UAE

Dubai World in talks on Nakheel sukuk and asset sale

Dubai World is in talks with bankers over a restructuring of part of its debt obligations that could include asset sales.

Frank Kane

December 01, 2009

Dubai World is in talks with bankers aimed at accelerating the restructuring process announced last week by "considering alternatives in respect of debt obligations of certain entities within the group". The move suggests Dubai World is unlikely to meet its obligation to bondholders of the $4 billion (Dh14.69bn) Nakheel sukuk payable on December 14, and that asset disposals are likely from the two property businesses involved, Nakheel and Limitless. In a statement released early on Tuesday morning UAE time, Dubai World said the proposed restructuring process would relate only to Dubai World and certain of its subsidiaries, including Nakheel World and Limitless World.

"The process will not include Infinity World, Istithmar World, and Ports and Free Zones World (which includes DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone)," the company said. It added: "The total value of debt carried by the companies subject to the restructuring process amounts to approximately $26bn, of which approximately $6bn relates to the Nakheel sukuk." Another $2bn of the Nakheel sukuk falls due early next year. Dubai World said the decision had been taken "following a detailed review of the group's liquidity and capital structure".

"It is envisaged the restructuring process will be carried out in an equitable way for the overall benefit of all stakeholders and will comprise several phases including: long term plans and commitment of stakeholders; determination of maintainable profit and cash generation; assessment of deleveraging options, including asset sales; assessment of funding requirements and the formulation of restructuring proposals to financial creditors and their implementation. "Initial discussions have commenced with the banks of Dubai World and are proceeding on a constructive basis. In light of the current operational challenges and the future obligations of the group, it is anticipated that the process and any related actions to address strategic alternatives will be conducted on an expedited basis. "As part of this overall process, Nakheel requests its sukuk holders to appoint an authorised representative with whom discussions can commence."

Dubai World has appointed the New York-based Moelis & Company, a specialist investment advisory and asset management group, to work alongside its long-term adviser, Rothschilds. Last week, Aidan Birkett of the UK-based accounting firm Deloitte, was appointed chief restructuring officer of Dubai World, reporting to the emirate's Department of Finance. Nakheel is the developer of the Palm Jumeirah and The World in Dubai, while Limitless projects include the Downtown Jebel Ali development.

fkane@thenational.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.”

What is the Supreme Petroleum Council?

The Abu Dhabi Supreme Petroleum Council was established in 1988 and is the highest governing body in Abu Dhabi’s oil and gas industry. The council formulates, oversees and executes the emirate’s petroleum-related policies. It also approves the allocation of capital spending across state-owned Adnoc’s upstream, downstream and midstream operations and functions as the company’s board of directors. The SPC’s mandate is also required for auctioning oil and gas concessions in Abu Dhabi and for awarding blocks to international oil companies. The council is chaired by Sheikh Khalifa, the President and Ruler of Abu Dhabi while Sheikh Mohamed bin Zayed, Abu Dhabi’s Crown Prince and Deputy Supreme Commander of the Armed Forces, is the vice chairman.

Banned items
Dubai Police has also issued a list of banned items at the ground on Sunday. These include:
  • Drones
  • Animals
  • Fireworks/ flares
  • Radios or power banks
  • Laser pointers
  • Glass
  • Selfie sticks/ umbrellas
  • Sharp objects
  • Political flags or banners
  • Bikes, skateboards or scooters
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