Dubai International Capital (DIC), the investment arm of the Dubai Holding conglomerate, has clinched a deal with creditors to restructure US$2.5 billion (Dh9.18bn) of loans over periods of between three and five years.
DIC, which led the emirate’s investment activity in the boom years ahead of the global financial crisis, simultaneously announced a new board structure under the chairmanship of Fadel Al Ali, the current executive chairman of Dubai Holdings Commercial Operations Group (DHCOG).
Dubai Holding is owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.
“This agreement is an important landmark for us. The successful restructuring is a result of the significant commitment demonstrated by all stakeholders and we acknowledge their role in achieving this agreement,” said Ahmad bin Byat, the chief executive of Dubai Holding.
“It puts DIC on a sound financial footing.”
Also nominated for independent positions on the new board are Aidan Birkett, a British restructuring adviser who in 2010 helped Dubai World agree to terms with creditors owed almost $25 billion; Christopher Rowlands, a British investment adviser; and Abdullah Sharafi, a prominent Emirati businessman with financial and industrial experience.
The new board will include David Smoot, an American and a former investment banker who has been heading DIC since its founding chief executive, Sameer Al Ansari, stepped down in 2010.
A restructuring of DIC has been under discussion between creditors, led by Emirates NBD, and Dubai Holding executives, for many months.
Under the terms finally announced yesterday, creditors holding $2.15bn of loans will see them repaid over five years, with an interest rate of 2 per cent cash. Creditors of $350m of loans are to be repaid over three years on unchanged terms.
No calculation of any possible “haircut” – a long-term reduction in the value of the banks’ loans – was available from the company or from bankers.
“The deal was already priced in on the bond market. Options available to lenders were limited and deal fatigue has set in. It’s better to restructure and take a small hit than force a borrower to default and deal with the implications,” Ahmad Alanani, a senior executive at investment firm Exotix in Dubai, told Reuters.
A person familiar with the deal said the strategy of DIC would be to focus on adding value to its existing portfolio of assets, and realising capital from those assets when prices were suitable.
“That is what a private-equity firm does, it buys and sells assets. I doubt there will be big acquisitions, but you cannot rule out bolt-on deals,” said the person, who wished to remain anonymous.
Mr Smoot said DIC was not being pushed to dispose of assets.
“Although we are under no pressure to sell assets, we have been able to make a number of profitable exits in recent months demonstrating the quality of our investments and our ability to find buyers in current market conditions.
“Despite the challenging macroeconomic environment the portfolio is well positioned to navigate current markets with less leverage, better liquidity and long-term financing, reflecting significant future value potential,” he said.
DIC has sold some smaller assets in recent months but it still has significant interests in Germany, the United States and Britain, where it owns the Travelodge chain of budget hotels.
“This represents another step in Dubai’s continued march in the right direction … This is clearly reflected in the recent tightening of credit default swap [CDS] spreads and we believe it will give further traction to the growing positive momentum,” said Rick Pudner, the chief executive of Emirates NBD.
CDS levels provide a measure of the likelihood of a company defaulting on its debts.
Other Dubai businesses still face potentially tricky negotiations with creditors. Dubai Group, the financial arm of the Dubai Holding conglomerate, is in talks over $6.2bn of debt, and DIFC Investments faces repayment of a $1.25bn sukuk (Islamic bond) in June.
DIC’s agreement is the second positive move on Dubai debt in the past few days. Drydocks World, the shipbuilding arm of Dubai World, said it had secured “overwhelming majority support” for its recent proposals on $2.2bn of debts, in which it sought the protection of Dubai’s so-far untested procedures for voluntary insolvency.
fkane@thanational.ae
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.”
Killing of Qassem Suleimani
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Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
FIXTURES
December 28
Stan Wawrinka v Pablo Carreno Busta, 5pm
Milos Raonic v Dominic Thiem, no earlier then 7pm
December 29 - semi-finals
Rafael Nadal v Stan Wawrinka / Pablo Carreno Busta, 5pm
Novak Djokovic v Milos Raonic / Dominic Thiem, no earlier then 7pm
December 30
3rd/4th place play-off, 5pm
Final, 7pm
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