International Investment Group Follow Up on Default

Today there was a flurry of activity on Nasdaq Dubai around IIG.

First, the Exchange suspended IIG's US$200 million sukuk.

Then, IIG Funding issued an announcement on the default on the Periodic Distribution Payment ("interest") on its Sukuk along with the canonical words that a  payment default of more than three  business days constitutes a Dissolution Event.  That gives the certificateholders the right to vote and if enough of them vote positively (at least 25%), the maturity of the issue is accelerated.   

You will notice that IIG Funding's announcement neatly skirts another potential Dissolution Event from  Section 13 (e) of the Offering Memorandum.  I've highlighted the relevant section in blue italics.

either (i) the Issuer becomes insolvent or is unable to pay its debts as they fall due; (ii) an administrator or liquidator of the whole or substantially the whole of the undertaking, assets  and revenues of the Issuer is appointed (or application for any such appointment is made);   (iii) the Issuer takes any action for a readjustment or deferment of any of its obligations or makes a general assignment or an arrangement or composition with or for the benefit of its  creditors or declares a moratorium in respect of any of its indebtedness or any guarantee of  any indebtedness given by it; (iv) the Issuer ceases or threatens to cease to carry on all or  substantially the whole of its business (otherwise than for the purposes of or pursuant to an  amalgamation, reorganisation or restructuring whilst solvent); or

A glance at IIG's 30 September 2009 summary financials (the latest issued) suggests that the Sukuk represents roughly 85% of IIG's borrowings.

Dubai Holding Not In Financial Trouble - Will Restructure Debt

As the GulfNews reports.

Dubai: Shaikh Ahmad Bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee, yesterday said government-owned Dubai Holding does not have financial troubles.

"Dubai Holding doesn't have any problem," he told reporters after the annual general meeting of Alliance Insurance.

 And as it further reports.

The real estate, hospitality and financial investments company last month said it would be restructuring $20 billion (Dh73 billion) worth of debt, according to a Financial Times report.

Hmm.. 

It seems to me if you can't pay your debts as they mature, you have some sort of a problem.  It could be an operating problem with your business, you just aren't generating enough cash to pay your debts.  It could be poor financial planning.  You took on too much short term debt maturing around the same time.  Or it could be a market issue.  Due to the market structure or conditions, you couldn't properly manage your liabilities.   Whatever the case, it seems you've got a problem.

Once I didn't have a problem with my home.  Strange thing.  Whenever it rained, there was water in the house.  Now I surely didn't have any problem at all mind you.  But I did replace the roof.  I like to think of it as my way of contributing to the development of the local construction sector.

International Investment Group Misses Another Sukuk Payment - Headed for Rescheduling

IIG issued the following announcement on the Nasdaq Dubai earlier today.

12 Apr 2010 - 16:11:22

IIG Funding Limited - International Investment Group KSCC (IIG)

Kindly be advised that IIG has communicated to the Sukukholders through IIG Funding Limited (Issuer of its US$ 200 million Sukuk) of its inability to make the Periodic Distribution Amount of USD$ 3,353,062.50, due on April 12^th, 2010 (being the first business day after April 10^th, 2010, scheduled for the distribution.)

 IIG has appointed an international consulting firm in relation to carrying out an independent business review, preceding a detailed financial restructuring at a later date.

You'll recall they missed a payment in January which they made on 20 January.  Earlier posts here and here.

IIG is currently suspended from trading on the KSE for failure to provide its 31 December 2009 financial to the Exchange within the specified time.

Sowwah - If You Build It, Will They Come?

Copyright The National

My guess is yes.

Especially for patient capital that is also prudent in what it builds and the leverage it uses. 

National Bank of Kuwait Increases Stake in Boubyan Bank to 46.66%

NBK has increased its stake in BB to 46.66% as per the KSE.   (Very last item on the page).

Currently, NBK has Central Bank of Kuwait approval to acquire up to 60% of BB - which would mean that at present they could not buy all of Commercial Bank of Kuwait's 19.196% stake in Boubyan.  Though I suppose the Central Bank of Kuwait might be persuaded to allow them to buy more.

Commercial Bank of Kuwait - New Board The Godfather in Kuwait

An interesting post by Sal over at Alphadinar.    Why Dherar Al-Rabah was Appointed Chairman of Commercial Bank of Kuwait. 

The Investment Dar - Central Bank to Release 2008 Financials?

What a difference a day makes, apparently.

From its rather negative take in Sunday's edition, AlQabas' Monday edition has a much more upbeat story for TID.

Quoting sources with a strong connection to the Central Bank, AlQ says that yesterday the Central Bank of Kuwait approved TID's 2008 annual report which was caught up for over a year in "back and forth" between the two parties.  In the middle of last March TID submitted amended financials along with accompanying notes on some of the points the Central Bank requested  explaining why they were difficult to implement.  AlQ says that the numbers were agreed earlier.

AlQ's sources tell it that TID's  2008 loss is roughly KD0.078 per share in addition to KD 100 million of provisions.  This seems a bit strange.  If the loss per share is net income, this would include provisions.  Unless what is meant is fair value adjustments which don't pass through the income statement.   With about 945 million shares outstanding that would translate into an approximate KD74 million loss.  Compare that to the KD260 million loss that GIH took with roughly the same size balance sheet.  I'm a bit surprised that TID's loss was so small.  The creditor reaction was much more severe at TID than GIH.  Creditor reaction is usually a function of repayment prospects - both ultimate amount and time to collect.   Let's see what the financials show when they're released. 

Whatever the case, at 30 September 2008, TID had roughly KD416 million in equity.  So KD74 million or even KD174 million would not seem to be major issues. So again it's unclear why the fuss over the approval.  What was TID resisting?  It must have been something important since there's nothing like a restructuring to focus minds on survival.

Having given the 2008 results, AlQ says it's not clear if these numbers were used or if further adjustments were made.  The latter case would contradict the earlier statement that the numbers had been agreed.

It's expected that quarterly financials will be approved much more quickly as the major sticking point was the 2008 financials. The article says that TID's first, second, and third quarter 2010 interim reports are already at the Central Bank.  Presumably a typo for 2009.

The article concludes by stating that this week the Creditors' Co-ordinating Committee will hold a meeting with the management of Commercial Bank of Kuwait to agree a satisfactory formula for resolving the dispute over the Boubyan Bank shares. While several possible mechanism have been discussed no agreement has been reached on a single one.

If true, this article represents the first bit of positive news for TID in some while.  A settlement with Commercial Bank would be another step forward.  The next key hurdle is the decision by the special FSL court as to whether to entertain AlMasar's objection.  If TID can get under the FSL, that will a major and perhaps the decisive step towards implementing the restructuring.

The Investment Dar – “Out of Breath” in Its War on Many Fronts

Update:  AlQabas had a more upbeat assessment in its Monday 12 April issue.  Here' s the link to my post.

So says AlQabas. 

First, let's review what AlQ had to say. Then some comments.

AlQ cites the following issues:

1. TID's 2008 audited financial report remains "frozen" at the Central Bank of Kuwait which refuses to approve it. Reportedly this is leading to a loss of confidence among many creditors that the restructuring plan will be implemented. 
2. The legal case by AlMasar Leasing – involving debt in excess of KD10 million – poses a threat to creditor acceptance of the restructuring plan. AlMasar is close to the implementation of the judgment in its favor and has obtained a precautionary block on assets sufficient to repay the debt. TID has filed an urgent challenge (motion) to stop the implementation of the order. The Court is reviewing TID's motion. Legal sources say that there are fears that the creditor alliance will disintegrate if AlMasar's judgment is upheld and enforced. That other creditors will see courts as a way to get their money back "early". 
3. The legal struggle with Commercial Bank of Kuwait over Boubyan Bank remains unsettled. AlQ says that in its weekly meeting held right before the end of last week TID took the pulse of the Creditors' Coordinating Committee about a potential negotiated settlement to this dispute. Details were not discussed. The goal was to determine if there were any creditor objections. If not, then TID has a green light to proceed. 
4. Also at the same meeting the CC discussed whether to retain the Chief Restructuring Officer in the coming phase or replace him. Three international firms reportedly have submitted proposals as well as the existing CRO. Details of the four proposals were reportedly not discussed.
   

Now to the comments.

1. Indeed TID has to be a bit short of breath with all the battles it is facing. Clearly, this case is quite different from that of Global Investment House. The key difference is a lack of confidence.   The Central Bank isn't confident in the financials.  Dissident creditors apparently think expensive and messy court cases offer a higher prospect of recovery than the restructuring - though they could be hoping to prompt a buyout by other creditors if they threaten to destroy the restructuring through their recalcitrance.  The rest of the creditors clearly want a monitor at TID.  All this makes for a very fragile situation.  
2. Why hasn't TID's audited 2008 financial report been released? Why is the Central Bank refusing to sign off? Presumably, TID's auditors, the local affiliates of KPMG and PwC, have completed their audit. Unless there is a substantial problem in their opinion (say an adverse opinion or a disclaimer), they have signed off on the "numbers". If the latter is the case, the Central Bank  would appear to be saying it doesn't trust the audit work of two major firms.  Ouch!  This is not just a slap at TID but also at these two firms.  
3. Why doesn't TID just give the Central Bank what it wants?  Quibbling over numbers would seem rather silly when the patient is  barely alive in intensive care.  The rumors are that the Central Bank is demanding additional provisions and reductions in the carrying value of assets. Seems simple to just sign on the dotted line. - whatever the results.  Historical statements from 2008 are just that history.    It's hard to see there being a major impact on the banks.  They have their own advisor's (Morgan Stanley's) cashflow focused analysis on the best path to recovery. And without any audited financials a significant number of them have decided that the restructuring is the "best" deal for them.   And, as I've written before, this looks a lot like a disguised liquidation.   So how would adverse financials change that?  The diagnosis would remain the same.  And the conclusion very likely the same.  A fire sale by a liquidator is not a good recipe for recovery. 
4. It must be is that the additional amounts are so large that they pose a serious problem.  Negative shareholder equity would probably  greatly complicate recourse to the Financial Stability Law if not make it impossible. The FSL is designed to rehabilitate companies.  Not to provide cover for a  liquidation. No clear cut Chapter 7's need apply. Similarly, there could be other problems.  A law that if losses exceed a certain portion of  paid in capital, the firm must raise more or enter formal liquidation.  Sometimes problems like these can be solved by having an Extraordinary General Meeting of shareholders vote to use reserves (share premium, mandatory and voluntary reserves to offset retained losses).  Presumably, if it were that simple a matter then  TID would take the step.   If it's a need for additional new equity, that's probably something that shareholders probably aren't particularly keen to do right now.  So the battle on the financials is to prevent getting into a worse situation.
5. The real issue with AlMasar would seem to be it's formal objection to TID entering under the protective wing of the FSL.  There are other creditor cases out there, e.g. BLOM.  Yes, AlMasar has the "block" on some assets.  But if TID is successful with the FSL won't that solve its legal problems, especially those in Kuwait?  So isn't the FSL objection the key? The AlQ article is silent on this topic. 
6. Also the comment about AlMasar success leading other creditors to similar action is probably correct in one sense.  But, if all the creditors rush for the exit, the ultimate recovery is going to be  affected.   If any bank's creditors and depositors suddenly asked for their money back, no bank could pay them back immediately. Not Deutsche Bank.  Not National Bank of Kuwait.  And TID is very very far away from being in NBK's very strong position. The best recovery is going to come from a controlled process.   Hopefully, the banks have figured this out by now, though I suppose in a panic logic is the first casualty.
7. Boubyan turns not only on the relative strength of the two parties' legal positions but more importantly on the ability of the weaker party to tie the shares up in court for years and years.  In terms of legal advantage, I think the legal definition of the transaction is  critical  If the  original transaction is considered a sale, then CBK owns the shares which it bought at a bargain price.  TID had the opportunity to buy them back but failed to do so.   Tough luck.  Unless in consideration of "equity" the Court allows TID the opportunity to go "back in time" and complete the repurchase.  In which case, it would make abundant sense for the banks to lend TID the money.  Lend $200 million, get shares worth $400 million, sell them to NBK and  put a cool $200 million  extra into TID's estate.  If it is a secured loan, then CBK owes TID  the excess of the realization proceeds from the collateral over the  repayment of the loan.   In which case  the result is the same as the Court sanctioned "time travel" mentioned above.   In terms of waiting, Commercial Bank probably has a less urgent need for the cash than TID.  Luckily for CBK, NBK is running the show at Boubyan so the likelihood of something going really wrong going there is fairly low.  That should put a floor of sorts under the share price - assuming there are no legacy problems from before NBK's stewardship began. And make waiting a bit more palatable, though there are signs that shareholders at CBK aren't particularly happy now - if AlQ's account of the recent OGM is accurate.
8. The debate over the continuing role of the CRO is pretty clear evidence of the creditors' continuing lack of confidence in TID's management. Under the restructuring, they are taking TID's assets into companies they will control (assuming that AlQ's earlier account of the restructuring is correct).  Yet, they still seem to feel they need an on site minder at TID.   Usually in a restructuring the creditors would form a committee to monitor the borrower.  Or perhaps require an accounting firm to do periodic reports to confirm the borrower was discharging its obligations.  Both of these mechanisms on a post facto basis.  That is, the creditors check on the borrower after the fact -  to review its conduct in the last quarter.  It seems that with TID the creditors want a monitor for  "real time" monitoring.  With the assets in separate (from TID) holding companies,  it's unclear just precisely what the CRO will monitor.  Will he run those holding companies?  And how will his position fit in with that of the Central Bank "monitor"?  Especially, since if TID is successful in getting under the FSL umbrella, the Central Bank is probably going to have a monitor  in the company to keep an eye on things.  This isn't a trivial matter since the expense isn't trivial.  The creditors are in effect saying we're willing to pay a price to make sure we keep an eye on TID's management.

Mashreqbank v The International Banking Corporation

This post reviews documents submitted in the case brought by Mashreqbank against TIBC in the Supreme Court of New York State (Case Index #601616/2009). This case has been stayed following TIBC's filing of a petition under Chapter 15 (Ancillary and Other Cross-Border Cases) of Title 11 (Bankruptcy) of the USC. Chapter 15 provides for USA recognition of insolvency or reorganization legal proceedings in other countries.  When that recognition is given then all legal proceedings in the USA are stopped pending the outcome of the foreign case.

As a foreword, there's no substitute for reading the original documents. So I recommend that you go to the NY Supreme Court website. Use the above Case Index Number to search for the case records. Note there are two cases with this Case Index Number. One in Nassau County and one in New York County. The latter is the TIBC case. Click on this one. On the next page look for the button for e-filed documents. It appears in the lower right hand. This earlier post has some instructions on how to navigate the NYSC website.

Here's a summary:

1. On 5 May Mashreq and TIBC entered into a split value FX deal. On 5 May Mashreq was to pay US$75 million to TIBC's account at HSBC NY. On 11 May TIBC would pay Mashreq SAR282.150 million to Mashreq's account with the National Commercial Bank Saudi Arabia. 
2. You will notice this is the exact same FX rate (3.762) that Mashreq applied in its transaction with AHAB. 
3. Mashreq made its payment. TIBC did not. 
4. On 11 May (from the documents in Exhibit B (Document 4-2), TIBC tried to transfer its remaining balance at Mashreq NY US$6.15 million to its account at Bank of America New York City. Mashreq canceled the transfer and offset that amount against the US$75 million. 
5. Thus, its claim is now US$68.85 million.
   

Looking at the other exhibits, specifically F and G (Documents 4-6 and 4-7), account information supplied respectively by HSBC New York and BofA New York on TIBC's accounts with them, we see that:

1. The US$75million received from Mashreq on 5 May 2009 was transferred to TIBC's account at BofA on 6 May. 
2. After various debits and credits during the month, at the end of the month TIBC had some US$57 million in its automatic investment account at BofA. An auto investment account is an account linked to the main clearing account. Each day after all transactions have been processed, the bank automatically debits the clearing account (above some agreed minimum balance to be retained and in agreed multiples) and transfers the funds to an interest bearing overnight deposit account. Each morning the funds are returned to the clearing account so that the bank can use them for its payments. 
3. At the end of May, TIBC had an approximate US$2.35 million credit balance at HSBC New York. This resulted from a credit of US$8.97 million on 20 May which partially covered a persistent overdraft of US$6.62 million in the account. Mashreq tried to seize the entire amount of the credit but HSBC had offset it against the OD. The parties agreed to recognize the Court ordered freeze on the US$2.35 million credit balance in Mashreq's favor and deal with the US$6.62 million later.  That is, whether HSBC had a right of offset against the OD on its books.
4. What precisely happened with these funds after the NY Supreme Court recognized the Bahrain legal proceedings under Chapter 15 is not clear to me.  Are the funds still in New York? Are they frozen in favor of Mashreq? Or frozen in favor of all creditors of TIBC?
   

Exhibit A (Document 4-1) provides a list of FX transactions undertaken between Mashreq and TIBC from January 2009 through 5 May 2009. 

1. There are 21. 
2. Only one was not a split value transaction. 
3. The countervalue (Saudi Riyal) amounts are not shown in this list so it's not possible to determine what the interest rates were on the loans that Mashreq was granting TIBC through this mechanism.

 
 

Hissa Hilal - Last Poem (7 April 2010)

(Update:  Translation of Poem by The National)

My poems! When your critics seek flaws in you, they will be overwhelmed when they find none.
When you suffer from drought during a summer, I will pour meanings into you until your thirst is quenched.
Defeat fear and conquer every frightening cave.
Do not live life with one eye looking behind.
Any illusion that seeks to find a nest in you, make it fly.
Scare it away from your thoughts and ambitions.

Illuminate and realise your potential, and feel what God has given you.
The feeling of helplessness never helps the weak. If you step back, you will be gone.
For courage, there is a price. O, honest one.
When night and coward people renounce you,
When faint-hearted get scared even from the sound of the bullets,
When rumours increase around you, through genuine verses, you can kill any illusion.
You have come with thought exposing fodder-seekers.

You would think friends will praise you.
Your honesty is itself a slap in the face of all falsehood.
Those who are used to only compliments will be annoyed.
He will get jealous who wags his tail when he sees the bread.
When you prefer to stay hungry out of pride.
He who has no conscience hates you.
In his darkness he is immersed, he does not see your light.
What benefits the scum when standing in your way?

When every free voice remains supportive of you do not fear his snake hiss.
You have a waving wing; you will not be betrayed by your open skies.
Bring the good news to he who wants to be your ally.
When you fly and no one can reach you in the sky.

Hissa Hilal - Not Only #1 at Suq Al Mal

A nice article from The National.

As you'll notice she had the highest marks from the judges but lost two to one in the "popular" vote.

She showed, through her poems, that she is brave. Meeting her in person, she is a very decent woman. People have attacked her for expressing her ideas and views but she stood up for her views.

No two people can disagree that she is an able poet,” Mrs al Ahmadi said. “We knew her poetry, she wrote under the name Rimmia [deer in Arabic]. We are familiar with her talent.”

Barbarity

Copyright The National

Link here.

This is NOT Islam.

And it is taqlid only if your tribe happens to be a pack of wild dogs.

الرجل اسفل من كلب ابن كلب
العائلة بدون اي شرف او اخلاق او دين
البلد والمجتمع بدون اي إنسانية

Gulf Finance House - Deutsche Bank Converts Another US$5 Million to Shares

GFH announced on the BSE that Deutsche Bank had converted another US$5 million to GFH shares under the convertible murabaha agreement concluded 10 September 2009.  The conversion price is US$0.38 per share. 

The last trading price on the BSE was US$0.245 per share. 

Here's an earlier post that might shed light on this transaction. 

GFH is still not showing any major shareholder on the BSE "Major Shareholders' page" and only has disclosed itself (Treasury shares) and Shamil Bank as holding more than 5% of the shares.

So what's happening to the GFH shares that Deutsche converts?

So far, if my tally is correct, US$55 million out of the US$100 million issue (for which Deutsche paid US$80 million) has been converted.  The issue must have been done for clients of Deutsche Bank since DB is not showing up as a major shareholder in any disclosures I've seen.  Either that or DB is selling the shares as soon as it gets them. 

Limitless - First DIFC Case

Here's a report from Maktoob Business that a former employee has filed a case against Limitless at the DIFC Courts.

As you'll recall (and if you don't, here's the link), if a company owes US$2,000 and does not pay for a period of three weeks, it may be wound up.   Chapter 5 Articles 50 and 51 are the place to look.

Presumably a tactic by the former employee to secure a payment.  It's highly unlikely the Court will put Limitless in compulsory liquidation.

Commercial Bank of Kuwait - Fireworks at Annual Shareholders' Meeting - Directors Not Released from Responsibility for Fiscal Year 2009

AlQabas has a report on CBK's Annual General Meeting of Shareholders ("AGM") 7 April.  (Also sometimes referred to as an Ordinary General Meeting to distinguish from an Extraordinary General Meeting.  The difference between the two arises from the entity's articles of association which set forth the powers of each.  For example, an amendment of the Articles generally requires an EGM).

Some 85.49% of shareholders were at the meeting which proceeded calmly until the 9th Agenda item - the release of the Board of Directors and the Managing Director from responsibility for their conduct during the last fiscal year (2009).  Generally, not a contentious issue.  Usually approved quickly.

This time was different.   As the AGM moved to Item #9, Ali Musa Al Musa, Chairman and Managing Director of Securities Group,  made two proposals.

1. To delay voting on releasing the old board and the previous Chairman/Managing Director, Dr. Abdul Majid AlShatty from responsibility for their conduct during fiscal year 2009 until a future AGM  (While these are generally scheduled once a year, there is no reason one couldn't be called sooner).  In the interim the new board would conduct a legal, management and accounting review of the conduct of the previous board and managing director to determine if they had taken any salary, benefit, compensation or other perk during 2009 and the period up to the date of the AGM (when they were still in control of the bank).
2. And that in line with sound corporate governance, the principles of disclosure, transparency etc the AGM vote that no member of the board or the managing director can receive any salary, benefit, compensation or other perk without the prior agreement of an AGM with full disclosures of the package. 

Mr. AlMusa's proposals passed with 79% of the vote.

There is a transcript of the exchange between Mr. AlShatti and Mr. AlMusa.  As you might expect, AlShatti took AlMusa's proposals as a personal attack.  So there is some interesting back and forth.  AlShatti saying that he and Jamal AlMutawa had taken at 15% salary cut noting that whatever the AGM said, or did not legally the Board was not released for its conduct until after 5 years.  He also noted that the board had served loyally for 12 years.  For his part AlMusa denied that he was accusing anyone, but fighting for fundamental principle of shareholders' rights.

Buried in the third paragraph from the end of the article is a statement that the Central Bank of Kuwait supposedly ruled that any profit from the sale of Boubyan Bank shares by CBK belongs to CBK's shareholders not the creditors of TID.   This is an important point to watch in view of the current market value of BB being roughly twice the amount of the repo between CBK and TID.

CBK's new board comprises Darar Al-Ribah as Chairman, Ali A-Awadi, Anud AlHatharan, Ahmad AlMishari, Badr AlAhmad, Tariq AlUthman, and Mahdi AlJazaaf.   

Note:  AlShatti had objected to the election of AlMishari saying he had not been cleared of his responsibility for 2009 and that it was nothing personal.   AlMishari apparently was a director in 2009 but resigned prior to the AGM.   In responseAlMishari said he had resigned for "lack of fit" with the board.

Alternate Directors (in case one of the above leaves the board) are Ali AlMusa, Abdul Rahman AlAli,  and Mohammad AlShatti.

Markaz Report on Dubai and Dubai Real Estate

Markaz has published another of its excellent research reports.

This one's on Dubai Real Estate and the prospects through 2012.

Here's the link.

Essentially, they see

1. Dubai's economy marking time in 2010 and 2011 with a moderate uptick in 2012.  
2. Trade will be up all three years.  
3. Tourism down in 2010, marking time in 2011, and up beginning in 2012. 
4. Real estate down in 2010 and 2011 and marking time in 2012,

The Benefits of Blogging: Recognition

When one is associated with a prestigious blog like this, it's only natural that there is an effect on one personally.  Recognition, fame and accolade follow in rapid succession.   

Yes, there are the awards - the tangible evidence of one's accomplishments.  As gratifying as these are, even more touching are the requests to provide guidance or help.

It's not been that long since Suq Al Mal was launched and already the process has begun.

Today I received an email advising me that

You were recently chosen as a potential candidate to represent your professional community in the 2010/2011 Edition of Distinguished Professionals Online.

We are please to inform you that your candidacy was formally approved March 15th, 2010. Congratulations.

The Publishing Committee selected you as a potential candidate based not only upon your current standing, but focusing as well on criteria from executive and professional directories, associations, and trade journals. Given your background, the Director believes your profile makes a fitting addition to our publication and our online network. 

As you'll note I've made it to the highly prestigious status of a "potential" candidate to represent my very own "professional" community as a "Distinguished" Professional.  And you'll note that I was not only selected by the Publishing Committee based on my current standing, but that the "Director" himself thinks my profile makes a fitting addition.

And to think I was flattered by two comments nominating me to the Chairman of the Federal Reserve Board or Emcredit.  I'll bet Mr. Greenspan isn't in the Distinguished Professional Directory.  I seriously doubt if he was even a potential candidate.

As gratifying as that was, you can imagine how I felt when I found a personal email to me from  HE AlHaji Lamido Sanusi, Newly Executive Governor of the Central Bank of Nigeria Head Office kindly inquiring about my health and apologizing for the delay in sending me the US$40 million that the CBN owes me.  All I need to do is send him my personal bank account details and the money will be on its way.  Of course he might ask for some money to cover expenses in Nigeria, but then one has to spend a buck to make a buck.

But that was not all, I also had an email from a nice young lady in Sierra Leone, the adopted daughter of a deceased head of state of another African country who needs my personal help in assisting her to secure an inheritance.  Once I send her my account details, I shall get the funds and will be allowed to keep 10% of the principal for myself plus 30% of the profit on the entire amount.  I'd reveal more but I am sworn to secrecy for security reasons and her future.

I really do need to look in my spam inbox more often.

Sukuk - Bond or Equity A Profoundly Subversive Answer

Here's an extremely interesting and important article by Oliver Ali Agha, Managing Partner at Agha and Shamsi, and Claire Grainger, Partner of Head of Projects and Dispute Resolution at Agha and Shamsi.

Their central thesis is that Shari'ah compliant sukuks cannot be bonds or bond like instruments.   Shari'ah compliant sukuks are equity-like.  And so to refer to events of default or defaults is wrong.  Equity cannot default.  Therefore, sukuks can never default. 

These few simple statements embody a radically subversive thesis which demolishes the theoretical foundation of sukuk market as it currently exists by denying that there is an  Islamically acceptable from of traditional debt securities. 

This position is much more dangerous than law cases like BLOM v TID.  Posts on that topic here and here.  The latter represent attacks on implementation of aspects of the transaction while presupposing the structure is sound.  The former holds the structure itself is against the law (Shari'ah).  Under Agha and Grainger's thesis there is no "fix", no magic drafting that can achieve the goal of an "Islamic" debt instrument with bond-like features.

Some other observations.

1. Most of the sukuks I have seen do not meet AAOIFI's five tests. (outlined in the article)  Most fall down on the first. The Offering Memorandum are clear that the sukuk holders have no right in ownership of the underlying asset.  They do not own it during the transaction.  And  generally may not seize it if the obligor fails to perform.  Sukuk certificate holders have the right to the use or proceeds from the assets.  It seems to me that if I've leased you a piece of land which you've re-leased to me and I stop honoring the master lease contract, your recourse in a Shari'ah Court is not to take ownership of the land, but to sue me for the lost revenues. 
2. Sukuk are deliberately structured to be bond equivalents.   That is what the market appears to be demanding.  What Agha and Grainger are saying is that these instruments are not Shari'ah compliant.
3. From there it is not a giant leap to the conclusion that presenting these sukuk as Shari'ah compliant is fraud - on the part of the obligor, its financial advisors, and the Shari'ah boards.  The principle is crystal clear according to Agha and Grainger.
4. They make one other point which I don't follow.  "In reality, sukuk holders do have substantial remedies under Shari'ah: they are the beneficial owners of the underlying assets that would need to be excluded from the insolvency proceedings of the issuer."   Since the documentation I've seen explicitly states that the certificate holders do not own the assets, I 'm presuming they are referring to the hypothetical situation in which title transfer has taken place.
5. Without too great an intellectual leap, other debt like structures presented as Shari'ah compliant come under siege.

Million's Poet Final: Hissa Hilal in Third Place

Tonight marked the final competition in the Million's Poet 2010 contest.  

Nasser AlAjami of Kuwait is the Million's Poet for 2010 with 67 points (out of 100).

Falah Al Mowraqi of Kuwait second with 63 points.

Hissa Hilal third with 62.

Or one can look at it another way, Hissa came ahead of 44 other poets.

Either way you look at it is a remarkable achievement.

She was born to a bedouin family.  Discouraged from pursuing poetry by her parents.  Raised in a society that has confused tribal taqlid from the Jahiliyya with a noble religion.  A society in which a 43 year old mother of two  needs her husband or her brother's permission to get a passport.  And their permission and presence to travel.

Yet she persevered.

And came in third in a field traditionally dominated by men.

But beyond the prize the more important thing is really the message.  The content.  Not the banner that one is given.  And she acquitted herself quite nicely.

I also found her quite an appealing sort of person.  

In the early episodes of the contest she was quite clearly nervous.  Having been kept down for so long, it must have been daunting to go out in front of such a large audience, including members of the royal family of Abu Dhabi, noted poets among the judges as well as tens of millions of TV viewers.  

There are also a couple of interviews with her on You Tube and she seems a down to earth sort of person.  Direct in her response to questions.  And displaying a flinty spine of steel on some issues.

Hissa Hilal - Video of Poem on Fatwas and Religious Extremism (with Translation)

Here's a link to the poem at The National.  With translation via subtitles.

This is not from the actual contest.

Here's a YouTube link to the contest.  She begins by saying that the topic of her poem requires a lot of courage to talk about.  That many are silent.

And here's her poem about the media.  In the first bit (till about 1:20) she's reciting a poem to Shaykh Muhammad Bin Zayed.   It's customary for the poet to honor the host with a couple of verses.

All posts on Hissa now have the label "Hissa Hilal".