US Treasury gives $6bn to GMAC

The US Treasury has unveiled a US$6 billion (Dh22bn) package to assist GMAC, the troubled financial arm of General Motors seen as vital to the survival of America's largest automaker. The Treasury said in a statement yesterday that it would purchase $5bn in senior preferred equity with an eight per cent dividend from GMAC, which is also partially owned by Chrysler parent company Cerberus Capital Management, and make a $1bn loan to General Motors.

In exchange, the Treasury would receive warrants from GMAC in the form of additional preferred equity equal to five per cent of the preferred stock purchase and would be paid a nine-per cent dividend if used. GMAC said the sale of its preferred membership interests and warrants to Treasury was completed yesterday. "GMAC Financial Services ... has sold five billion dollars of GMAC's preferred membership interests and warrants to the US Department of the Treasury as a participant in the Troubled Assets Relief Program (TARP) established under the Emergency Economic Stabilization Act of 2008," GMAC said in a statement.

The GM loan comes on top of a $13.4bn rescue loan package the US government approved this month for GM and Chrysler to stave off collapse amid tight credit and dismal sales. GM would receive an additional $4bn from February pending congressional approval. The Treasury said it agreed to the additional one-billion-dollar loan "so that GM can participate in a rights offering at GMAC in support of GMAC's reorganisation as a bank holding company". The reorganisation was approved by the US Federal Reserve on Dec 24.

GMAC faced possible bankruptcy, jeopardising financing for GM car dealers and customers, and its demise could have dragged down the Detroit automaker's fortunes with it. GMAC has lost $5bn over the past six months in investments in the plagued automobile and real estate sectors. But the company has stressed that acquiring bank holding company status ? and access to federal TARP bailout funds ? would help restore stability to the company seen as crucial to GM's survival.

"The company intends to act quickly to resume automotive lending to a broader spectrum of customers to support the availability of credit to consumers and businesses for the purchase of automobiles," GMAC said. The Treasury said the GMAC plan is "part of a broader programme to assist the domestic automobile industry in becoming financially viable." Under the agreement, GMAC must also comply with enhanced restrictions on executive compensation.

The funds for all automaker loans were to come from the TARP, the $700bn government bailout plan initially introduced earlier this year to shore up financial firms, the Treasury said. The Treasury announced on Dec 19 a massive rescue of cash-strapped GM and Chrysler, facing a threat of imminent bankruptcy that could create economic chaos and throw millions out of work across the country. *AFP

At a glance

Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.

Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year

Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month

Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30

Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse

Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth

Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances

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Dubai launched the pilot phase of its real estate tokenisation project last month.

The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.

Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.

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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.”

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Is it worth it? We put cheesecake frap to the test.

The verdict from the nutritionists is damning. But does a cheesecake frappuccino taste good enough to merit the indulgence?

My advice is to only go there if you have unusually sweet tooth. I like my puddings, but this was a bit much even for me. The first hit is a winner, but it's downhill, slowly, from there. Each sip is a little less satisfying than the last, and maybe it was just all that sugar, but it isn't long before the rush is replaced by a creeping remorse. And half of the thing is still left.

The caramel version is far superior to the blueberry, too. If someone put a full caramel cheesecake through a liquidiser and scooped out the contents, it would probably taste something like this. Blueberry, on the other hand, has more of an artificial taste. It's like someone has tried to invent this drink in a lab, and while early results were promising, they're still in the testing phase. It isn't terrible, but something isn't quite right either.

So if you want an experience, go for a small, and opt for the caramel. But if you want a cheesecake, it's probably more satisfying, and not quite as unhealthy, to just order the real thing.