these exaggerations, which are far from reality".
5. He added: "The diligent waves have amazing patience.. amazing".
6. At the end of the meeting, Sheikh Mohammed expressed his hope that the media will convey the truth, saving the people from falling into quagmire, and reminded that transparency and credibility are the most important attributes of successful media.  He called on the journalists to search for the truth, to uphold credibility and judge by conscience above all, so as to earn public trust and respect.

As I go forward I intend to report on this so-called story without hype and with minimal buzz, paying particular close attention to Point #5 above. (Tafsir on the waves comment:  long term versus short term).

National Industries Sues Carlyle Group

AA saw the news item in the Financial Times this morning.  Hard to miss it's on the front page.

What a shock!

There was no editorial (lead or otherwise) calling for Carlyle Group to step up and guarantee Carlyle Capital Corporation so that NIG could get back its US$50 million investment. 

Nor even more surprisingly was there a call on Abu Dhabi to step up and accept responsibility.

What's capitalism coming to?

Of course, AA will be keeping his eye on tomorrow's FT.  The editorial may be there.  

Other Kuwaiti Companies Report on Dubai Exposure

Most of the notices on the KSE today were about exposure to Dubai World and Nakheel.

Company KSE numbers provided in case you need to look up more details on them.  As per KSE classification, Investment Companies are 200 series,  Real Estate Companies 400 series and Services Companies 600 series.

All of the companies report they have no exposure to either Dubai World or Nakheel.  You'd expect the companies with no exposure would be the quickest off the blocks to report.

1. Mansha'at (433)
2. Aref Investments (216)
3. Aref Taqa (627)
4. Sukuk Holding (239)
5. First Investment (219)
6. Usul Investment (225)
7. Arjan Global (431) - And despite it's name it states it has nothing in the UAE at all.

Link to earlier post on Kuwaiti bank exposure to Dubai. 

Golden Belt Sukuk 1 (Saad Group) Vote on Dissolution

Following the payment failure on 16 November 2009 and the earlier event of dissolution notified investors last August, the Delegate on the Sukuk has approached investors again asking them whether they wish to vote to dissolve the Trust and thereby collapse the Sukuk triggering Saad's purchase obligation. 

25% of investors have to vote for this to be effective.

So far 7.4% have. 

Notice posted on BSE here.