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Lauritzen to get ¥15.5bn loan to buy six ships


Mitsubishi UFJ Financial Group, Japan’s biggest bank by market value, and France’s Société Générale will lend ¥15.5 billion (Dh624.4m) to Danish shipper J Lauritzen to buy six ships made in Japan. Che the other live UAE business news

“We will make the first order on this facility granted by Société Générale and Bank of Tokyo-Mitsubishi tomorrow,” said Birgit Aagaard-Svendsen, said Chief Financial Officer of Copenhagen-based J Lauritzen. “The deals will be more formally announced later.”

Nippon Export and Investment Insurance, a Japanese Government-backed export credit agency, will guarantee 95 per cent of the loan, said Aagaard-Svendsen.

The Danish ship owner, which has already ordered the vessels from Japanese shipbuilders including Imabari Shipbuilding Co, is seeing an improvement in its bulk shipping, she said.

The banks agreed on March 16 to provide the ship-owner with funds, a person familiar with the deal said earlier, declining to be identified ahead of an announcement.Shinya Matsumoto, a Tokyo-based spokesman for Mitsubishi UFJ, declined to comment, as did Hiroko Kato, a spokeswoman for Société Générale in Tokyo.

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Dubai’s Spanish Standoff Over Colonial




Investment Corporation of Dubai (ICD) has allowed the time limit to pass on its planned deal to buy Spanish property group Immobiliaria Colonial – but this, I suspect, is a tactical manoeuvre to show Dubai will not overpay for assets in this distressed market, especially when they come encumbered with equally distressed debt.

In short, ICD is saying it has as much sense as it has money.
It is a good lesson to get across, especially in these troubled times.
Dubai walked away from a deal once before because the price did not suit it – when Dubai International Capital allowed American businessmen George Gillett and Tom Hicks to buy Liverpool football club. Now Dubai is back in a commanding strategic position to take over Liverpool football business. We will have to wait and see the detailed terms to tell if Sameer Al Ansari’s wait was financially worth it.
The circumstances at Colonial and Liverpool are different. In the case of the football club, Dubai’s offer was turned down by the greedy former owners of the club, who suddenly saw millions more on the table from Hicks and Gillett. (Money borrowed by the Americans, as it turns out.) The delicate business negotiations still being played out over Colonial are rather different, not least because they come after the collapse of debt markets around the world after the US sub-prime crisis. Colonial has some decent assets on its books, in the Spanish commercial market and in France, but is over-borrowed at the bank and undervalued on the market.
It appears ICD initially won the agreement of the controlling shareholders of Colonial to sell their stake in the company for a mixture of cash and bonds to the value of around €3 billion (Dh13.2bn).
The stumbling block, however, is that Colonial has more than twice that in debt, and its bankers would not agree to the takeover unless Dubai took on this debt at existing terms of the negotiated business. Quite sensibly, Dubai pointed out that the market had changed in its favour – now, any financial deal that has the words “property” and “debt” in the same paragraph will get the corporate advisers and the lawyers running for the doors.
The Colonial bankers involved are interesting too. Goldman Sachs wants to keep its reputation as the one big US bank that sailed through sub-prime virtually unscathed; Royal Bank of Scotland wants to limit the already considerable damage it has suffered at the hands of American “trailer trash”; Calyon wants to prove that not all French banks are a soft touch when it comes to complex financial instruments. Together, they have said “no” to Dubai’s offer, which involved discounting the debt before agreeing a deal. Check out the other UAE Top Business News
You have to admire the nerve of the banks involved in that transfer business. Dubai is offering hard cash, and bonds that (given the backing of ICD) are as good as cash, to a value way above Colonial’s collapsing worth on the stock market. The alternative to Dubai’s terms would appear to be effective bankruptcy for Colonial, which would leave the banks with only a small portion of their outstanding loans likely to be repaid. To insist on full value for the debt in these circumstances is either brave, if Dubai pays up, or foolhardy, if ICD walks away. It will be up to the bank’s shareholders to judge which.
The banks are trying to draw a line under their post-subprime exposure; Dubai is trying to ensure it does not overpay for assets, and demonstrate that it should not be viewed as a sovereign wealth fund with deep pockets, but shallow understanding of the financial world. It will be intriguing to see who comes out on top.
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SWFs: what’s all the fuss about a name?


Sovereign wealth funds (SWFs) are no more than government investors in developing markets who have been targeted by the West for years, renamed. Even for a seasoned Gulf financier like myself, the term “sovereign wealth fund” is a relatively new one.

For the seven years I have worked for international investment businesses seeking to raise assets here, myself and my colleagues referred to these government funds simply as institutional investors, or government institutions. Now, rebranded by the markets as SWFs, these powerful entities seem to be attracting even more interest, but it is not all positive.

The momentum behind the current global debate on the merits of regulating SWFs seemed to gather force in the furore following the acquisition by Dubai Ports World of P&O’s business in the US.

Each subsequent transaction including some as far afield as New Zealand, Australia, as well the EU have fanned the flames of controversy, and calls for the regulation of funds have got ever louder. Check out the other 24-7 emirates business updates


In this maelstrom of ire and indignation, many of the positives SWFs have brought to international capital markets over many years has been overlooked. Further, many commentators and asset raisers have completely forgotten how SWFs have directly allowed them to develop their own businesses in the Gulf and other emerging regions.

Indeed, the world’s biggest asset management and private equity firms from the established markets of the West have courted these funds for years.

Never, has there been a suggestion that such institutional investors are anything other than extremely worthy of the attention of the blue-chip money managers who have poured into the Gulf, first as classic suitcase bankers, and latterly armed with DIFC licences.

In fact, what many of these bankers have learned is that in the Gulf we deal with some of the most sophisticated, analytical and successful investors in the world.

Investors who were among the first to realise the opportunity hedge funds represented and then to put their money where their mouths were.

Notably, many of these investors are increasingly shying away from the international behemoths and see increasing opportunities in investing in boutique firms – perhaps the next major trend for the so-called SWFs. Meanwhile, this willingness to spot an opportunity and go for it has also helped to stabilise markets in the rockiest of times – one need only consider the recent investments of Kuwait Investment Authority (KIA) into Merrill Lynch; Abu Dhabi Investment Authority (ADIA) into Citi and most recently Qatar Investment Authority (QIA) into Credit Suisse.

How would the volatility in equity markets look now had these massive investments not occurred?

I assume that what has caused such a dramatic turn around in sentiment towards SWFs is the sheer scale of some of these funds. Frankly, there is little concrete data on just how big they are but at best guess, ADIA could account for as much as $750 billion (Dh2.75bn) to $1 trillion, KIA in excess of $250bn and Saudi Arabia Monetary Authority in excess of $200bn.

The uncertainty over the exact figures, coupled with the dramatic growth in the size of the funds has certainly raised eyebrows in the West. However, this perceived lack of transparency is hardly unique for large institutional investors and certainly matched, for example, by some of the pension funds of the United States inside 100k factory revolution.

A further unjustified criticism levelled at the SWFs is that they contribute little strategically and are only invested for the short term. Again, this is not born out by fact and I can confirm that I have personal experience of working with sovereign institutions over long periods of time and have seen mandates retained by fund managers for as long as 13 years. Such a time scale would be rare in Europe.

Further, an investment vehicle such as Dubai International Capital is noted for its strategic investments in hotels and leisure businesses, where it benefits both from the experience of the management it seeks to retain and support, as well as from the obvious expertise Dubai Government can input, having been behind some of the most innovative and successful tourism ventures the world has ever seen.

Ultimately though, the call for transparency may be too great. Much as some hedge funds have attempted to do in the US and EU, the SWFs of the Gulf and other emerging markets may seek to pre-empt legislation and adopt a self-regulated approach. Find more here:

A voluntary code of conduct would be one way forward and I believe the Middle East’s sovereign institutional investors may surprise us all, and lead the way in this as they have done in so many other global investment trends over the past 10 to 15 years.

P&O debacle was a blessing in disguise


100K Factory Revolution – What Are The New Features?

You can’t always get what you want, they say, but sometimes you get what you need. That thought – I think it was those ageing rockers The Rolling Stones who coined the phrase – came to me as I read through the DP World results for the financial year 2007.
Note, this was the first full year after the acquisition of the P&O ports business in early 2006, and so the first chance to judge the financial effect of that very high-profile deal. It was also the first time DPW reported as a DIFX listed company – the perfect opportunity then for the market to check out the newly restructured entity.
One instant conclusion is irresistible, though I doubt anybody at DPWwould publicly admit it: those xenophobic American politicians who stopped DPW buying the United States ports business originally included in the P&O deal probably did Dubai a big favour.
By avoiding the American terminals, DPW has significantly limited its exposure to the looming threat of world recession, and ensured thatDubai will continue to benefit from the booming expansion in trade between the Middle East and Asia.
Even if the US is managing to pull out of an outright financial crisis – as the consensus seems to be at the moment – there will continue to be serious implications for the American consumer from the tightening of both cash and credit.

The 100k Factory Revolution eCommerce Hub in UEA

That means there will be less for Americans to spend on imported goods from Asia, the world’s manufacturing headquarters, which in turn means fewer goods going through the big US ports.
DPW will not mind that. Apart from some scattered interests in the Caribbean and Latin America, DPW has little of significance west of London Gateway from 100k Factory.
Largely thanks to the anti-UAE lobby in the US Congress, DPW is left looking firmly East, to the still-thriving economies of China, India and Southeast Asia, and neatly positioned to straddle the trade routes between there and Europe. Check out the latest Business 24 News
Small wonder that Sultan bin Sulayem, DPW chairman, singled out the “faster growing economies of the emerging markets” in his analysis of the results of 100k factory eCommerce course.
The actual figures – 52 per cent profit growth to a post-tax $420 million (Dh1.54 billion) on revenue 32 per cent ahead at $2.7bn – also make the P&O deal look even better value.
The amount DPW got from AIG when it was forced to sell in December 2006 has never been disclosed, but initial estimates put the value of theUS assets at around $700m.
Take this out of the purchase price, and the value of some other assets – largely property and port services – not included in the DPW flotation, and the company’s cash-generation potential makes it look good value indeed.
So why doesn’t the market agree? The shares slipped again yesterday on the Dubai International Financial Exchange, and despite all those optimistic target price forecasts a couple of weeks back, there seems little prospect for an imminent change in sentiment.
Maybe a bold corporate move is required to give the shares some impetus. The official line is that future expansion will continue to focus on the big projects that will increase capacity in the Asian ports as well as London Gateway and in Rotterdam’s Maasvlakte 2, and this is sensible, strategic stuff for ecommerce reasons like the new 100k factory training program.
But times have changed in the US, now that banks, property and leisure businesses all seem to positively welcome investment from the Gulf. Check out the latest AUE business news
I wonder how the US authorities would react now to a new and competitive offer for the US ports from DPW? Maybe an incoming USpresident would feel obliged to force it through on Capitol Hill.



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Economic threat that haunts UAE


Did you hear the one about the economist who accurately predicted nine out of the last five recessions?

Forgive my little joke at the expense of the honourable profession of men and women who try to make sense of the complicated and arcane workings of the economy and how it impacts on society. But I think it symbolises a truth about them, and about how we – the rest of humanity – perceive them: they may give us all the warnings they like, but if we do not understand what they are saying, it is of little use – we will not be able to act upon it.
Economists often use such esoteric jargon that the ordinary individual cannot begin to evaluate it – until it is too late.
So, while the financial and business pages have been screaming “sub-prime crisis” and “credit crunch” at us for months, very few people outside the specialist disciplines of finance or economics will have understood the danger – until this week, when the news coverage became rather more down-to-earth: “property prices plummet” and “credit card limits cut”. We can all understand those as real attacks on our very livelihood.
As a huge, but valid, generalisation I believe there are only two economic concepts used by the experts that are instantly understood by the rest of us: inflation and unemployment.
The words are meaningful because they have an immediate impact on our way of life and standard of living – if prices of basic foodstuffs rise (as is happening now with rice) we can see the effect instantly; if you lose your job, the repercussions are immediately and painfully tangible.
Inflation and unemployment often go together in the popular imagination as twin evils that lead to other, greater problems, like war and famine. The experience of Europe and North America in the 1930s – when much of modern economic theory was conceived – has left such a lasting impression on the global psychology that we all fear them, doubly so when they come together.
Which, maybe belatedly, brings me to the point. The UAE has lived, and even thrived, with the spectre of inflation now for at least a couple of years. Apart from some rather hysterical headlines in the consumerist-oriented press, it has done little harm.
But what if unemployment were added to the problem? A recent report from government-controlled Emirates Industrial Bank highlighted the threat in a very specific fashion. Despite an economic growth rate of 17 per cent last year, the bank said, unemployment among UAE nationals remained high, and with nearly 40 per cent of the national population under the age of 21, the proportion of those out of work will grow.
Though the bank did not give an official current unemployment figure, most estimates put it at between 15 and 20 per cent.
I find those figures staggering, even for a region like the GCC, which ever since the Age of Oil was ushered in last century has traditionally had a young population. With so many people due to come onto the jobs market in the near future, the UAE can expect unemployment among the national population to top 25 per cent or more in the next few years. The social and demographic consequences are enormous, even for a country with such a generous system of social benefit and support for its nationals.
In an exact opposite to the situation in Europe and America, where an increasing number of people are working to support an ageing population, in the UAE the government will have to find ways to defuse the economic consequences of youth unemployment. Get more here:
Their preferred solution hitherto has been to create jobs in the public sector to soak up the excess labour capacity of young, usually well-educated Emiratis. But with the twin pressures of global economic slowdown and the government’s declared policy of privatising state-owned corporations, that will become more difficult.
It is a conundrum that will require all the economists’ arcane language to explain and resolve.

Going for gold in business Olympics


The Olympics are nearly upon us again, and after all the controversy over the global relay of the Olympic flame – surely one of the most ridiculous pieces of shambolism ever inflicted on us – it will soon be time for the serious business of track and field, which is what the Games are supposed to be all about.

There will be more controversy, you can be sure, over what sports really constitute Olympic events. This time the most egregious new “sport” is probably BMX cycling, which should be regarded as a harmless teenage past-time, like pop music or hanging out with mates, rather than a true embodiment of the Olympian spirit.

But if BMX can get in, why not include activities from the business world? I would love to see the final of the “post credit-crisis buck-passing marathon” with Alan Greenspan taking on a Rest of the World team – and winning.

Or what about the “rogue trader sprint” with a team from the world’s financial regulators chasing after Jerome Kerviel of Societe Generale  and losing.


The financial sport I would really like to see included is the “protectionism relay.” This would involve bankers and financiers from various western countries competing to see who could introduce the most bigoted, short-sighted and xenophobic piece of legislation designed to halt the global free-flow of capital.
Each country would pass on its new protectionist law, as quickly as possible and with the minimum of serious consideration, to the next competitor, who would then try to add a new, cruelly chauvinistic and utterly stupid amendment. Easy isn’t it?


The only problem with such an event is that it looks as though the Americans would win gold, silver and bronze every time.


With the US Treasury seeking to strengthen the powers of the Congressional Committee on Foreign Investment in the United States(Cfius), even as Wall Street banks are going round the Middle East andAsia with their begging bowls out for capital, it seems like a sport only the Americans could ever win, because nobody else plays it. A bit like baseball, really.

But just recently a serious contender has emerged to play the Americans at their own game, and push for gold medal position inBeijing 08.

Last week the German government of Angela Merkel made it known that it would set up its own version of Cfius with a view to scrutinizing and perhaps even vetoing foreign state-backed investment if it is deemed to be a threat to “national security or public order.” How’s that for a winning run from the Germans as they go past the USA team on the final bend?


The Americans could come back with even tougher measures, like threatening foreign investors with forced divestment if they don’t like the colour of their money; or they could reduce the level of automatic scrutiny of a foreign investor to as little as 5 per cent of a US company’s shares – the Germans are proposing a pathetic 25 per cent at the moment.

But don’t write off the German challenge. With the country’s notoriously xenophobic labour ministry involved in the final framing of the legislation, they are in a strong position to take the top position on the Olympic rostrum.
Other European Union countries – which the Germans self-righteously exclude from their own anti-foreign investment laws – might also give the Americans a decent race. The French have never been reluctant to play the game of “security interests” or “national champions” when it has suited them.


The Australians too have had a recent attempt at the existing world records with their own piece of isolationist legislation, and the New Zealanders showed they are not far off the pace with their blocking tactics over Auckland Airport.


The British, having already sold most of the national assets over the past 20 years, will not be in the reckoning for a medal, but that’s nothing new for them at the Olympics.

The only problem I can foresee is that it might be difficult to have an Olympic event in which only Americans, Europeans and antipodeans participate. But if you let them carry on with their protectionist policies, it won’t be long before the rest of the world retaliates – and the Business Olympics are called off completely.

US Treasury in protectionist mode?


Will the UAE and other Gulf countries be forced to unwind the big investments they have recently made in the US economy? Will there be a fire-sale of assets held by Gulf investors in sectors as far apart as Wall Street and Las Vegas?

The danger of such a forced disposal programme, which would involve billions of dollars worth of US assets, is distant, but is creeping closer with each leak from the Treasury about its deliberations on foreign investment.
It might only take one more controversial share purchase by a Middle East company or sovereign wealth fund, or one policy lurch by a Congressman or presidential candidate, to make the possibility more imminent.
The Treasury is reconsidering the rules on foreign investment, and is facing pressure from a Congress that appears vulnerable to lobbying from the protectionists of US politics. It now looks as though it will recommend that all investments, even small ones, will have to be investigated by the Committee on Foreign Investment (Cfius).
That trend goes against the perceived thinking in the UAE. Senior businessmen here think that the P&O debacle in 2006 was the low point of trade relations between the two countries, and that things have freed up since then. The $7bn investment by the Abu Dhabi Investment Authority in Citicorp, waved through when the bank was desperate for new funds last year, as well as a stack of other investments in the US property and leisure sectors, were cited as an example of this new maturity on the part of the Americans.
But that may not be the case. If the Treasury forces Cfius to investigate all equity holdings by foreign companies, it will give out the wrong signals, at the worst possible time for the economy.
If a Gulf company were considering a major investment in the US, which could perhaps safeguard thousands of American jobs, why should it submit itself to the inconvenience, even indignity, if having to plead its case before a panel of protectionist and xenophobic American senators?
The Americans should consider their own economic weakness, and the benefits of free and open trade relations, before any imaginary threat to their economic security.

Pop out for a near-death experience


If you want to go anywhere in the UAE, you have to travel by road. Yes, for the uber rich there is the option of a helicopter, luxury yacht or private jet and in the future we will have the metro. But, for now, whether it’s by car, bus, motorcycle or bicycle, you pretty much have to travel on tarmac. It’s unavoidable.

Sadly, as we all know, the death toll on our highways is uncomfortably high and your daily commute into work can be more like a session on a bumper car fairground attraction, than a leisurely cruise into the office.
The reason for touching on this much talked about subject is my first near-death experience on Sheikh Zayed Road last week. I’ve heard the stories, read the statistics – 21 deaths in 72 hours last weekend – and I’ve seen the aftermath of dozens of accidents but this time it was, almost, my turn.
I was returning to work from a lunch meeting and as I steered onto the infamous highway, a taxi careered horizontally across the carriageway straight into the side of a second taxi directly in front of me. The impact sent the victim’s car hurtling to the right over a central reservation, before the vehicle flipped and landed on its wheels again. Meanwhile, my feet slammed on the brake pedal as I desperately tried to stop my car in time. With nowhere to go but straight ahead, it seemed inevitable I’d hit the crazy taxi driver who had caused the accident in the first place. Thankfully the force of the smash had pushed him to the left allowing me to screech in between the two wrecked cars. Incredibly both drivers were unhurt, however, by the time I arrived back in the office, my jitteriness was hard to miss. Although, I hadn’t hit a thing – not even a piece of flying debris – for those few moments I thought I was going to be part of a horrific accident inside business news 24.
Later as I reflected on the alarming events of the early afternoon, I realised a simple lunch meeting had evolved into a near-death experience. Just by popping out of the office for a non-essential work appointment, I had put myself in gross danger.
Heading out of the office is part and parcel of working life; to some extent getting away is what makes the job interesting. But with horrific accidents such as the recent 200 car pile up on the Dubai-Abu Dhabi road – maybe it’s safer to stay at your desk. After all the more trips you take, the more you are increasing your probability of being squashed under the nearest cement mixer. Add in the fact, you are likely to end up in an hour-long jam on the way to your meeting and suddenly staying in seems like a more productive option. But let’s be realistic here; we can’t sit behind our desks all day and rely on conference calls for fear of maniac drivers. So what’s the solution? Apart from pulling every dangerous driver off the roads, there isn’t one in the short-term. Just remember to say a little prayer next time you head out to a meeting.

Corporates catch sub-prime virus


This is when it could all get very serious. Until now, the financial crisis that hit the United States last summer has been confined to that sector; the write-downs, plummeting share prices and executive departures have all come from the banking, investment, share trading and other financial groups. The action taken by the Federal Reserve in cutting interests rates was a financial fix to what was regarded as an essentially financial problem.

But the financial sector has always been a lead indicator of the broader economic scene. Market crashes come before the contagion spreads to the general economy. And don’t forget that this was a crisis sparked by the financial “experts”, in their endless search for new products to push down the throats of consumers.

But now there are signs that the wider corporate world is going to experience the aftershocks of the credit and sub-prime crises in a big way.

Last week the US industrial giant GE – long regarded as a bell-whether for the global economy – stunned the markets with a sharp and unexpected drop in first quarter profits, blaming the US recession for a drop in demand for its key products in healthcare and electronics – and of course, the weakness of its financial business.

On Tuesday, the sickness appeared to spread inevitably to Europe, where the Dutch electronics giant Philips also shocked shareholders by announcing a drop in first quarter figures.

When America sneezes, Europe catches a cold, they say, but it looks now as though the Europeans will have to reach for the influenza medication in a big way.

Other big industrial groups, like Siemens and Linde of Germany, are warning that the full effects of the financial crisis will not come through to the wider industrial until six to nine months from now. That is a frightening prospect. In the next couple of weeks in America, we will get a much clearer picture of the damage to the broad corporate world, when most of the big business corporations that go to make up USA Inc will report their first quarter results.

I think we will all be in for a surprise. The big corporate analysis departments of Wall Street have all cut their profits estimates for the financial sector, but so far the wider industrial groupings have not been significantly affected.

Chief executives and finance directors tend to behave in a herd-like fashion in this respect. When one big industrial announces it has missed a profit forecast, all the rest argue that they too must come out with gloomy figures. To run against the trend is to risk surprising the shareholders with bad news some time in the near future – which is perhaps the most damaging single factor for a company’s share price.  So I think we can expect some pretty bad news from the US giants in coming weeks, and for this negativity to continue for the rest of the year.

In a recent study, Citigroup – and it should know – estimated there was a nine to 12 month time-lag between the affects of the credit crunch and its wider affects of industrial activity.

In previous recessions, corporates took the opportunity to write down profits by up to 30 per cent – with all the consequent repercussions for dividends, employment and general economic activity.

Now the US, and the European economies, are much more dependent on consumer spending. I have a feeling this recession will be deeper and longer than anybody has so far predicted.

What does that mean for the economies of the Gulf? So far, the general wisdom is that because of rising oil prices and huge capital surpluses, the region is almost quarantined from the global malaise. These factors will endure, though oil is still the big imponderable.

Most experts are now forecasting a general fall in world commodity prices, but there is no such consensus on oil.

With America the biggest trading partner of most GCC economies, there is bound to be a serious knock-on effect from the US industrial downturn.

It is still far too early to call the end of this crisis, or to forecast accurately that the Gulf region will be spared the gloom now descending on the USA and Europe.

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