Dubai Investor confidence - Sheikh Mohammed issued tougher Anti Fraud Law

original source more:  www.sheikhmohammed.com
read also: KhaleejTimesOnline   “Anti-fraud Law Made Tougher”
read also GulfNews

Who is carrying the risk - Dubai’s unfinished construction projects is in the hundreds of billions of dollars

extract of original TheDailyMarverick

Some say the sum for Dubai’s unfinished construction projects is 400 billions of dollars , so who is carrying the risk?

Multiple reports state that Abu Dhabi will "pick and choose" how to assist Dubai.

As capital of the United Arab Emirates and home to the central bank that feeds the cluster of seven emirates, everybody is exposed to everyone else. Abu Dhabi pumps 90% of UAE oil, so that’s a big hedge. But just as Dubai World has subsidiary upon subsidiary, and extends its tentacles into state enterprises, parastatals, and listed firms, it’s hard to track where the fault lines lie in the patchwork that is UAE finances, and beyond into the markets of the Middle East proper.

Abu Dhabi’s own cost of insuring its debt against default has soared, from just less than $100,000 per $10 million, to more than $177,000. And while this number fluctuates with the desert winds, there’s no guarantee that Abu Dhabi will keep forking out money to save its emirate cousin. For now, though, the prospect of rising costs on its own borrowings appears to have galvanised Abu Dhabi into providing more cash to Dubai. Stock markets swelled after Abu Dhabi’s payment of $10 billion to its neighbour, with Abu Dhabi's stock market clambering 7.9%, while Dubai’s benchmark index rallied 10%, the biggest single-day gain in more than a year. But this remains far below its level before Dubai World announced it wanted a hold on debt.

Reuters quotes Abu Dhabi people who say most of the über-emirate’s credit flow was too big, government-backed entities in Dubai, which helped collateralise Abu Dhabi's own late entry into the wedding-cake architectural stakes.

"During those years, the property market was still in its infancy in Abu Dhabi, so like other banks here, we, too, diverted our credit to Dubai," one Abu Dhabi bank executive said. "We have to face the stress that will be caused to our balance sheet and profit and loss account due to this exposure to Dubai World and associated companies because it is a default. Yes, we will have to take more provisions."

No one yet knows where the debt really resides.

Western banks appear to have some $12 billion of exposure to Dubai’s unfinished building frenzy.

There’s a sprinkling of Islamic sukuk bonds, such as the one that funded Nakheel’s $4.1 billion of due debt.

But the market wants to know if Abu Dhabi’s latest $10 billion was a gift, or a loan, or came from the proceeds of a veiled asset sale.

Abu Dhabi recently launched a push to improve transparency and raise money overseas, to help fund its own 20-year development programme. And so far, the emirate has raised about $8 billion this year on international credit markets.

But last week, ratings agency Moody's placed the credit ratings of several big Abu Dhabi companies on review for a possible downgrade, citing uncertainty over government support. And in the meantime, rival agency Fitch downgraded Dubai Bank, and also Tamweel – the largest provider of UAE real estate financing. It also downgraded Bahrain's TAIB Bank.

Another motivation for Abu Dhabi helping out Dubai World is the company's Dubai port operations, which it needs to market as a dependable global transport hub.

Dubai has got off lightly to date. But if the property market doesn’t return soon, hundreds of billions of dollars worth of skyscrapers and palm-shaped islands will remain unfinished hulks amid the dunes and warm waters off Dubai’s coastline.

more.

Read more: Barrons, Reuters, Guardian, The Wall Street Journal

D-day for Nakheel Dubai - December 28 is the final cut off point

original published by Reuters

DUBAI (Reuters) - Heavy rain pounded Dubai on Sunday adding to the gloom of the emirate's debt woes a day before the deadline of the $3.52 billion bond by state-owned developer Nakheel, with no word on how it will be handled.

Dubai's stock market did soar for a second consecutive session on Sunday as traders reacted to a surge in Nakheel's bond price last week on mounting speculation it will repay.

The Islamic bonds, or sukuk, had been trading around 110 cents to the dollar before the government shocked investors on November 25 with a request for a six-month standstill on the debt of state-linked Dubai World.

The announcement sent the sukuk down to mid-40 lows, but closed on Friday at about 54 cents to the dollar.

Fund managers and bankers regard Monday's outcome as the litmus test for Dubai World's planned $26 billion restructuring and Dubai as a whole for resolving its debt burden.

But the odds of Nakheel, the developer of palm-shaped islands, repaying are low.

"It's very hopeful people (speculating)," says a Dubai-based fund manager. "It seems very strange that if Dubai World intended to pay they would have gone through the last two weeks of pain."

A sudden u-turn and repayment would placate disappointed and confused investors in the immediate term. Dubai's handling of the situation has tarnished its reputation.

Dubai's finance chief on Thursday tried to reassure investors saying its actions were more important than its public image. But, Dubai World has few options.

"The key thing is the lack of clarity," said Nish Popat, ING's head of fixed income in the Middle East. "What's needed more than anything else is some sort of information to understand what the plans are going forward and how they are progressing."

Reflecting rising repayment hopes, five-year credit default swaps for Dubai fell more than 30 basis points on Friday to 533 basis points, according to CDS monitor CMA DataVision, compared with a peak of almost 700 bps at the end of November.

The level is still high given the CDS was quoted at about 300 bps before the November 25 announcement.

"The CDS spreads are better, and news of a hedge fund buying into Nakheel - this is all positive ... even if you buy Nakheel at 50, and they pay out 70, you're still making good money," said a banker from a Dubai government-controlled lender.

If Nakheel does not pay on Monday, it would technically be in default, but it would still give its restructuring team a two-week grace period to reach an agreement with creditors.

December 28 is the final cut off point. After that a cross default clause in its original prospectus will be triggered that covers Nakheel and its guarantor Dubai World, adding to the overall debt burden.

Regional markets have been struggling for weeks under the issue.

"Prices are so distorted right now," said Haissam Arabi chief executive at Gulfmena Alternative Investments. "Tomorrow is a big day, until we get some clarity (about Dubai's debt) there will be no real trend. The main catalyst we are waiting for is Nakheel news."

STRIKING A DEAL

Analysts have speculated Nakheel could repay its bond at 70 cents to a dollar and issue new debt for the remainder.

"Such an outcome would be beneficial for both parties involved," EFG Hermes analyst Fahd Iqbal

Dubai Holding seen at risk

original source Zawya / Financial TimesThursday, Dec 03, 2009
Thursday, Dec 03, 2009

Thursday, Dec 03, 2009

With Dubai World cut adrift from implicit government support, there are concerns about potential defaults by other state-related entities. The name mentioned most by bankers and investors in the region is that of Dubai Holding, the personal investment vehicle of the ruler, Sheikh Mohammed bin Rashid al-Maktoum.

"Dubai's actions have introduced the risk that restructuring of other corporates could follow," Barclays Capital said in a report this week. "We would focus on those with weak fundamentals and upcoming maturities and we view Dubai Holding as being most at risk."

Dubai Holding's Commercial Operations Group's debt was yesterday downgraded to below investment grade by Standard & Poor's, the ratings agency, along with four other government related companies. The cost of insuring $10m (€6.7m, £6m) for five years against default ballooned to $1.1435m a year on Tuesday, making it the riskiest Dubai corporate bond according to the market.

A Dubai Holding spokesman yesterday said: "I am very doubtful that we will face any problems paying the debt. Dubai Holding is confident that it is on track with all payments."

Formed in 2004, its investment arms led the emirate's international buying spree to recycle funds generated by developing swaths of Dubai desert. The group leveraged profits to build debts of $10bn, with maturities in 2010 of $2bn, according to Barclays Capital.

Bankers say because of its connection to the ruler the conglomerate enjoys stronger political standing than Dubai World

It appears to have a stronger financial position. Analysts say it has a greater ability to service its debts thanks to a number of cash-generating businesses. It is believed to have received cash injections from the government in recent months. The company has never confirmed this.

Still, bankers say its investment arms, Dubai International Capital and Dubai Group could face more financial problems than its commercial wing, which spans hospitality, business parks and real estate. "Dubai Holding is not going to acknowledge problems right now. But there is a contagion effect in every Dubai entity , this is just the beginning," a senior banker said.

Dubai International Capital is believed to be looking to sell assets but has enough money ringfenced by the holding company to keep afloat its buy-out businesses in Europe and the Middle East, according to those familiar with the company. These people say its public equities portfolio, which includes stakes in EADS, Sony and ICICI Bank in India, may be sold. DIC is also winding down its emerging markets private equity unit, Middle East venture capital portfolio and interests in other private equity funds.

Dubai HoldingDubai 's commercial arm includes profitable businesses, such as flagship hotels company Jumeirah Group. The group has slimmed down faster than the troubled Dubai World conglomerate. DICand Dubai Group, for example, have merged their back-office operations and Dubai Holdings' developers have merged and been folded into Dubai 's leading developer, Emaar Properties, much to the alarm of minority shareholders who fear dilution and say they are being forced to bail out other companies.

The restructuring already under way at Dubai Holding is so deep that analysts are raising the possibility that, like Dubai World
, it could be broken up and its best businesses - notably Jumeirah - moved into other parts of Dubai Inc., such as Investment Corporation of Dubai , which is emerging as the emirate's "good bank" of assets.

Sheikh Mohammed al-Maktoum : "They do not understand anything."

original source The Independent

Headline: Sheikh attacks investors for global fallout of Dubai debt

The ruler of Dubai hit out at international investors yesterday as his government's impecunious investment vehicle revealed plans to restructure $26bn of its debts.

Sheikh Mohammed al-Maktoum said: "They do not understand anything."

After days of uncertainty that sent shudders throughout the world's stock markets, Dubai World finally unveiled plans to address the liabilities of its two property ventures – Nakheel and Limitless – after midnight on Monday night.

The timing of Dubai's request for a debt standstill, on the eve of the four-day Eid holiday, drew criticism from financial communities across the globe.

But in his first public comments since the crisis broke, Sheikh Mohammed had harsh words for investors and remained bullish about Dubai's economy. "We are strong and persistent," he said. "It is the fruit-bearing tree that becomes the target of [stone] throwers."

more... The Independet

Nakheel and its parent will be a test case for Dubai

original source Business Standard

Dubai World’s guarantee to bondholders could prove worthless. The emirate’s holding company, which is seeking a six-month standstill from creditors, pledged to repay a $3.5 billion Islamic bond issued by its now troubled property subsidiary Nakheel. Yet with local creditors effectively calling the shots, foreign lenders might find enforcing that guarantee impossible.

Nakheel has asked for trading in all three of its listed Islamic bonds to be suspended. Only the first, which was issued in 2006 and is due to mature December 14, was guaranteed by parent Dubai World. The liability on the subsequent two bonds, which have a total face value of $1.7 billion and mature in 2010 and 2011, appears to be limited to Nakheel itself.

The Dubai property developer’s 2008 accounts show $41.5 billion of assets and $17.5 billion of liabilities — a net asset value of $24 billion. But real estate prices in the emirate have fallen around 50 per cent in 2009.

That means Nakheel, which funded some of the emirate’s most outlandish projects, could easily now have a negative equity value of $5.5 billion.

The equity value at parent Dubai World, which had liabilities of $59 billion at the end of 2008, is also likely to be negative. Its portfolio of 10 companies looks mostly troubled. However, Dubai World does hold 77 per cent of publicly-listed ports operator DP World. That was worth $5.1 billion on November 25, just before Dubai World announced its intention to restructure.

Nakheel’s foreign creditors shouldn’t get excited about their recovery prospects.

To get a lawsuit against Dubai World off the ground, 75 per cent of Nakheel’s bondholders have to agree. But the majority of creditors are local banks, which are likely to accede to any request to roll over Nakheel’s debt — even if the capital structure remains unsustainable, according to one ratings analyst. And even if local lenders joined in, Dubai’s law might not support a claim that forced the sale of the assets of government-related entities.

Lawyers agree the restructuring of Nakheel and its parent will be a test case. That makes Dubai World’s guarantee look less than solid.

Dubai is down, but fighting for its place in the sun

original source Wall Street Journal

Dubai 2 December 2009

Finally, a chink of light. Dubai World has belatedly provided some of details on its planned debt restructuring.

But for investors the situation still resembles a darkened room, where the outlines of the furniture are now visible but little else. And for Dubai itself, there is more than just the future of $26 billion of debt at stake. The emirate's credibility as a financial center and its ability to continue financing good businesses, such as ports operator DP World, will hinge on its handling of the crisis.

Tuesday brought some good news. The $26 billion of debt affected is less than the $60 billion feared last week. Even so, questions linger. The restructuring process will include Dubai World itself and property developers Nakheel World and Limitless World. Analysts at Barclays Capital have identified $8.5 billion of debt at Nakheel, $5.5 billion at Dubai World and $1.2 billion at Limitless. That still leaves $10 billion unaccounted for. It may be in bilateral bank loans where there is no public disclosure. But it still leaves creditors unsure of their position.

It is also encouraging that Dubai World intends to adopt a policy of regular communication, though again the process lacks detail. For example, it is unclear whether the six-month standstill requested from creditors is voluntary or enforced. Given the looming Nakheel maturity -- just two weeks away -- it will be a challenge to secure creditor agreement in advance. If some lenders reject a stand-still it could trigger another bout of uncertainty and bondholders are organizing themselves for battle: a group holding 25% of the Nakheel bonds has hired Ashurst as a legal adviser.

Dubai's strategy relies on ringfencing certain key businesses from the general restructuring -- possible because of the lack of cross guarantees in the Dubai World group. For example, Ports & Free Zone World, which includes port operator DP World and P&O Ferries, is now clearly excluded from the process. But the initial lack of clarity on this issue has already cost Dubai Inc. a swathe of ratings downgrades. Of Moody's six ratings on Dubai companies, four are now junk.

The history of debt restructurings suggests that investors will not be scared off Dubai forever. Russia, for example, returned as an oil-fuelled darling of international investors even after its sovereign default in 1998 and amid continuing corporate governance and transparency problems.

If Dubai handles the painful process sensibly, it will emerge chastened from the experience, but not necessarily a spent force. The infrastructure built during the bubble will not vanish. The emirate now has to prove its status as one of the most western-friendly places to do business in a region still attractive for its massive oil wealth. If it can do so, Dubai will be down, not out.

Write to Richard Barley at richard.barley@dowjones.com

Dubai Stock Market Slumps Monday 30 November 2009

Gambles Dubai with its financial reputation ?

original source Zawya

When you start building a third island shaped like a palm tree, intending it to be as big and crowded as Manhattan, you are crying out for a sober voice to bark: "Stop!"

But when that island is just one atoll in an artificial archipelago that would reconfigure the Persian Gulf coast into a thicket of trees, a map of the world, a whirling galaxy, a scythe and a sun that looks like a spider, what you need is some corporate restructuring. That, we learnt on Wednesday, was exactly what holding company Dubai World, the parent of Dubai's chief coastal developer Nakheel, would get.

Last year, Robert Lee, one of Nakheel's executives, showed me a map of the future Dubai Waterfront as his company put the finishing touches on the more modest Palm Jumeirah, the skyscraper- and villa-crammed island that started the trend.
"That's crazy!" I said.  "Bold," countered Mr Lee.
Bold is probably not the word that the number-crunchers at Deloitte are muttering as they pore over the company's books.

The Dubai government's decision to postpone repayments on $3.5bn in Dubai World debts - seen by investors as the litmus test of the emirate's creditworthiness - is the clearest sign yet of the dire state of its economy. Dubai's fanciful island reclamation, a doubtful investment in an era of rising sea levels, was just one of the gambits that ushered this tiny emirate into the world's consciousness.

Thankfully, many of these ideas wound up on the scrapheap. There is the cancelled Snowdome (although the city's indoor ski slope lives on), part of a gargantuan amusement district that was to be larger than the city of Orlando it intended to rival. Also scrubbed is the $11bn Arabian Canal, a 75km moat that would have ringed the city. Enough of these sorts of schemes were built to make Dubai and the United Arab Emirates the holder of the world's largest percapita environmental footprint.

Until Wednesday, investors were largely content to give Dubai the benefit of the doubt, given that ruler Sheikh Mohammed bin Rashid al-Maktoum had assured the world that his emirate was good for its debts.

In a region where a man's word already carries outsized weight, the blunt-spoken sheikh's charisma had been built on the credibility of his pronouncements. It must be painful indeed for him to be seen as backtracking.

Sheikh Mohammed, whose family has run the emirate with astonishing stability since 1833, faces an acute test of his leadership and the clearest threat yet to his dreams for the city.
The ambitious sheikh wants Dubai to become the financial centre for a quarter of the globe, the under-served and fast-growing markets between Singapore and Frankfurt.

Wednesday's announcement makes that goal less likely, damaging Dubai's reputation among the investors and financiers it has worked so assiduously to court. "Naturally they are not amused," says Eckart Woertz, chief economist at the Dubai-based Gulf Research Centre. "It will be a case of once bitten, twice shy should Dubai try to tap international markets again."

In the longer term, the news could make Dubai's rivals more attractive, persuading international companies to decamp to, say, Doha or Abu Dhabi. Unlike Dubai, those cities have sound, energy-based economies.
But for now they do not offer the same level of western lifestyle, nor can they match Dubai's services in shipping, logistics, banking and air travel.

The emirate's inability to repay also casts a shadow on the Maktoum family's vital relations with its cousins who rule Abu Dhabi, the al-Nahyans, who seem to be letting their poorer kin sweat it out in public.
One wondered what price Abu Dhabi might demand for a full bail-out.

One plausible option was a tighter union among the seven UAE states, with maverick Dubai forced to trim its embarrassing ties with Iran and Israel. Dubai might also have been asked to merge its independent customs service into the federal bureaucracy.

Sheikh Mohammed may be calculating that Dubai's foreign policy freedom is more valuable than its financial reputation.

There is logic in this.

The bankers in London and New York have been important in nurturing Dubai's growth.

But the emirate's ties with the region - Karachi, Mumbai, Riyadh and Tehran - are those that will make or break this city.

The writer is the author of City of Gold: Dubai and the Dream of Capitalism
By Jim Krane

Secenario - Why Dubai`s Debt Matters

original source Forbes from Oxford Analytica

If Abu Dhabi doesn't mount a serious rescue operation, creditors are likely to seek legal redress against the defaulting Dubai government.

Dubai's heavily foreign investment-dependent economy began to unravel in September 2008 following the global credit crunch. Property prices fell steeply, share prices in publicly listed companies collapsed and confidence was badly shaken in the emirate's ability to survive the crunch. By the close of 2008, government-backed companies responsible for Dubai's development had accrued debts of more than 80 billion dollars.

Abu Dhabi bailout.
In February this year, following Dubai's difficulty in refinancing a $3.8 billion loan, the United Arab Emirates (UAE) Central Bank, backed by Abu Dhabi, subscribed to a $10 billion bond, with interest rates set at 4%. However, earlier this month, it became apparent that Dubai would need a much bigger capital injection, especially given that its largest property developer--Nakheel, a subsidiary of Dubai World--was due to refinance a $3.5 billion Islamic sukuk bond on December 14.

Article Controls
On November 24, it was announced that Abu Dhabi had provided an additional $5 billion loan:

--Significantly, insiders indicated that this loan came with strings attached, and that it was to be used to pay disgruntled foreign contractors rather than to re-finance the Nakheel debt.

--While little is known about Abu Dhabi's reasons for these limits on its assistance, it may have been reluctant to be associated with Nakheel, a company with problems considered to be too big to solve through loans.

Sovereign default ?

Although not technically an example of a sovereign default, the request has been viewed as such. The agencies have thus downgraded most government-backed Dubai companies and entities either to below investment grade or to junk status.

The credit default swap rate on Dubai debts rose by more than 100 basis points, taking it to 434 points.
As a result, the emirate's ability to seek additional credit on international markets has been sharply curtailed.

Political collapse ?

If Abu Dhabi does not mount a serious rescue operation, creditors are likely to seek legal redress against the defaulting Dubai government:

--In this scenario, 'Dubai Inc.' will be widely regarded as bankrupt and the ruling Al-Maktoum family held responsible, due to the 'blurred lines' between the government and the wealth of the ruling family.

--There would also be political ramifications. It would be unfeasible for Sheikh Mohammed or Sheikh Hamdan to remain in power following such a massive loss of prestige.

If, on the other hand, Abu Dhabi does agree to provide more credit, there will also be significant implications:

--It will do so only under very strict conditions, since it will be reluctant to pour money into rescuing failed projects.
--It will thus begin to dictate terms to Dubai, and almost certainly seek to centralize power in the UAE federation and rein in Dubai's autonomy.
--However, given the political culture of the Gulf states, such moves are likely to be made discretely, in order to allow the Dubai ruling family to save some face.

Outlook.
Dubai World's decision to delay paying its creditors is a serious miscalculation, since, by trying to restructure some of its largest debts, it has placed itself under close international scrutiny. This will make it extremely difficult for the company to acquire fresh credit, and increase the risks of further defaults. Only oil-rich Abu Dhabi is in a position to stage a financial rescue, but even if it does, Dubai is likely to emerge chastened, and to adopt a different approach towards economic development.

To read an extended version of this article, log on to Oxford Analytica's Web site.
Oxford Analytica is an independent strategic-consulting firm drawing on a network of more than 1,000 scholar experts at Oxford and other leading universities and research institutions around the world.
For more information, please visit Oxford Analytica here

Sheikh Mohammed Ruler of Dubai has told the emirates`s critics to " Shut Up"

original source 7Days

Dubai Ruler tells critics to ‘do their homework’ as he stresses unity and confidence in the future

The Ruler of Dubai has told the emirate’s critics to ‘shut up’.

HH Sheikh Mohammed bin Rashid Al Maktoum yesterday broke away from a pre-prepared speech in Arabic on the Dubai economy to make his point in English.

His remark was directed at people who have tried to suggest there is a wedge between the emirates of Dubai and Abu Dhabi after Dubai drew a $10 billion emergency loan from the UAE central bank.

But Sheikh Mohammed said these people “should really do their homework” about his country.

“I just want to tell these people who nag about Dubai and Abu Dhabi to shut up,” he told the MENA and Frontiers Conference in Dubai, organised by Bank of America Merrill Lynch.

Sheikh Mohammed, who is also the prime minister and vice president of the UAE, stressed the close ties between Dubai and Abu Dhabi.

“Dubai and Abu Dhabi are one,” he said, adding: “I assure you that we’ll be there for each other when we need it.”

The comments were clearly aimed at dispelling perceptions of a rivalry between the two emirates.

There have been accusations around the globe that Abu Dhabi has become jealous of Dubai’s success in recent years as it tries to diversify its economy away from a dependence on oil.

But yesterday, in rare public comments on the subject, Sheikh Mohammed stressed the tribal bonds and blood relations between the emirates’ rulers.

“We, our fathers, grandfathers have fought for the Arabian Peninsula,” Sheikh Mohammed said. “We are very, very proud of our country, very proud of our people... And our people (are) very proud of us.”

The ruler also confronted critics who say Dubai was slow to react to the global financial crisis.

He said the government “preferred to wait rather than rushing” so it could restructure state-owned companies. And Sheikh Mohammed said he
was confident the worst of the crisis was over.

“As the global economy stabilises, Dubai today is well placed to exploit its inherent strength,” he said.

“The slowdown will never dampen the mettle of children of Dubai to steam forward in the drive toward development,’’ he added.

Dubai faces a debt of about $80 billion. As well as the $10 billion loan, it expects to raise an additional $10 billion in financing before the end of the year.

more Maktoob.com

Dubai - Sheikh Mohammed`s speech at Bank of America Merill Lynch investment conference

original source SheikhMohammed

Follow the link to read an edited translation of the speech of His Highness Sheikh Mohammed bin Rashid al Maktoum Ruler of Dubai at an investment conference organized by the Bank of America Merill Lynch in Dubai.
Link



Video of the speech