Aabar’s bonds drop on ‘adverse’ audit, despite Abu Dhabi backing

Aabar was a subsidiary of International Petroleum Investment Co. (IPIC), which is now part of Abu Dhabi state fund Mubadala Investment Co. (Shutterstock)
Updated 04 September 2019

Aabar’s bonds drop on ‘adverse’ audit, despite Abu Dhabi backing

DUBAI: Aabar Investment’s bonds, worth 2 billion euros ($2.2 billion), have lost about a quarter of their value this week after an auditor of the Abu Dhabi company gave an “adverse opinion” on its 2018 financial statements.
Aabar was a subsidiary of International Petroleum Investment Co. (IPIC), which is now part of Abu Dhabi state fund Mubadala Investment Co.
Its convertible Eurobonds due in 2020 and 2022 which, according to a JPMorgan note, were issued with expectation of support from the government of Abu Dhabi, have lost about 25 cents on the dollar each, Eikon Refinitiv data showed.
Aabar said in a regulatory disclosure on Aug. 30 that Ernst & Young audited its 2018 financial statements and gave an adverse opinion “due to losses incurred during the financial year, accumulated losses and a deficiency of assets.”
Aabar also said it was “considering the resources and options available to it to continue its normal operating activities and meet its financial obligations as they arise.”
Aabar’s portfolio has included Dubai-listed contractor Arabtec Holding, which over the past few years has experienced financial troubles, and Zurich-based Falcon Private Bank, which has faced a criminal investigation over links to 1Malaysia Development Berhad (1MDB).
In a note to clients on Tuesday, US investment bank JPMorgan likened Aabar’s situation to that of Dubai’s state-owned developer Nakheel in 2009.
“We are once again confronted with a 100% state owned entity that lacks much standalone ability to meet financial obligations,” said the bank.
Nakheel, developer of palm shaped islands off Dubai, was one of the worst hit by Dubai’s 2009-2010 real estate crash, forcing it into a massive debt restructuring.
JPMorgan said it expected the state to intervene to help Aabar meet its obligations.
“The company’s credit worthiness rested almost entirely on expectation of support from its direct (IPIC) and indirect (Government of Abu Dhabi) shareholders. We continue to believe that shareholders would step in to help support Aabar’s repayment of debt,” the bank said.
A spokesman for Aabar declined to comment on Abu Dhabi’s potential support. The Abu Dhabi Department of Finance did not immediately respond to a request for comment sent after office hours.


Oil retreats in face of renewed coronavirus uncertainty

Updated 22 February 2020

Oil retreats in face of renewed coronavirus uncertainty

  • G20 finance leaders to meet in Saudi Arabia at the weekend to discuss risks to the global economy
  • OPEC+ has been withholding supply to support prices and many analysts expect an extension or deepening of the curbs

LONDON: Oil prices fell on Friday as weak Asian data and a rise in new coronavirus cases fuelled uncertainty about the economic outlook while leading crude producers appeared to be in no rush to curb output.

Brent crude was down $1.56, or 2.6 percent, at $57.75 in afternoon trade, while U.S. crude dropped $1.25, or 2.3 percent, to $52.63.

"With Brent failing to breach the $60 level on Thursday despite better than expected U.S. oil inventory data, rising market uncertainty is dragging down oil prices on Friday," said UBS analyst Giovanni Staunovo.

"Market participants who benefited from the price rise in recent days might prefer not to go into the weekend with a long position."

 

China reports rise in coronavirus cases.

Japan factory activity shrinks at fastest pace since 2012.

Russia says early OPEC+ meeting no longer makes sense.

Finance leaders from the Group of 20 major economies meet in Saudi Arabia at the weekend to discuss risks to the global economy after new Asian economic and health data kept investors on guard.

Beijing reported an uptick in coronavirus cases on Friday and South Korea reported 100 new cases, doubling its infections. In Japan, meanwhile, more than 80 people have tested positive for the virus.

Factory activity in Japan registered its steepest contraction in seven years in February, hurt by fallout from the outbreak. 

"We still believe that the market is likely to trade lower from current levels, given the scale of the surplus over the first half of this year, and the need for the market to send a signal to OPEC+ that they must take further action at their meeting in early March," said ING analyst Warren Patterson.

Russian Energy Minister Alexander Novak said on Thursday that global oil producers understood it would no longer make sense for the Organization of the Petroleum Exporting Countries and its allies to meet before the planned gathering.

The group, known as OPEC+, has been withholding supply to support prices and many analysts expect an extension or deepening of the curbs.