6th GCC Financial Forum kicks off today

Khalid Al-Rumaihi
Updated 26 February 2017
0

6th GCC Financial Forum kicks off today

MANAMA: Economic diversification in the Gulf and innovative approaches to the future of finance in the region will be the key issues to be addressed at the 6th GCC Financial Forum scheduled today in Manama.
Around 600 experts in finance, economists and policymakers are taking part at the two-day meeting hosted by Bahrain Economic Development Board (EDB) and Euromoney Conferences.
“Diversification agendas across the Gulf Cooperation Council (GCC) are generating exciting new opportunities for the private sector to offer sustainable solutions,” said Khalid Al-Rumaihi, chief executive of EDB.
He said that Bahrain, where financial services are the second-largest contributor to the economy, is committed to working with the industry to facilitate sustainable long-term growth.
“The forum provides decision-makers with a unique platform to share ideas that will (help) shape the region’s response to the challenges and opportunities ahead,” Al-Rumaihi said.
The main issues to be raised at the forum include dynamics of the oil market, fiscal strategy and taxes and fees that will be part of the GCC’s economic future. The impact of global political events and the role of private capital will also discussed.
“This year, our objective is to look at how financial markets in the Gulf (region) are evolving, (so as) to examine the region’s financing challenges and to explore how the creation of vibrant and innovative approaches to financial intermediation can provide effective solutions to these challenges,” said Victoria Behn, head of Middle East and Africa at Euromoney Conferences.
Among the key speakers will be Bahrain’s Minister of Finance Shaikh Ahmed bin Mohammed Al-Khalifa, who will deliver a keynote speech on Tuesday addressing the challenges that face the financial industry in the GCC. Other speakers include Francis Fukuyama, futurist and political commentator and Lord Adair Turner, chairman of the Institute of New Economic Thinking and former head of the UK’s Financial Services Authority.


Gulf companies challenged by debt and rising interest rates

Updated 22 April 2018
0

Gulf companies challenged by debt and rising interest rates

  • Debt restructurings on the rise, but below crisis levels
  • Central Bank of the UAE has raised interest rates four times since last March

There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the region following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.

 

Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams ($1.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to 2.1 billion dirhams of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in the emirate were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”

FACTOID

Four

The number of interest rate rises in the UAE since March 2017.