Tuesday, May 19, 2009

Dubai may issue more bonds to support government related entities, Kuwait government may bail out TID

Dubai has handed out nearly half of its first tranche raised in its recent $10 billion to government related entities including DP World and Nakheel. The government of Dubai is also likely to issue another $10 billion tranche of bonds to continue to support GREs including assistance to Nakheel as its $3.52 billion sukuk reaches maturity in December (a sukuk I discussed earlier this month). Troubled Islamic mortgage providers Amlak and Tamweel will not be merged until after they are restructure, plans for which are expected in a "few weeks" according to Sheikh Khalid Bin Zayed Bin Saqer Al Nahyan.

The Kuwaiti government may bail out troubled Islamic investment bank The Investment Dar which recently defaulted on its sukuk, the first such default in the GCC. Critics point to a mismatch between cash flow and liabilities as well as the company's highly leveraged position which included its partial takeover in a leveraged buy-out of Aston Martin. Two interesting paragraphs in the article, which touches on systemic risk in Islamic finance, the topic of my forthcoming opinion piece in Business Islamica magazine:
"Bankers agree that the TID default may be a one-off and would not have a contagion effect even if there were one or two more defaults in the Sukuk or wider Islamic finance market. The financial market generally also prices in default probabilities to a certain extent.

"Another Islamic capital markets expert, however, warned that the main "issue has always been a lack of transparency in the structure and Shariah compliance process. The issuance is also not under a well-regulated jurisdiction familiar with Islamic financial products. Obviously there will be some contagion, as investors will now relook at the structure of the product they are holding. But it is fortunate that there is no secondary market otherwise the mark to market valuations across the board would be in a state of disarray."

Other News

1 comment:

Los angeles bail bonds said...

Organized content is the best way to display or post an article, thank you for making it easy to digest your post.