Amlak Finance, the Dubai-based Sharia-compliant mortgage lender, has reached an agreement with its creditors in a deal to restructure debts that have hung over the UAE mortgage market since the height of the global financial crisis six years ago.
Under the auspices of the UAE federal committee set up to oversee the restructuring, Amlak yesterday announced that it had secured unanimous approval from 28 creditors over roughly $2.7bn of debt and that it hoped to resume trading in its shares on the Dubai Financial Market — halted in November 2008 — next year.
Under the deal, the company said it would make an initial repayment of Dh2bn “shortly”, with the balance repaid over 12 years. Amlak also said that it would repay financial support from the UAE Government over the next six years.
“We are very pleased that Amlak’s financiers have accepted the restructuring proposal,” said Sultan bin Saeed Al Mansoori, UAE Minister of Economy and the chairman of the “committee to assess the condition of some public shareholding companies”.
“In close collaboration with Amlak’s management, the committee has led the discussions and negotiations with the financiers over the last two years, ultimately achieving this amicable restructuring solution,” he said.
“The committee expects the restructuring to be completed and fully implemented in 2014, allowing Amlak’s shares to be readmitted for trading on the DFM in early 2015. The success of Amlak’s restructuring demonstrates the Government’s commitment to support the UAE’s financial system and its economy and to protect the public and commercial investors.”
The deal, which needs the approval of a general meeting of Amlak shareholders including the 45 per cent shareholder Emaar Properties, will close a chapter on one of the UAE’s most intractable financial problems.
Amlak was an immediate casualty of the credit crunch in 2008 when it was unable to tap global credit markets to service its mortgage business. Protracted negotiations to merge Amlak with its rival mortgage lender Tamweel were finally aborted when the latter was taken over by Dubai Islamic Bank.
The new deal could also involve a short-term debt-for-equity swap on the part of some creditors, though few details were given.
“The deal has been structured so that financiers will swap approximately Dh1.4 billion of their original debt to a convertible instrument, which is to be fully redeemed over the next few years from Amlak’s real estate assets value growth monetisation,” the company said.
Arif Alharmi, Amlak’s chief executive, said: “We would like to thank the UAE Government and the committee and our financiers for their support and confidence in Amlak. We will be working closely with all our stakeholders over the next few months to implement the restructuring in order to return to market, and we look forward to providing innovative products and improved services to our existing and future customers.”
Since the shares were suspended, Amlak has disposed of assets, cut back costs and taken action against debtors. Against the background of a rapidly improving Dubai property market, it began to offer mortgage facilities again earlier this year.
fkane@thenational.ae
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
