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Saudis Tightening Chinese Energy Ties to Move Away From Dependence on U.S.

April 20, 2010

By Henry Meyer April 20 (Bloomberg) — Li Wei, a Chinese diplomat in Riyadh, had only just seen off a Ministry of Commerce delegation to Saudi Arabia this month when he started preparing for another Chinese governmental visit in two weeks. “Every month we have delegations coming to Saudi Arabia,” said Li, who works in the Chinese Embassy’s commercial section in the Saudi capital. “We are too busy.” China, the world’s second-largest oil consumer, and Saudi Arabia, holder of about a fifth of global crude reserves, are forging ever closer ties as the Persian Gulf kingdom responds to a Chinese drive to feed its rising energy needs. China in November overtook the U.S. as the main buyer of Saudi oil, and Saudi Arabian Oil Co. and Saudi Basic Industries Corp. are investing in refinery and petrochemicals projects in China. The partnership between Saudi Arabia and China is part of a broader strategy by the world’s largest oil exporter to tap Asian markets and extend global influence. It also helps Saudi Arabia reduce reliance on the U.S., which since World War II has protected Saudi security in return for stable oil supplies, said Ben Simpfendorfer , Hong Kong-based chief China economist at the Royal Bank of Scotland Plc. “China’s rise has provided Saudi Arabia with an excuse to knock on Washington’s door and to say, you are not our only partner,” he said. Compared with the U.S., whose support for Israel has created friction with Saudi Arabia, “with China, there is less baggage, there are easier routes to mutual benefit,” said Prince Turki al-Faisal , a former Saudi ambassador to the U.S. and brother of Foreign Minister Saud al-Faisal , in an interview. Booming Trade Since Saudi Arabia and China established diplomatic ties in 1990, two-way trade has grown to more than $40 billion in 2008 from $290 million. Oil lies at the heart of the relationship. With about a fifth of China’s crude imports now coming from Saudi Arabia, or about 1 million barrels a day compared with 455,000 barrels a day in 2005, the kingdom is investing to expand Chinese capacity for refining of Saudi heavy crude. Saudi Aramco, the world’s biggest crude producer, teamed with China Petroleum & Chemical Corp. and Irving, Texas-based Exxon Mobil Corp. to triple capacity at a refinery in China’s Fujian province to 240,000 barrels a day last year. Dhahran- based Saudi Aramco is in talks with the same Chinese partner, Beijing-based Sinopec, to take a stake in a 200,000-barrel-a-day plant in Shandong. Petrochemical Complex Riyadh-based Saudi Basic Industries Corp., the world’s largest petrochemicals maker, collaborated with Sinopec to build a petrochemical complex in the northern Chinese port city of Tianjin that starts up this year. “China is a country that has the greatest market for our products, so there is no politics behind this, it is only straight business,” Mohammed Al-Mady , the chief executive officer of the company known as Sabic, said in an April 10 interview at a conference on the Chinese island of Hainan. China’s need for oil is prompting it to seek greater influence in the Middle East , said Shi Yinhong, a professor of international relations at Renmin University in Beijing. Increasing economic ties to Saudi Arabia “will play some role in gradually eroding American preponderance over that country, but this is not a very elaborate and conscious objective of China’s relationship with Saudi Arabia,” Shi said. “This is a by-product. China’s objective is energy.” China and Energy Chinese demand for refined products is forecast to jump 7.2 percent this year to 9.12 million barrels a day, according to the International Energy Agency’s monthly Oil Market Report on April 13. Demand climbed 20 percent in February from a year earlier. U.S. demand for crude oil and petroleum products will average 18.84 million barrels a day this year, the Energy Department said on April 6. That will be a 9.4 percent drop from the 2005 peak of 20.8 million barrels a day, according to data from the U.S. Energy Information Administration. That mirrors a decline throughout the developed world. Consumption in the 30 industrialized countries that belong to the Paris-based Organization for Economic Cooperation and Development will average 45.4 million barrels a day this year, down 8.3 percent from 2006, according to the International Energy Agency, which coordinates the energy policy of 28 developed nations. Military Security China isn’t looking to provide Saudi Arabia with the protection it gets from the U.S., which maintains air, naval and army bases in the Gulf, including one in Saudi Arabia. In 1991, the U.S. assembled a coalition to reverse the Iraqi occupation of Kuwait and, before that, defended neighboring Saudi Arabia from a threatened Iraqi attack. Now it is enlisting Saudi help to pressure Iran to rein in its nuclear program. Saudi Arabia was the biggest foreign buyer of U.S. weapons between 2005 and 2008, agreeing to purchase $11.2 billion worth, according to the Congressional Research Service in Washington. “It shouldn’t surprise anyone that the Chinese are buying more Saudi oil than ever before,” Robert Hormats , the U.S. undersecretary of state for economics, energy and agriculture, said in an April 11 interview in Hainan. “But the fact is that our relationship with Saudi Arabia is much deeper and broader than oil.” King Abdullah , 86, picked China as the first destination on his maiden foreign tour in January 2006, months after becoming king. Chinese President Hu Jintao has been twice to Saudi Arabia since 2006, most recently in February last year. More Trade More than 90 Chinese companies do business in Saudi Arabia, including 70 construction firms employing 20,000 Chinese people, according to a study by John Sfakianakis , chief economist at Riyadh-based Banque Saudi Fransi. Among recent contracts won by Chinese companies in Saudi Arabia was a $1.8 billion award to a Saudi-Chinese consortium including Beijing-based China Railway Construction Corp. in March 2009, for a new high-speed line between the holy cities of Mecca and Medina. To cater to the influx, Riyadh’s Sheraton hotel last year started to offer a Chinese breakfast of rice porridge, dim sum and steamed buns along with Arab, continental and U.S. dishes. “We try to satisfy the cultural preferences of our Chinese guests,” said Farid al-Aauuar, director of rooms at the hotel. To contact the reporter on this story: Henry Meyer in Riyadh via the Dubai newsroom at hmeyer4@bloomberg.net .

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Turk Telekom Beats Vodafone by Keeping Kids in School During Flu Outbreak

April 19, 2010

By Ercan Ersoy and Ben Holland April 19 (Bloomberg) — When a swine flu epidemic shut schools last year in Diyarbakir, one of Turkey’s poorest provinces, lessons continued using broadband links and software provided by Turk Telekomunikasyon AS . The unplanned test of Turk Telekom’s interactive education service embodied Chief Executive Officer Paul Doany’s strategy five years after the late Lebanese Prime Minister Rafiq Hariri’s family bought a 55 percent stake. He’s turning the former state- owned monopoly, which once took years to install a phone, into a provider of data and entertainment over the Internet. “We weren’t really ready to launch at that time but within 48 hours we were hosting live lessons,” Doany, 55, said April 9 in an interview in the resort town of Antalya, where he met with company managers. “The teachers were able to ask questions and kids answered from their homes, just like they were in class.” Doany has been CEO since 2005, when he persuaded the Hariris to invest $6.6 billion in Turk Telekom, ignoring a mobile phone company eventually snapped up by Vodafone Plc . Since then Doany has laid 128,000 kilometers (79,550 miles) of fiberoptic cable, extending high-speed Internet to every province in Turkey. Now he’s adding content, from online classes to soccer highlights, to attract subscribers from the burgeoning middle class of Europe’s fastest-growing economy, and says he wants to buy an additional 10 percent stake from the government. Turk Telekom’s revenue rose 40 percent to 10.6 billion liras ($7.2 billion) in 2009 from 7.53 billion liras in 2006. Net income fell to 1.83 billion liras from 2.21 billion liras. Driving Demand “Content can drive demand,” said Said Irfan, a telecommunications analyst at International Data Corp. in Dubai. “I would say that’s the case in Turkey. It could be a good proposition for them.” The company’s expansion ratifies Prime Minister Recep Tayyip Erdogan’s drive to bring Turkey, a country of 72 million people, into the European Union despite criticism of his party’s Islamist roots. Turk Telekom, which controls 97 percent of Turkey’s fixed-line market, was the biggest single item in a program of state asset sales that has raised $44.3 billion since Erdogan took office in 2003. That’s five times the total in the previous 17 years. “Money has no religion, nationality, or race,” Erdogan told business leaders Feb. 27 in Istanbul. Doany’s vision for Turk Telekom wasn’t always obvious as fixed-line use in Turkey stagnated and the number of mobile- phone subscribers almost tripled from 2001 through 2007. Taking a Chance Vodafone paid $4.6 billion for Telsim, Turkey’s second- biggest mobile phone company, to expand in faster growing markets. The world’s biggest mobile phone provider, based in Newbury, England, paid a 20 percent premium based on Telsim’s subscriber base and even more considering the Turkish company’s poor brand image and a history of underinvestment, said Toygun Onaran, an analyst at KBC Financial Products in London. “Mobile was the attractive business at the time, but it was at a very high premium,” said Doany, a Jordanian of Palestinian descent who became CEO of the Hariri’s Oger Telecom in 2002 and retains the post. “Turk Telekom looked like at least something which could be bought at fair value.” Analysts now reckon Turk Telekom is a better investment than Turkcell Iletisim Hizmetleri AS, the country’s biggest mobile provider. Sixteen of 28 analysts tracked by Bloomberg rate Turk Telekom a buy, compared with 5 of 24 for Turkcell . Bedtime Sudoku A Sudoku addict who says he can’t sleep unless he’s solved one of the Japanese number puzzles, Doany has been obsessed with merging fixed-line, mobile and data services since he joined Oger Telecom in the mid-1990s, according to Joe Haj Ali, his friend and marketing officer at the Dubai-based company. “Paul always liked complex things,” Ali said. “He always wanted to make this fat pipe going into homes not only a voice provider but also data, education, entertainment, security and other services.” By the time the government put Turk Telekom up for sale, Doany had studied BT Group Plc’s struggles to boost revenue after the former U.K. fixed-line monopoly spun off its mobile phone unit, stripping the company of growth opportunities. BT had to pay Vodafone to provide mobile services when it offered a combined product. By contrast, Doany was convinced Turk Telekom could profit by bundling landline products with mobile services offered by Avea, in which the company had a 40 percent stake. Less than a year after Oger Telecom took over, Turk Telekom paid $500 million to more than double its holding in Turkey’s third-biggest mobile phone company. Learning From BT “BT pushed for convergence because they had sold their mobile company,” Doany said. “We all knew this was BT’s biggest mistake. We had to learn those lessons.” Doany inherited a state enterprise with 57,000 workers . The company used copper lines in all but Turkey’s largest cities, and customers crowded around desks manned by cigarette-smoking bureaucrats. There was no sales and marketing department. After taking over, Doany slashed the workforce to 27,000 and moved top executives from Ankara, the capital, to Istanbul, Turkey’s business and financial hub. The Turkish offices of Oger Telecom are in Istanbul’s Kanyon tower , home to international banks such as UBS AG and Bank of America Corp. The CEO, who played guitar in a Beirut rock band before moving to Turkey, often walks through security in a grey suit and blue tie while listening to Jimi Hendrix , the Beatles, and the original line up of Genesis on his iPhone. Golden Share “It would take you literally years to subscribe to a land- line or resolve an issue with Turk Telekom,” said Sukru Andac, technology editor at Dogan Yayin Holding AS , Turkey’s biggest media group. “Now they have a very well functioning call center. In only a few minutes you have a solution, and within two days you get a line.” Not everything has changed. The government retains a so-called golden share in Turk Telekom, giving it the right to block some initiatives. “Turk Telekom management may need the government’s go- ahead in hiring staff and acquisitions,” said Timur Sirt, co- owner of the Turkish technology Web site televidyon.com. “The involvement of the state may mean that Turk Telekom’s policies are not always commercial. This gives the company a difficult position in the market.” Expectations that the government may sell some or all of its remaining 30 percent stake to the public has also capped the share price, Sirt said. The government is still reviewing its options, Transport Minister Binali Yildirim said Jan. 6. Hartnett Pick Turk Telekom has risen 18 percent this year, compared with a 10 percent gain on Turkey’s National ISE-100 Index. The stock has returned 17 percent since the company’s record $1.8 billion IPO in 2008, compared with a 24 percent decline in the MSCI World Telecommunication Services Index. Michael Hartnett , chief global equity strategist at Bank of America-Merrill Lynch, named Turk Telekom one of his top 21 global recommendations out of almost 3,000 candidates. “We define best of breed as highly liquid companies which have solid earnings growth, good corporate management, healthy balance sheets and the potential for margin expansion,” he said in an April 5 report. Turk Telekom has grown as the average income in Turkey tripled in the past decade to about $8,500 a year. Erdogan, elected after a currency crisis plunged Turkey into its worst recession since World War II, has tamed inflation, reined in spending and sold state companies to attract investment. Turk Telekom has also benefited from the government’s effort to make technology a pillar of economic growth, partly by cutting the tax on Internet services to 5 percent from as much as 25 percent to help link Turkish homes and businesses to the global economy. ‘International Player’ “There are a number of reasons why Turk Telekom could and should become an international player,” said Jonathan Liebenau, a professor of technology management at the London School of Economics. “For example, it fits the government’s policy of deepening relations with neighboring countries.” Turk Telekom has 16.5 million fixed-line subscribers, contributing about half of the company’s sales , as well as 11.8 million customers at Avea and 6.2 million for broadband. Oger has invested $5 billion since the takeover. That includes setting up a call center which also serves the Health Ministry and Turkish Airlines, buying software companies that produce content, and investing in research and development. After failing in a $1.5 billion bid for the TV rights to Turkey’s top soccer league, Doany won an auction for rights to show highlights on mobile phones. Spiderman, Incredible Hulk Acquisitions included Sebit AS, which helped develop Vitamin, the educational software used in Diyarbakir; Sobee AS, which is teaming up with Walt Disney Co.’s Marvel Entertainment LLC to create games using characters including Spiderman and The Incredible Hulk; and Argela AS, which lets users make calls from laptop computers when away from home. “We don’t want to be stigmatized as being just a telecom operator,” Doany said. “The future is about providing cheap connectivity with all devices.” Doany, who has a Turkish wife, studied electrical engineering at the American University in Beirut and earned a Ph.D. from the U.K.’s Manchester University. His ambitions for Turk Telekom match his international background. Vitamin, which provides lessons in physics, chemistry, biology and mathematics to students in the fourth through eighth grades, has signed up 95 schools in the U.S. and gets half of its 2 million subscribers from outside Turkey. Customers in Turkey pay 7 to 36 liras annually for the classes. Award-Winning Software Vitamin won last year’s CODiE award from the Washington- based Software and Information Industry Association for Best Online Instructional Solution. It also won Best Content Service at the World Communication Awards in London. Turk Telekom has launched English, Arabic and Malay versions and a Spanish- language service will be available soon, Doany said. Turkey is “almost on par with developed countries,” said Sebastian Kahlfeld , who manages the 85 million-euro ($115 million) Turkey Fund at DWS Investment GmbH in Frankfurt and holds Turk Telekom shares. “Growth has to come from new services and not subscribers.” To contact the reporter on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net Ben Holland in Istanbul at bholland1@bloomberg.net

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Dubai Shares Drop on Concern With Dubai World Interest Proposal, Goldman

April 18, 2010

By Dana El Baltaji April 18 (Bloomberg) — Dubai’s stocks fell the most this month on concern Dubai World is offering creditors interest that is about a fifth of the market rate and after global markets slumped on fraud allegations at Goldman Sachs Group Inc. Arabtec Holding PJSC slipped the most since February after a unit of the construction company won’t bid for a contract to build a 1.1 kilometer (0.68-mile) skyscraper in Saudi Arabia. Emaar Properties PJSC retreated 3.9 percent. The Dubai Financial Market General Index lost 2.3 percent, the biggest drop since March 29, to 1,775.56 at the close in Dubai. Saudi Arabia’s Tadawul All Share Index fell 0.9 percent at 1:48 p.m. in Riyadh. Dubai World, the state-owned holding company restructuring $24.8 billion of debt, is offering to pay creditors 1 percent interest on new loans as part of a restructuring plan, a banker familiar with the plan said April 15. Banks are reluctant to accept the new rate presented on March 25 as it is lower than the market rate of about 5 percent and would force Dubai World’s creditors to book impairment provisions, two bankers said. “A 1 percent interest on the restructured amount is not in the best interest of anyone,” said Marwan Shurrab , assistant fund manager and chief trader at Gulfmena Alternative Investments in Dubai. “It would hurt banks and force them to make more provisions, which will affect their results.” A spokesman for Dubai World declined to comment when contacted on April 15. Withdrawing Offer U.S. stocks fell on April 16, halting the longest rally in a year, after allegations of fraud at Goldman heightened concern the government will crack down on Wall Street. Arabtec tumbled 5.6 percent, the most since Feb. 14, to 2.51 dirhams. The plan was withdrawn for “various reasons associated with the requirements of the Kingdom Tower,” Arabtec said in a statement read over the phone to Bloomberg News today. Arabtec Construction had planned to submit a proposal for Kingdom Tower with its South Korean partner Samsung Corp . this month, The National reported earlier. Emaar, the developer of the world’s tallest tower in Dubai, fell to 3.90 dirhams. Dubai Islamic Bank PJSC , the United Arab Emirates’ biggest Islamic lender, retreated to the lowest level in a month, falling 3.8 percent to 2.29 dirhams. Abu Dhabi’s measure declined 1 percent, the most in more than two weeks, on concern a cloud of ash from volcanic eruptions in Iceland will disrupt flights to and from Abu Dhabi ahead of a real estate exhibition in the emirate this week. The number of people attending the property exhibition in Abu Dhabi is likely to drop because of flight cancelations, said Majed Azzam , a real estate analyst at Al-Futtaim HC Securities. Aldar Properties PJSC , Abu Dhabi’s biggest real-estate developer, fell 4.8 percent, the most since Jan. 26, to 4.20 dirhams and Sorouh Real Estate Co. lost 2.9 percent to 2.38 dirhams. Iceland’s Volcano “There’s a lot of foreign ownership in Aldar and Sorouh,” Azzam said. “Whenever there is bad or good news globally, the stocks tend to overreact. Even though the property conference is directed more at Asian investors than the European market, the ash cloud doesn’t help sentiment.” Northern and central Europe may remain closed to air traffic until April 22 as winds push ash from volcanic eruptions in Iceland across the continent, forecasters said. European airlines canceled more than 77 percent of their flights yesterday as airports from Dublin to Moscow closed. The Muscat Securities Market 30 Index fell 0.4 percent and the Bahrain All Share Index retreated 0.3 percent. Qatar ’s gauge declined 1 percent and Kuwait’s measure was little unchanged. To contact the reporter responsible for this story: Dana El Baltaji in Dubai delbaltaji@bloomberg.net .

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Dubai’s $330 Billion Deferred Buildings Impose Fees

April 12, 2010

By Zainab Fattah April 12 (Bloomberg) — Silvia Turrin paid two-thirds of the $520,000 purchase price of her Dubai apartment, only to learn that it won’t be finished until 2012, two years late. When she stopped payments to Emaar Properties PJSC , the developer hit her with late fees. “We feel hopeless and we’re running out of options,” said Turrin, one of about 400 buyers in two nonexistent towers called 29 Boulevard. “It’s almost like we don’t have any rights.” Developers in Dubai are demanding that buyers like Turrin keep paying for homes that in some cases haven’t even been started. Builders in the emirate have delayed or canceled projects worth about $330 billion, Dubai-based market researcher Proleads estimates. The best performing real estate market in the world collapsed in 2008 after credit dried up, sparking defaults and forcing writedowns of land and property values. Emaar, the United Arab Emirates’ biggest developer, isn’t the only one dealing with disgruntled buyers. About 30 filed a claim against Union Properties PJSC at the Judicial Authority at Dubai International Financial Center, saying it breached contracts by failing to deliver apartments on time. Nakheel PJSC, the creator of palm tree-shaped islands off Dubai’s coast, said it’s assessing which projects will be halted. “There is a growing distrust between developers and customers,” said Chet Riley , a Dubai-based analyst at Nomura Holdings Inc. “Customers don’t want to pay because they can’t see the development being completed and developers can’t continue building because customers are not paying.” Confidence Blow Disputes between buyers and builders are eroding confidence and discouraging new investors needed to spark a recovery, Riley said. Dubai and its state-controlled companies amassed $109 billion in debt to turn the Persian Gulf city state into a financial center and tourist destination as oil reserves dwindled. Neighboring emirate Abu Dhabi and the country’s central bank provided $20 billion in financial support in 2009. Buyers in Emaar’s 29 Boulevard were notified of the two- year construction delay in February, just before the original completion date for the two 45-story towers. Most have paid 30 percent to 65 percent of the purchase price, according to Mehdi Nosratlu, who heads a group of investors negotiating with Emaar. The site remains a walled-off hole in the ground with idle cranes hovering above. The Peak Emaar, among the first companies to allow buyers to swap for different units, said in a March 18 statement that it’s offering customers flexible payments on an individual basis and has informed buyers about negotiations with contractors to lower construction costs. It didn’t respond to a further request for comment. Nakheel said it’s offering alternative properties and new financing terms to investors in stalled projects. Union Properties said in a March 29 statement that it isn’t in breach of any contracts. Dubai real estate prices were rising at the fastest rate in the world in 2008, allowing investors to profit by buying and re-selling properties — often before a single brick was laid. Customers stood in long lines to sign contracts for the yet-to- be-built houses and apartments that accounted for about 90 percent of the market, according to Elaine Jones, chief executive officer of Dubai-based property manager Asteco . At the time, real estate, business services and construction accounted for 24 percent of the Dubai’s nominal gross domestic product, according to government statistics. If building materials and financing are included, the figure was about 40 percent, said Nabil Ahmed , a Deutsche Bank AG analyst. Little Power The credit crisis put an end to all that. Emaar’s profit fell to 327 million dirhams ($89 million) last year from 6.58 billion dirhams in 2007, as revenue declined by more than half and the value of its properties fell. Nakheel, owned by state holding company Dubai World, has struggled with 73.3 billion dirhams of liabilities, including term loans of 16.3 billion dirhams, according to its first-half financial report. Emaar shares are down 63 percent in the past two years. They have gained 5.2 percent this year to 4.06 dirhams. Buyers soon found they had little power to recover their investments when work stalled or force developers to finish projects or offer alternatives of equal value. While negotiations have resolved some of the disputes, customers who aren’t satisfied with the developer’s offer face a long battle through an untested arbitration process and the courts. “There have only been a few actual decisions made,” said Ashley Painter , a partner at Dubai-based law firm Clyde & Co. “The property court won’t take on a case unless it’s been through mediation and then the whole thing grinds to a halt.” Most of the laws and regulatory bodies dealing with real estate contracts have only been created in the past two or three years and haven’t been able to cope with the sudden flood of disputes, lawyers and property buyers say. Regulations Emerge The Real Estate Regulatory Agency, or RERA , was set up in 2007 to license and govern the market. A real estate court was also created to rule on disputes that aren’t resolved by the Dubai Land Department’s mediation center. RERA put in place laws that tie customers’ payments to the progress in construction. “Gradually, Dubai has been passing its real estate laws and regulations,” said Lisa Dale , a partner in the Dubai-based law firm Al Tamimi & Co. “However, further resources need to be dedicated to implementing these laws fully and evenly everywhere.” Turrin, a 32-year-old property consultant, has been paying for a two-bedroom apartment on the fourth floor of Tower 1 at 29 Boulevard since 2007. She said Emaar offered her a 5 percent discount in return for signing a new contract with a later completion date or an alternative apartment in the Loft or Burj Khalifa, the world’s tallest skyscraper, at double the price. Obtaining a document from RERA supporting her right to withhold additional payments to Emaar didn’t stop the company from charging her 14,623 dirhams in late fees, Turrin said. Enforcement “We can enforce linking payment to the progress of construction, but only the Real Estate court can cancel contracts,” RERA Chief Executive Marwan Bin Ghalita said. “Why did investors pay up to 65 percent before any construction was done? The law has been out there for two years.” Investors hurt themselves by signing contracts that were ambiguous and usually favored the developer, Clyde & Co.’s Painter said. Some didn’t even include completion dates and others failed to define the buyer’s rights if a project should stall. “Two years ago, many of those same customers were throwing checks over the rails at developers,” said Nomura’s Riley. “In effect, there was no paperwork or anything. A lot of buyers who decided to enter the market had no intention, capacity or capability to complete on the purchase.” Wherever the fault lies, Dubai’s government can’t afford to leave the conflicts unresolved if it wants to restore confidence and bring investors back into the real estate market, he said. Government Pressure Dubai pledged to take direct control of Nakheel last month, providing $8 billion in cash and saying it will help buyers of stalled projects to swap their properties for units in developments nearing completion or receive credit for money already paid. It may also offer revised payment plans. “There is pressure from the government to improve service and treat investors fairly because Dubai needs them for the long term,” said Majed Azzam , an analyst at Al-Futtaim HC Securities in Dubai. Nakheel had to make a deal with buyers or face “massive defaults,” said Saud Masud , head of Middle Eastern research at UBS AG in Dubai. Buyers may not get units without additional cost and will still have to deal with negative equity, falling prices and maintenance expenses, he said. “Nakheel will continue to assist customers in longer-term projects in their consolidation or swapping process to find an alternative investment in an active development if they so choose,” the company said in a statement on April 8. Off-Plan Dead New buyers in Dubai won’t be forced to choose between unfinished developments because companies built more properties than they could sell in the last several years. Off-plan sales accounted for the majority of transactions after the property market was opened to foreigners in 2002, Asteco CEO Jones said. Today, off-plan buying is “effectively dead” and isn’t likely to be revived anytime soon, Riley said. After finding that they own unfinished properties that are worth less than they owe on mortgages, many buyers just want to get out, RERA’s Bin Ghalita said. While the regulator can protect buyers’ rights, “people have to take responsibility for their investment decisions,” he said. To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net

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Iranian Supertankers Expand Oil Storage, Echoing Surge of 2008

April 12, 2010

By Alaric Nightingale April 12 (Bloomberg) — Iran, OPEC’s second-biggest crude producer, expanded the number of supertankers being used to store surplus oil, echoing a program that contributed to a tripling of freight rates two years ago. At least nine such vessels are idling in the Persian Gulf, Gulf of Oman and to the south of Egypt’s Suez Canal, according to data from the ships collected by AIS Live Ltd. Two months ago, there were three. Their depth in the water indicates they are loaded, with as many as 18 million barrels of oil being stored, almost enough to supply Europe for a day. Refineries across Asia, accounting for almost two-thirds of global demand for supertankers, typically process less fuel in the second quarter to carry out maintenance. Two years ago, Iran used as many as 15 tankers for storage when demand from refiners fell, constricting vessel supply and helping to drive up freight rates more than 200 percent in less than three months. “This kind of development can be a psychological trigger for the market,” said Per Mansson , managing director of Nor Ocean Stockholm AB. The supply of ships “is already about equal to demand, and this can rapidly alter sentiment.” National Iranian Tanker Co., which operates the nine supertankers, also has a laden suezmax tanker idling off Iran, ship-tracking data show. A suezmax can hold about 1 million barrels of oil. Four of the supertankers are off Iran, three are near the United Arab Emirates in the Gulf of Oman and two are south of the Suez Canal. ‘Positive Effect’ “Any capacity being taken out of the market is reducing the fleet and should have a positive effect,” Dag Kilen , an analyst at RS Platou Capital Markets A/S in Oslo, said by phone. The number of Iranian tankers being used for storage this year is about double the average, he said. Calls today to the office of Seifollah Jashnsaz, managing director of National Iranian Oil Co., weren’t answered. The office of Deputy Oil Minister Hossein Noghrekar Shirazi referred calls to NIOC’s office of international affairs. Ali Asghar Arshi , the company’s manager of international affairs, wasn’t immediately available for comment, his office said. Mohammad Souri , managing director of National Iranian Tanker, wasn’t immediately available for comment, his office said. Demand for Iran’s sulfur-rich crude has weakened as refineries that can process the fuel shut down for maintenance. The discount on Iran Heavy crude compared with Oman and Dubai petroleum is at its widest in more than a year, according to data compiled by Bloomberg. The discounts on Iran’s Forozan, Soroosh and Norooz crudes have also widened. Oil Production Iranian oil production expanded 0.8 percent last month to almost 3.83 million barrels a day, data compiled by Bloomberg show. That’s in contrast to the combined 12 members of the Organization of Petroleum Exporting Countries, accounting for about 40 percent of global supply, who kept output little changed in March, the data show. Iran’s tankers have idled since at least March 19, the ship-tracking data show. A normal turnaround for a supertanker taking on a cargo would be one or two days, said Halvor Ellefsen , a tanker broker at SeaLeague AS in Oslo. Iran’s expanding oil storage runs contrary to what is happening globally. The number of tankers tied up in storage fell to 104 by the end of February, from a record 168 in November, according to Simpson, Spence & Young Ltd., the world’s second-largest shipbroker. There were 18 supertankers storing. Stored on Tankers Traders had bought crude, stored it on tankers and sold the fuel for delivery in the next several months. Those trades unwound after the premium for later delivery was eroded. Iran’s storage may bolster freight rates and prompt traders to revise their expectations for the second quarter. Rates on the benchmark Saudi Arabia-to-Japan route will average $28,758 a day in the period, according to the median in a Bloomberg survey of 13 analysts, traders and shipbrokers at the end of March. That’s 49 percent less than the rate of $56,246 on April 9, according to prices from the Baltic Exchange in London. Higher freight rates could bolster earnings for shipping lines including Hamilton, Bermuda-based Frontline Ltd., the biggest operator of the vessels. The six-member Bloomberg Tanker Index of shipping stocks advanced 14 percent this year, more than the 5.1 percent gain in the MSCI World Index of 23 developed nations’ equities. The absence of Iranian tankers from the market would also compound an expected contraction in the global fleet this year as a ban on single-hulled vessels takes hold. The fleet will shrink 4.2 percent this year, according to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net

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Dubai Stocks Advance, Paced by Emaar on Its Plan to Sell Shares in India

April 11, 2010

By Zahra Hankir April 11 (Bloomberg) — Dubai’s benchmark stock index rallied by the most in more than two weeks, led by Emaar Properties PJSC after its chairman said the company doesn’t need Dubai government help as its India unit planned a share sale. Arabtec Holding Co., the United Arab Emirates’ biggest construction company, rallied 6.3 percent and Emaar, the developer of the world’s tallest tower in Dubai, jumped by the most in two weeks. The DFM General Index rose 3.4 percent, the most since March 25, to close at 1,824.97 in Dubai. Saudi Arabia’s Tadawul All Share Index was little changed at 6,866.62 as of 1:45 p.m. in Riyadh, after yesterday closing at the highest level since Sept. 28, 2008. “There is value in the region as a whole and definitely in the U.A.E,” said Ibrahim Masood , a Dubai-based fund manager at Mashreqbank PSC, who helps manage about $400 million. “Saudi was pretty strong yesterday, so that’s positive from a sentiment perspective. The first few earnings that have come out in the region have been interesting.” Companies in the Gulf have started releasing first-quarter earnings. Saudi Arabian Fertilizer Co. , a unit of Saudi Basic Industries Corp. , yesterday said quarterly profit rose 33 percent to 698 million riyals ($186 million). Saudi’s benchmark stock index has surged 12 percent this year, beating the MSCI’s gauge of emerging markets. Emaar, which makes up 26.5 percent of Dubai’s stock measure, rose 6.8 percent, the most since March 25, to 4.06 dirhams. Emaar MGF Land Ltd., the Indian joint venture of the Dubai-based developer, plans to sell shares in an initial public offering in the next three months, executive vice chairman Shravan Gupta said on April 8. Emaar Rises Separately, Emaar’s Chairman Mohammed Alabbar said that the developer is healthy and that it hasn’t pulled out of a tourism project in Indonesia. Alabbar said property prices in Dubai are stable and that Emaar will not need assistance from the sheikhdom’s government. Arabtec jumped 6.3 percent to 2.70 dirhams, the most since March 30. Bahrain’s All Share Index declined 2.3 percent to 1,537.38, the biggest drop since April 2009. Abu Dhabi’s ADX General Index rose 0.9 percent to 2,847.68. Qatar’s measure gained 1.2 percent to 7,723.38. The Kuwait Stock Exchange Index slid 0.2 percent while Oman’s MSM30 Index increased 0.5 percent. To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

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Oil Surges to Highest Level in 17 Months After Jump in U.S. Jobs in March

April 5, 2010

By Ayesha Daya and Gavin Evans April 5 (Bloomberg) — Crude oil surged to the highest level in 17 months after March data showing employers in the U.S., the world’s biggest oil consumer, added the most jobs in three years, bolstering optimism that fuel demand will climb. Oil increased as much as 1.2 percent after the Labor Department reported that payrolls rose by 162,000 last month. Oil also climbed before a report today that may show service industries in the U.S. expanded in March at the fastest pace since 2007, based on a Bloomberg survey of economists. “Traders were waiting for the March payroll report to come out to see if the trend in the U.S. is still positive,” said Thina Saltvedt , a commodities analyst at Nordea Bank AB in Oslo. “It has raised hopes of the need for energy in the market.” Crude oil for May delivery rose as much as $1.02, or 1.2 percent, to $85.89 a barrel in electronic trading on the New York Mercantile Exchange, the highest intraday price since Oct. 9, 2008. The contract was at $85.38 at 1:04 p.m. London time. Futures increased $1.11, or 1.3 percent, to settle at $84.87 on April 1. Prices climbed after reports showed Chinese, European and U.S. manufacturing expanded, while pessimism decreased among Japan’s largest industrial companies. Oil trading resumed today after the exchange closed April 2 to mark the Good Friday holiday. The Labor Department report published that day showed U.S. payrolls were buoyed by 48,000 temporary workers hired by the government to conduct the census. Investor Confidence Oil traded within a range of $68 to $84 a barrel in the six months ended March 30. Prices climbed the past two months as improved investor confidence lifted world equity markets and U.S. refining climbed from a 16-month low. Still, U.S. crude oil stockpiles have posted nine weekly increases and held 354.2 million barrels in the week ended March 26, which is 6.5 percent higher than the five-year average for the period, the Energy Department said last week. Saudi Aramco, the world’s largest state-owned oil company, raised official selling prices for light crude grades for customers in the U.S. and Asia for May, it said yesterday. Aramco set the price for its Extra Light crude oil for May loadings for U.S. buyers at a premium of $1.35 a barrel over the Argus Sour Crude Index, 40 cents higher than April. The discount for shipments of light-grade crude to the U.S. narrowed 20 cents to 40 cents below ASCI a barrel. Abu Dhabi National Oil Co. raised its retroactive March prices more than 5 percent on all grades, to the highest since November, the state-owned producer from the United Arab Emirates capital said today. Price Floor “Economic data indexes are getting better and that is supporting crude oil prices,” said Ken Hasegawa , energy trading manager at broker Newedge in Tokyo. “Still, we need time to see quite a strong economic recovery” and prices may struggle above $87 without further evidence of growth, he said. Prices have established a floor of $75 a barrel, Venezuela’s Oil Minister Rafael Ramirez said April 2 in Caracas. There’s no need for the Organization of Petroleum Exporting Countries to increase production and Venezuela seeks a price band between $80 and $100 a barrel, he said. OPEC, which pumps about 40 percent of the world’s oil, slashed output in January of last year to prevent a supply glut. The 12-member group left production quotas unchanged when ministers met in Vienna on March 17. Brent crude oil for May settlement rose as much as 97 cents, or 1.2 percent, to $84.98 a barrel on the London-based ICE Futures Europe exchange. The contract was at $84.40 at 1:04 p.m. London time. To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net ; Ayesha Daya in Dubai adaya1@bloomberg.net

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Briton Sentenced to Jail for Kissing Girlfriend in Dubai to Appeal Ruling

April 4, 2010

By Henry Meyer and Dana El Baltaji April 4 (Bloomberg) — A British resident of Dubai will mount a second appeal of his conviction for kissing a female friend in public after a judge upheld his sentence of a one- month jail term and deportation from the Persian Gulf emirate. The 25-year-old British woman in the case, who was also sentenced to the same jail term and deportation, hasn’t yet decided whether to appeal, Khalaf al-Hosani, the man’s lawyer, told Bloomberg News by phone today. The two remain free on bail. The 24-year-old man, who works in Dubai, and his visiting female friend were convicted Jan. 19 of committing a public sexual act, and their sentence was affirmed by an appeals judge today. The two Britons admit to kissing on the cheek and appearing in public after drinking alcohol. Dubai, which borrowed $109 billion to build itself into a regional tourism and business center, has been seeking to shed its image of a free-and-easy destination for foreigners. A British visitor and her partner earlier this year returned home after being detained in Dubai on charges of illegal extramarital sex when they reported that she was raped. “Dubai markets itself as an international tourism destination,” said Sean Tipton , London-based spokesman for the Association of British Travel Agents . “The danger is if this type of incident becomes a regular occurrence, it could do a lot of damage to Dubai’s reputation among tourists.” Jail and Deportation Under the Islamic laws of the United Arab Emirates, Muslims aren’t allowed to drink alcohol and sexual relations between unmarried men and women are illegal. Intimate contact in public is punishable by jail and deportation. The Britons’ trial followed a complaint lodged by an Emirati woman who said she witnessed them kissing on the lips outside a restaurant in November. Dubai, which is in the second year of recession after suffering the world’s worst property crash, received 800,000 U.K. tourists in 2008, up from 450,000 in 2006, said Tipton. The emirate boasts beaches, all-year sunshine and luxury hotels. “With their economic problems, the last thing they need is a reputation that if you kiss someone on the cheek, you could get arrested,” Tipton said. The sheikhdom is struggling with a culture clash between the tens of thousands of Europeans, Americans and other Westerners who live there, attracted by its warm climate and tax-free lifestyle, and locals who account for less than 20 percent of the population, said Jim Krane , a Cambridge, England- based author who has written about the U.A.E. Flight Attendants Jailed “Westerners go to the beach, scantily clad. You have a mixture of conservative Muslim families and Western singles,” said Krane, author of “City of Gold: Dubai and the Dream of Capitalism.” Last month, two Emirates Airline flight attendants from India were jailed in Dubai for three months for sending each other sexually suggestive text messages. In 2008, two Britons were found guilty of having sex on a beach in Dubai after meeting at an all-you-can-drink champagne brunch. Their prison sentences were suspended and they were deported four months after the incident. “If they want to stay in business, they need to do it carefully,” said Krane. “Dubai is an island of liberalism in a conservative region.” To contact the reporter on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net .

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Growing Interest for Distressed Commercial Real Estate in Dubai

April 1, 2010

PRNewswire/ — With the real estate market still in flux in many parts of the world, buyers and sellers of property watch for signs of recovery in their local real estate market. Rebirth in Dubai

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Subprime-Mortgage Debt Rallies as Treasury Boosts Loan Aid: Credit Markets

March 29, 2010

By Jody Shenn March 29 (Bloomberg) — Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump. A Markit ABX index of credit-default swaps tied to 20 subprime-loan bonds rated AAA when created in the first half of 2006 climbed 3.2 percent last week to 49.1, the highest since January 2009, according to Markit Group Ltd. Senior-ranked bonds tied to borrowers with poor credit will mostly benefit after the Treasury Department said for the first time it would seek to cut the size of mortgages, reducing the likelihood that loan modifications will fail, according to JPMorgan Chase & Co., Morgan Stanley and Barclays Plc. The housing market will also be aided as the revised plan helps avert more foreclosures, Amherst Securities Group LP analyst Laurie Goodman said. The new U.S. policy “will dramatically improve the success rate on mortgage modifications,” Goodman, who is based in New York, wrote in a March 26 report. “This will, in turn, help cushion future home price depreciation and limit further housing market deterioration.” ABX-HE-AAA indexes tied to bonds from different periods also gained while remaining below levels reached in January. The gauges declined from 100 starting in 2007, suggesting similarly sized drops in the prices of the subprime securities. The ABX.HE.AAA 06-2 index rose today to 49.12. Treasury’s Program The Treasury announced March 26 the change to the federal Home Affordable program, which makes use of taxpayer subsidies and is aimed at helping as many as 4 million homeowners avert foreclosures through debt modifications. The initiative, which was announced 13 months ago, had focused on encouraging cuts to payments rather than balances. Elsewhere in credit markets, Ambac Financial Group Inc. may not make a payment to cover a cash shortage for bonds issued by Las Vegas Monorail Co. in July. Dubai World offered creditors a shortfall guarantee as part of a repayment plan and Deutsche Bank AG said asset-backed bond sales in Europe will outstrip the number of deals kept by banks this month for the first time since the start of the credit crisis in August 2007. The Las Vegas monorail, linking the city’s casinos, is seeking to reorganize under Chapter 11 bankruptcy and has minimal funds to cover its next scheduled debt payment of $9.6 million, Wells Fargo, the trustee for the bonds, said March 26. While insured by Ambac, the obligation has been transferred to a segregated account by Wisconsin insurance regulators, according to the filing. Dubai Guarantee If the sale of assets from Dubai World, the state-owned holding company seeking to restructure $14.2 billion of debt, doesn’t generate sufficient cash to repay loans, the government will make up the shortfall up to a certain level, said a person familiar with the matter who declined to be identified because the discussions are private. The guarantee clause wasn’t outlined in Dubai World’s press statement on March 25 when the restructuring plan was announced. About 3.5 billion euros ($4.7 billion) of notes backed by real estate, consumer debt or corporate loans were sold this month by banks in Europe, London-based Deutsche Bank analysts Conor O’Toole and Ivan Pahlson-Moller wrote in a report. A total 1.6 billion euros of notes were issued and retained. Banks kept the bonds as collateral for short-term loans from central banks when investors shunned asset-backed securities after the credit crunch took hold. As concerns eased, yield spreads on three-year prime residential mortgage-backed notes have dropped to 155 basis points more than benchmark rates from 350 basis points a year ago, Deutsche Bank data show. Commercial Mortgage Debt Investors should buy higher-yielding bonds backed by commercial mortgages as the economic recovery gains steam, according to JPMorgan. Yields on the safest debt backed by real estate loans have narrowed 1.3 percentage points to 3.7 percentage points more than benchmark swap rates this year, according to bank data. Buyers are seeking higher returns amid a lack of new bonds and will increasingly look for securities originally rated AAA that have less of a cushion insulating investors from losses, many of which have had ratings cuts, JPMorgan analysts led by Alan Todd wrote in a report. The cost to protect against defaults on corporate bonds fell, trading in benchmark credit derivatives indexes shows. The Markit CDX North America Investment Grade Index Series 14 declined 2 basis point to a mid-price of 85.2 basis points as of 5:02 p.m. in New York, according to Markit Group. Risk in Europe In London, the Markit iTraxx Europe Index, which investors use to speculate on creditworthiness or to hedge against losses on 125 investment-grade companies, fell 1.1 basis point to 77.5, Markit prices show. Credit-default swaps tied to Greece rose 23 basis points to 318 basis points, according to CMA DataVision. Greece, the European Union’s most indebted member, offered more than five times the yield premium of comparable Spanish debt to lure investors to its first bond sale since a bailout was agreed to for the nation. Greece priced the 5 billion euros of seven-year bonds to yield 310 basis points more than the benchmark mid-swap rate, according to a banker involved in the transaction, who declined to be identified before the sale is completed. The price of Greece’s credit swaps soared to as high as 428 basis points on Feb. 4 when it seemed likely Greece’s debt crisis would spread to its southern European neighbors. Home Affordable Program Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point is 0.01 percentage point and equals $1,000 annually on a contract protecting $10 million of debt for five years. A decrease indicates improvement in the perception of credit quality; an increase, the opposite. Under revisions to the Treasury’s Home Affordable program scheduled to take effect this year, mortgage servicers must consider reducing amounts owed by delinquent borrowers if their loans exceed 115 percent of the current value of their homes. Borrowers who haven’t missed payments may also qualify. “Until now, foreclosure mitigation efforts focused on the ‘ability of borrowers’ to make their mortgage payments,” Morgan Stanley analysts Vishwanath Tirupattur and James Egan wrote in a report today. “However, they did not address the ‘willingness of borrowers’ to default on their mortgages in view of their underwater (negative equity) status,” with about 23 percent facing balances greater than their properties’ values. Performance of Indexes ABX indexes indicate prices for credit-default swaps linked to 20 bonds. The swaps offer protection if the securities aren’t repaid as expected, in return for regular insurance-like premiums. In 2007, the indexes tumbled from at or near 100 as investors bet correctly that defaults on home loans would rise, with the ABX.HE.AAA 06-2 falling as low as 28.72, indicating that a investor buying protection on $10 million of debt would pay $7.3 million upfront as well as $110,000 a year. About 46 percent of subprime mortgages underlying securities without government-backed guarantees are at least 30 days late, in foreclosure or have already turned into seized properties, according to data compiled by Bloomberg. The re-default rate of loans modified in the first quarter of 2009 was 51.5 percent by the end of the year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report March 25. The Home Affordable program had initially sought to lower re-defaults by encouraging larger decreases in borrowers’ payments relative to incomes. ‘Moral Hazard’ Senior securities backed by mortgages will benefit in part from the new plan because principal reductions will wipe out junior classes sooner and afterward the deals won’t “leak any cash flow” to holders of that debt, according to a March 26 report by Barclays Capital. Some of the benefits from the Treasury changes will be offset by the program extending how long investors must wait to get principal returned and may be overrun “if moral hazard sets in” as more borrowers seek forgiveness, the analysts wrote. At the same time, some senior-ranked subprime securities will be hurt because they must share in principal payments with others after losses begin to be realized, JPMorgan said. The bank forecast overall loan losses will “not dramatically decline,” in part because many borrowers won’t qualify and coordination between holders of first and second mortgages will be difficult. Biggest Beneficiaries Generally, “securities with high defaults and a low dollar price will benefit the most,” wrote Amherst’s Goodman. “This includes pay option ARMs, sloppy senior Alt A hybrid floaters and senior last-cash-flow subprime securities.” Option ARMs, or option adjustable-rate mortgages, allow borrowers to pay less than the interest they owe by increasing their balances, resulting in potential jumps in payments later on. Alt-A loans fall between prime and subprime in terms of projected defaults, often because borrowers didn’t document their incomes or plan to live in properties. Excluding subprime debt, prices for senior home-loan securities without government-backed guarantees in the $1.5 trillion non-agency market are generally lower over the past three months, failing to match gains in other credit markets, according to Barclays Capital data. Typical prices for the most-senior securities backed by option ARMs were unchanged last week, and are down 1 cent on the dollar at 54 cents from three months ago, according to the data. That’s still up from a record low of 33 cents a year ago. “Winston Churchill said it best,” Goodman wrote in her report, saying as many 12 million borrowers will default in the next few years unless the government changes their loans successfully. “‘The United States invariably does the right thing after exhausting every other alternative.’” To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

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Dubai World Said to Offer a Shortfall Guarantee in $14.2 Billion Debt Plan

March 29, 2010

By Arif Sharif March 29 (Bloomberg) — Dubai World, the state-owned holding company seeking to restructure $14.2 billion of debt, offered creditors a so-called shortfall guarantee as part of a repayment plan, a person close to the Dubai government said. If the sale of Dubai World’s assets does not generate sufficient cash to repay loans, the government will make up the shortfall up to a certain level, said the person, who declined to be identified because the discussions are private. The guarantee clause was not outlined in Dubai World’s press statement on March 25 when the restructuring plan was announced. Dubai World, one of the emirate’s three main state-owned holding companies, and its property unit Nakheel PJSC are seeking to renegotiate terms on $24.8 billion of debt after the global credit crisis battered Dubai’s property market and hurt the ability of the emirate’s companies to raise loans. The Dubai government and its state-owned companies racked up $109.3 billion of debt, according to International Monetary Fund estimates, as the emirate sought to transform into a tourism, trade and financial services hub. Dubai World asked creditors March 25 to roll over outstanding debt into two new loans of five year and eight year maturities. Lenders will be paid their principal in full, although the interest rate on the loans is still being negotiated with the banks, Dubai World Chief Restructuring Officer Aidan Birkett said that day. Interest Rate Dubai World’s creditors will be paid interest below the market rate in cash, although that will be supplemented by a so- called payment-in-kind element, the person said. The person did not specify how much the payment-in kind was. Nakheel’s creditors were asked to extend loan maturities at interest rates linked to the Emirates interbank offered rate and the London interbank offered rate. Two of Nakheel’s Islamic bonds, which together raised $1.73 billion, will be paid in full when they mature this year and in 2011. The treatment of Dubai World and Nakheel’s creditors reflects the different levels of security and the legal positions of each creditor class, the person said. Dubai World’s lenders are unsecured, while lenders to Nakheel have recourse to the company’s assets, the person said. A spokesman for Dubai World declined to comment when contacted by Bloomberg News today. To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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Dubai Shares Rise to Three-Month High on Debt-Plan Optimism; Arabtec Gains

March 28, 2010

By Zahra Hankir March 28 (Bloomberg) — Dubai shares gained for a second day, rising to the highest level this year, as the emirate said it will support Dubai World’s $24.8 billion debt restructuring. Arabtec Holding Co., the United Arab Emirates’ biggest construction company, increased the most in almost three months on improved sentiment following the announcement. Emirates NBD PJSC, the U.A.E.’s largest bank by assets, climbed for a seventh day after saying it may sell debt when the restructuring is complete. The DFM General Index rose 1.9 percent to 1,880.62, the highest since Dec. 16. Abu Dhabi’s ADX General Index rose 0.9 percent to 2,929.32, the highest since Nov. 18. Dubai shares jumped 4.3 percent on March 25 after the government said it will support state-owned Dubai World with as much as $9.5 billion, doubling to $20 billion the amount the emirate paid to holding company. Lenders to Dubai World will be repaid their principal in full by swapping loans with two tranches of new debt with five and eight-year maturities, according to the proposal. Today’s move “is a follow through from last Thursday’s announcement on the Dubai World restructuring, which was above expectations as it addressed the concerns of customers, trade creditors and sukuk holders, other than just the financial creditors,” said Yong Wei Lee, senior fund manager at Emirates NBD Asset Management. “Institutional investors who have been significantly underweight the U.A.E are most likely to increase their weighting in the market,” said Lee, who oversees around $200 million for Middle East North Africa equity funds. Nakheel’s Restructuring Dubai World’s property unit Nakheel PJSC will receive $8 billion in funding and $1.2 billion by converting government debt to equity. Dubai World and its property units Nakheel and Limitless LLC used loans to finance real-estate projects such as palm-shaped islands off the emirate’s coast, which they struggled to refinance after the credit crunch made banks reluctant to lend. The sheikhdom will supply Dubai World with $1.5 billion to support its new business plan and will convert $8.9 billion in debt to equity. Arabtec jumped 12 percent to 2.59 dirhams, the biggest increase since Dec. 28. “Thursday’s news sent a wave of optimism in the market that the cash flow cycle of contractors might improve,” said Ismail Sadek , a Cairo-based analyst at Beltone Financial. Arabtec is owed a “significant portion” of its total 4.6 billion dirhams ($1.25 billion) of receivables from Nakheel, Sadek said. Nakheel had delayed payments to contractors and suppliers causing Arabtec to stop work at its Al Furjan project earlier this year after building 550 villas at the project, which was designed to include 4,000 homes. Arabtec Upgrade Separately, Arabtec was raised to “outperform” from “market perform” with a price estimate of 3.20 dirhams at Al Mal Capital. Emirates NBD increased 3.6 percent to 3.17 dirhams, the highest since Dec. 21. The biggest bank in Dubai plans to sell debt after the restructuring is complete, Chairman Ahmed Bin Humaid Al Tayer said March 25. Qatar’s measure advanced 0.7 percent to 7,465.08, the highest since Oct. 11. The Kuwait Stock Exchange Index fell 0.3 percent. Oman’s MSM30 Index rose 0.5 percent. Bahrain’s measure retreated 1.3 percent and Saudi Arabia’s Tadawul All Share Index dropped 0.1 percent. To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

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Dubai Shares Rise to Three-Month High on Debt-Plan Optimism; Arabtec Gains

March 28, 2010

By Zahra Hankir March 28 (Bloomberg) — Dubai shares gained for a second day, rising to the highest level this year, as the emirate said it will support Dubai World’s $24.8 billion debt restructuring. Arabtec Holding Co., the United Arab Emirates’ biggest construction company, increased the most in almost three months on improved sentiment following the announcement. Emirates NBD PJSC, the U.A.E.’s largest bank by assets, climbed for a seventh day after saying it may sell debt when the restructuring is complete. The DFM General Index rose 1.9 percent to 1,880.62, the highest since Dec. 16. Abu Dhabi’s ADX General Index rose 0.9 percent to 2,929.32, the highest since Nov. 18. Dubai shares jumped 4.3 percent on March 25 after the government said it will support state-owned Dubai World with as much as $9.5 billion, doubling to $20 billion the amount the emirate paid to holding company. Lenders to Dubai World will be repaid their principal in full by swapping loans with two tranches of new debt with five and eight-year maturities, according to the proposal. Today’s move “is a follow through from last Thursday’s announcement on the Dubai World restructuring, which was above expectations as it addressed the concerns of customers, trade creditors and sukuk holders, other than just the financial creditors,” said Yong Wei Lee, senior fund manager at Emirates NBD Asset Management. “Institutional investors who have been significantly underweight the U.A.E are most likely to increase their weighting in the market,” said Lee, who oversees around $200 million for Middle East North Africa equity funds. Nakheel’s Restructuring Dubai World’s property unit Nakheel PJSC will receive $8 billion in funding and $1.2 billion by converting government debt to equity. Dubai World and its property units Nakheel and Limitless LLC used loans to finance real-estate projects such as palm-shaped islands off the emirate’s coast, which they struggled to refinance after the credit crunch made banks reluctant to lend. The sheikhdom will supply Dubai World with $1.5 billion to support its new business plan and will convert $8.9 billion in debt to equity. Arabtec jumped 12 percent to 2.59 dirhams, the biggest increase since Dec. 28. “Thursday’s news sent a wave of optimism in the market that the cash flow cycle of contractors might improve,” said Ismail Sadek , a Cairo-based analyst at Beltone Financial. Arabtec is owed a “significant portion” of its total 4.6 billion dirhams ($1.25 billion) of receivables from Nakheel, Sadek said. Nakheel had delayed payments to contractors and suppliers causing Arabtec to stop work at its Al Furjan project earlier this year after building 550 villas at the project, which was designed to include 4,000 homes. Arabtec Upgrade Separately, Arabtec was raised to “outperform” from “market perform” with a price estimate of 3.20 dirhams at Al Mal Capital. Emirates NBD increased 3.6 percent to 3.17 dirhams, the highest since Dec. 21. The biggest bank in Dubai plans to sell debt after the restructuring is complete, Chairman Ahmed Bin Humaid Al Tayer said March 25. Qatar’s measure advanced 0.7 percent to 7,465.08, the highest since Oct. 11. The Kuwait Stock Exchange Index fell 0.3 percent. Oman’s MSM30 Index rose 0.5 percent. Bahrain’s measure retreated 1.3 percent and Saudi Arabia’s Tadawul All Share Index dropped 0.1 percent. To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

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No hopes of recovery in Dubai real estate

March 26, 2010

unfinished projects and pay its bills, but there is no hope of a recovery in Dubai’s decimated real estate sector, analysts said on Thursday. “I don’t think this kick-starts project activity or (bank) lending for that matter. This just gives

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No hopes of recovery in Dubai real estate

March 26, 2010

unfinished projects and pay its bills, but there is no hope of a recovery in Dubai’s decimated real estate sector, analysts said on Thursday. “I don’t think this kick-starts project activity or (bank) lending for that matter. This just gives

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Euro Rallies From 10-Month Low on Aid Plan for Greece; Metals, Oil Advance

March 26, 2010

By Justin Carrigan March 26 (Bloomberg) — The euro rallied from a 10-month low against the dollar after Greece received a promise of aid to tackle its record debt burden. Metals and oil advanced. The 16-nation currency strengthened 0.8 percent against the dollar at 12:35 p.m. in London. The yield premium investors demand to hold Greek 10-year bonds rather than benchmark German securities narrowed for a second day and the Athens Stock Exchange’s ASE Index climbed as much as 3.2 percent. Futures on the Standard & Poor’s 500 Index advanced 0.3 percent while the Stoxx Europe 600 Index declined 0.4 percent. Nickel rose for a second day and oil added 0.6 percent. European leaders backed a Franco-German proposal yesterday for a mix of International Monetary Fund and bilateral loans for Greece, saying the nation probably won’t need outside help to cut the region’s biggest budget deficit. The U.S. economy expanded at a 5.6 percent annual rate in the fourth quarter of 2009 and corporate profits climbed, the government reported today, setting the stage for gains in employment that may broaden and preserve the expansion. “Investors see the agreement as a backstop, and it is helping sentiment towards the euro,” said Simon Derrick , chief currency strategist at Bank of New York Mellon Corp. in London, of the Greek accord reached in Brussels. “However, this is a rather uninspired recovery and it’s difficult to say that this is an unequivocal vote of confidence.” Greek Bonds The euro gained against all of the 16 most-traded currencies tracked by Bloomberg, while the yield on the two-year Greek note tumbled 38 basis points to 4.46 percent. The Dollar Index snapped a three-day advance, declining 0.4 percent to 81.82. Forward contracts on China’s yuan strengthened the most in a week after Fan Gang , an adviser to the country’s central bank, said the nation may resume a so-called managed float of the currency, while avoiding an abrupt revaluation that would harm exports. Twelve-month non-deliverable forwards rose 0.14 percent to 6.6725 per dollar in Hong Kong, according to data compiled by Bloomberg. The contracts reflect bets the currency will strengthen 2.3 percent from the spot rate of 6.8270. The MSCI World Index of 23 developed nations’ stocks was little changed. Stocks weakened in Europe. Unipol Gruppo Finanziario SpA sank 8.9 percent in Milan after Italy’s third- largest insurer announced a share sale and posted a full-year loss. Veolia Environnement SA, the world’s largest water company, slipped 1.4 percent in Paris after JPMorgan Chase & Co. advised selling the stock. Asian Stocks The MSCI Asia Pacific Index increased 1 percent, its biggest advance in more than a week. Japan’s Nikkei 225 Stock Average rose to the highest level since October 2008 and the Shanghai Composite Index rallied 1.3 percent. China led the MSCI Emerging Markets Index 0.3 percent higher, its first gain in three days. Russia’s Micex Index climbed 0.6 percent after the central bank cut its main refinancing rate for the 12th time in less than a year, lowering it a quarter point to 8.25 percent. Credit-default swaps protecting Dubai government debt traded at 405.7 basis points, near yesterday’s closing level of 402.9 basis points, the lowest since November, according to CMA DataVision. The emirate’s government pledged yesterday to support Dubai World. The gain in U.S. futures indicated the S&P 500 may rise for the first time in three days. The increase in gross domestic product, while smaller than the government’s previous estimate issued last month, marked the best performance in six years, figures from the Commerce Department showed. Company earnings increased 8 percent, capping the biggest year-over-year gain in a quarter century. Treasuries were little changed, on course for the biggest weekly loss this year, with the 10-year note yielding 3.97 percent. Nickel for delivery in three months rose 2.8 percent to $23,460 a metric ton on the London Metal Exchange, extending its gain this year to 26 percent. Copper, zinc and tin also advanced. Gold for immediate delivery added 0.4 percent to $1,098.60 an ounce. Crude oil rose 44 cents to $80.97 a barrel in New York trading. To contact the reporter on this story: Justin Carrigan in London on jcarrigan@bloomberg.net

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Stocks, Euro Gain, Dubai Swaps Plunge as Debt Concern Eases

March 25, 2010

By Gavin Serkin March 25 (Bloomberg) — Stocks rallied and the euro snapped a two-day slide against the dollar as Germany backed a Greek aid proposal and forecasts at Qualcomm Inc. and Best Buy Co. topped estimates. The cost to protect Dubai against a default slid as the emirate committed $9.5 billion to restructure Dubai World. The MSCI World Index gained 0.5 percent and the Standard & Poor’s 500 Index rose 0.7 percent at 10 a.m. in New York, returning to an 18-month high after yesterday’s retreat. The DFM General Index of Dubai shares jumped 4.3 percent, the most since December. The euro strengthened as much as 0.4 percent against the dollar, rebounding from a 10-month low. German Chancellor Angela Merkel said she’ll recommend to European leaders that Greece be pledged International Monetary Fund assistance and bilateral aid to tackle the region’s biggest deficit. The Dubai government’s promise to support the state- owned holding company eased concern of a default four months after plans to delay debt payments roiled markets. Qualcomm’s forecast sent S&P 500 technology shares up 1.1 percent. “Governments are moving toward solutions to stop wholesale collapse in the short term,” said Mark Schofield , head of fixed-income strategy at Citigroup Global Markets Ltd. in London. “There’s a structural desire to stabilize the fiscal environment.” The S&P 500 climbed above its highest close since September 2008 as Citigroup Inc. rose 2.7 percent to help lead financial shares higher. The U.S. Treasury intends to unload its 27 percent stake in the bailed-out bank using a preset trading plan that will lock the government into a schedule for selling its shares, people with direct knowledge of the matter said. Best Buy Rallies Best Buy Co. jumped 8.6 percent after fourth-quarter profit and its full-year earnings forecast topped analyst estimates. U.S. stocks also gained as initial jobless claims fell to the lowest level in six weeks as the rebound in the economy encourages companies to make fewer cuts in payrolls. First-time jobless applications declined by 14,000 to 442,000 in the week ended March 20, lower than anticipated, Labor Department figures showed today. Abu Dhabi’s ADX General Index gained 1.1 percent and Poland’s WIG20 Index advanced 1.8 percent. Credit default swaps linked to Dubai fell 40 basis points to 382.9 basis points as of 12:20 p.m. in London, according to prices provided by CMA DataVision. Europe, Asian Shares Europe’s Stoxx 600 Index rose to the highest level in 18 months. Hochtief AG, Germany’s biggest construction company, gained 4.4 percent in Frankfurt after posting earnings that beat analysts’ estimates. Next Plc, the U.K.’s second-biggest clothing retailer, surged 5.3 percent in London after boosting its dividend and reporting better-than-estimated profit. The MSCI Asia Pacific Index slipped less than 0.1 percent. Li & Fung, a trading company that supplies Wal-Mart Stores Inc., slumped 11 percent in Hong Kong, while Unicom, China’s No. 2 mobile-phone company, sank 4.1 percent. The euro strengthened versus the dollar for the first time in three days, climbing as much as 0.4 percent to $1.3371. European Central Bank President Jean-Claude Trichet said the bank will extend its emergency collateral rules beyond 2010, softening his stance as Greece struggles to cut a budget deficit that is 12.9 percent of gross domestic product. European Union leaders are meeting in Brussels as Germany tries to end haggling over an aid package for Greece, whose budget deficit is more than four times the EU’s limit. Greek bonds rose, with the two-year note yield dropping 21 basis points to 4.8 percent. ‘Very Generous’ Dubai’s government said in a statement it will supply Dubai World with $1.5 billion and convert $8.9 billion in debt to equity. Nakheel PJSC will receive $8 billion in funding and $1.2 billion through a debt swap. Nakheel’s bank creditors will be asked to restructure loans to the company at commercial rates. Dubai’s announcement “surpasses my expectations, it’s very generous,” said Daniel Broby , chief investment officer at SilkInvest Ltd., a London-based investment firm that holds bonds of the Dubai World unit Nakheel PJSC. “This is what it takes to get the U.A.E. and Dubai back on its feet again.” Concern that the fallout from the global financial crisis may leave some countries unable to pay their debts was reignited after Dubai World said Dec. 1 it wanted to restructure $26 billion of securities. Treasuries were little changed before congressional testimony from Federal Reserve Chairman Ben S. Bernanke and a $32 billion auction of seven-year notes as some investors bet yesterday’s surge in yields was unjustified. The yield on the benchmark 10-year note was 3.86 percent after jumping 17 basis points yesterday. Crude oil for May delivery rose 0.7 percent to $81.15 a barrel in New York. To contact the reporters on this story: Gavin Serkin at gserkin@bloomberg.net

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Stocks Rally, Euro Gains as Merkel Backs Greek Aid; Dubai Debt Risk Slumps

March 25, 2010

By Gavin Serkin March 25 (Bloomberg) — Stocks rallied and the euro snapped a two-day slide against the dollar as Germany backed a Greek aid proposal and forecasts at Qualcomm Inc. and Best Buy Co. topped estimates. The cost to protect Dubai against a default slid as the emirate committed $9.5 billion to restructure Dubai World. The MSCI World Index gained 0.5 percent and the Standard & Poor’s 500 Index rose 0.7 percent at 10 a.m. in New York, returning to an 18-month high after yesterday’s retreat. The DFM General Index of Dubai shares jumped 4.3 percent, the most since December. The euro strengthened as much as 0.4 percent against the dollar, rebounding from a 10-month low. German Chancellor Angela Merkel said she’ll recommend to European leaders that Greece be pledged International Monetary Fund assistance and bilateral aid to tackle the region’s biggest deficit. The Dubai government’s promise to support the state- owned holding company eased concern of a default four months after plans to delay debt payments roiled markets. Qualcomm’s forecast sent S&P 500 technology shares up 1.1 percent. “Governments are moving toward solutions to stop wholesale collapse in the short term,” said Mark Schofield , head of fixed-income strategy at Citigroup Global Markets Ltd. in London. “There’s a structural desire to stabilize the fiscal environment.” The S&P 500 climbed above its highest close since September 2008 as Citigroup Inc. rose 2.7 percent to help lead financial shares higher. The U.S. Treasury intends to unload its 27 percent stake in the bailed-out bank using a preset trading plan that will lock the government into a schedule for selling its shares, people with direct knowledge of the matter said. Best Buy Rallies Best Buy Co. jumped 8.6 percent after fourth-quarter profit and its full-year earnings forecast topped analyst estimates. U.S. stocks also gained as initial jobless claims fell to the lowest level in six weeks as the rebound in the economy encourages companies to make fewer cuts in payrolls. First-time jobless applications declined by 14,000 to 442,000 in the week ended March 20, lower than anticipated, Labor Department figures showed today. Abu Dhabi’s ADX General Index gained 1.1 percent and Poland’s WIG20 Index advanced 1.8 percent. Credit default swaps linked to Dubai fell 40 basis points to 382.9 basis points as of 12:20 p.m. in London, according to prices provided by CMA DataVision. Europe, Asian Shares Europe’s Stoxx 600 Index rose to the highest level in 18 months. Hochtief AG, Germany’s biggest construction company, gained 4.4 percent in Frankfurt after posting earnings that beat analysts’ estimates. Next Plc, the U.K.’s second-biggest clothing retailer, surged 5.3 percent in London after boosting its dividend and reporting better-than-estimated profit. The MSCI Asia Pacific Index slipped less than 0.1 percent. Li & Fung, a trading company that supplies Wal-Mart Stores Inc., slumped 11 percent in Hong Kong, while Unicom, China’s No. 2 mobile-phone company, sank 4.1 percent. The euro strengthened versus the dollar for the first time in three days, climbing as much as 0.4 percent to $1.3371. European Central Bank President Jean-Claude Trichet said the bank will extend its emergency collateral rules beyond 2010, softening his stance as Greece struggles to cut a budget deficit that is 12.9 percent of gross domestic product. European Union leaders are meeting in Brussels as Germany tries to end haggling over an aid package for Greece, whose budget deficit is more than four times the EU’s limit. Greek bonds rose, with the two-year note yield dropping 21 basis points to 4.8 percent. ‘Very Generous’ Dubai’s government said in a statement it will supply Dubai World with $1.5 billion and convert $8.9 billion in debt to equity. Nakheel PJSC will receive $8 billion in funding and $1.2 billion through a debt swap. Nakheel’s bank creditors will be asked to restructure loans to the company at commercial rates. Dubai’s announcement “surpasses my expectations, it’s very generous,” said Daniel Broby , chief investment officer at SilkInvest Ltd., a London-based investment firm that holds bonds of the Dubai World unit Nakheel PJSC. “This is what it takes to get the U.A.E. and Dubai back on its feet again.” Concern that the fallout from the global financial crisis may leave some countries unable to pay their debts was reignited after Dubai World said Dec. 1 it wanted to restructure $26 billion of securities. Treasuries were little changed before congressional testimony from Federal Reserve Chairman Ben S. Bernanke and a $32 billion auction of seven-year notes as some investors bet yesterday’s surge in yields was unjustified. The yield on the benchmark 10-year note was 3.86 percent after jumping 17 basis points yesterday. Crude oil for May delivery rose 0.7 percent to $81.15 a barrel in New York. To contact the reporters on this story: Gavin Serkin at gserkin@bloomberg.net

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Stocks Rally, Euro Gains as Merkel Banks Greek Aid; Dubai Debt Risk Slumps

March 25, 2010

By Gavin Serkin March 25 (Bloomberg) — Stocks rallied and the euro snapped a two-day decline against the dollar as Germany backed a Greek rescue proposal. The cost to protect Dubai’s debt against a default plunged after the emirate committed $9.5 billion to Dubai World’s restructuring. The DFM General Index of Dubai shares jumped 4.3 percent and credit default swaps linked to the emirate’s debt fell 53.8 basis points to 368.9 basis points at 10:50 a.m. in London. Both were the biggest moves since Dec. 15. The Stoxx Europe 600 Index advanced 0.5 percent and futures on the Standard & Poor’s 500 Index gained 0.3 percent. The euro strengthened as much as 0.3 percent against the dollar, rebounding from a 10-month low. Chancellor Angela Merkel said she’ll recommend to European leaders meeting in Brussels today that Greece be pledged International Monetary Fund assistance and bilateral aid to tackle the region’s biggest deficit. In Dubai, the government promised to support the state-owned holding company, easing concern of a default four months after plans to delay debt payments roiled world markets. “Governments are moving toward solutions to stop wholesale collapse in the short term,” said Mark Schofield , head of fixed-income strategy at Citigroup Global Markets Ltd. in London. “There’s a structural desire to stabilize the fiscal environment.” Abu Dhabi Gains Abu Dhabi’s ADX General Index gained 1.3 percent and Poland’s WIG20 Index advanced 1.2 percent. Dubai five-year credit-default swaps are trading at the lowest level since November, according to prices from CMA DataVision and Bloomberg. Europe’s Stoxx 600 rose to the highest level in 18 months. Hochtief AG, Germany’s biggest construction company, gained 3.9 percent in Frankfurt after posting earnings that beat analysts’ estimates. Next Plc, the U.K.’s second-biggest clothing retailer, surged 5.2 percent in London after boosting its dividend and reporting better-than-estimated profit. The MSCI World Index advanced 0.1 percent and the MSCI Asia Pacific Index slipped less than 0.1 percent. Li & Fung, a trading company that supplies Wal-Mart Stores Inc., slumped 9.9 percent, while Unicom, China’s No. 2 mobile-phone company, sank 4.1 percent in Hong Kong. U.S. futures gained after the S&P 500 yesterday dropped 0.6 percent. Fewer Americans filed first-time claims for jobless benefits last week, economists said before a Labor Department report due at 8:30 a.m. in Washington. Euro Appreciates The euro strengthened versus the dollar for the first time in three days, reaching $1.3339 after $1.3284. European Central Bank President Jean-Claude Trichet said the bank will extend its emergency collateral rules beyond 2010, softening his stance as Greece struggles to cut a budget deficit that is 12.9 percent of gross domestic product. European Union leaders are meeting in Brussels as Germany tries to end haggling over an aid package for Greece, whose budget deficit is more than four times the EU’s limit. Greek bonds rose, with the two-year note yield dropping 18 basis points to 4.98 percent. The $750 million Islamic bond, or sukuk, of Nakheel PJSC, a Dubai World unit, surged 27 cents 91.5 cents on the dollar. The emirate’s government said in a statement it will supply Dubai World with $1.5 billion and convert $8.9 billion in debt to equity. Nakheel will receive $8 billion in funding and $1.2 billion through a debt swap. Nakheel’s bank creditors will be asked to restructure loans to the company at commercial rates. ‘Very Generous’ Dubai’s announcement “surpasses my expectations, it’s very generous,” said Daniel Broby , chief investment officer at SilkInvest Ltd., a London-based investment firm that holds bonds of the Dubai World unit Nakheel PJSC. “This is what it takes to get the U.A.E. and Dubai back on its feet again.” Concern that the fallout from the global financial crisis may leave some countries unable to pay their debts was reignited after Dubai World said Dec. 1 it wanted to restructure $26 billion of securities. Treasuries advanced, paring a decline yesterday that sent the 10-year yield to the highest level since January as demand at an auction from a group of investors that includes foreign banks fell to the lowest level in eight months. The yield slipped 3 basis points today to 3.83 percent. The 10-year U.S. swap spread was minus 9.2 basis points today. It turned negative for the first time on record three days ago. Crude oil for May delivery was little changed at $80.78 a barrel, 17 cents up, on the New York Mercantile Exchange. To contact the reporters on this story: Gavin Serkin at gserkin@bloomberg.net

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Stocks Rally, Euro Gains as Merkel Banks Greek Aid; Dubai Debt Risk Slumps

March 25, 2010

By Gavin Serkin March 25 (Bloomberg) — Stocks rallied and the euro snapped a two-day decline against the dollar as Germany backed a Greek rescue proposal. The cost to protect Dubai’s debt against a default plunged after the emirate committed $9.5 billion to Dubai World’s restructuring. The DFM General Index of Dubai shares jumped 4.3 percent and credit default swaps linked to the emirate’s debt fell 53.8 basis points to 368.9 basis points at 10:50 a.m. in London. Both were the biggest moves since Dec. 15. The Stoxx Europe 600 Index advanced 0.5 percent and futures on the Standard & Poor’s 500 Index gained 0.3 percent. The euro strengthened as much as 0.3 percent against the dollar, rebounding from a 10-month low. Chancellor Angela Merkel said she’ll recommend to European leaders meeting in Brussels today that Greece be pledged International Monetary Fund assistance and bilateral aid to tackle the region’s biggest deficit. In Dubai, the government promised to support the state-owned holding company, easing concern of a default four months after plans to delay debt payments roiled world markets. “Governments are moving toward solutions to stop wholesale collapse in the short term,” said Mark Schofield , head of fixed-income strategy at Citigroup Global Markets Ltd. in London. “There’s a structural desire to stabilize the fiscal environment.” Abu Dhabi Gains Abu Dhabi’s ADX General Index gained 1.3 percent and Poland’s WIG20 Index advanced 1.2 percent. Dubai five-year credit-default swaps are trading at the lowest level since November, according to prices from CMA DataVision and Bloomberg. Europe’s Stoxx 600 rose to the highest level in 18 months. Hochtief AG, Germany’s biggest construction company, gained 3.9 percent in Frankfurt after posting earnings that beat analysts’ estimates. Next Plc, the U.K.’s second-biggest clothing retailer, surged 5.2 percent in London after boosting its dividend and reporting better-than-estimated profit. The MSCI World Index advanced 0.1 percent and the MSCI Asia Pacific Index slipped less than 0.1 percent. Li & Fung, a trading company that supplies Wal-Mart Stores Inc., slumped 9.9 percent, while Unicom, China’s No. 2 mobile-phone company, sank 4.1 percent in Hong Kong. U.S. futures gained after the S&P 500 yesterday dropped 0.6 percent. Fewer Americans filed first-time claims for jobless benefits last week, economists said before a Labor Department report due at 8:30 a.m. in Washington. Euro Appreciates The euro strengthened versus the dollar for the first time in three days, reaching $1.3339 after $1.3284. European Central Bank President Jean-Claude Trichet said the bank will extend its emergency collateral rules beyond 2010, softening his stance as Greece struggles to cut a budget deficit that is 12.9 percent of gross domestic product. European Union leaders are meeting in Brussels as Germany tries to end haggling over an aid package for Greece, whose budget deficit is more than four times the EU’s limit. Greek bonds rose, with the two-year note yield dropping 18 basis points to 4.98 percent. The $750 million Islamic bond, or sukuk, of Nakheel PJSC, a Dubai World unit, surged 27 cents 91.5 cents on the dollar. The emirate’s government said in a statement it will supply Dubai World with $1.5 billion and convert $8.9 billion in debt to equity. Nakheel will receive $8 billion in funding and $1.2 billion through a debt swap. Nakheel’s bank creditors will be asked to restructure loans to the company at commercial rates. ‘Very Generous’ Dubai’s announcement “surpasses my expectations, it’s very generous,” said Daniel Broby , chief investment officer at SilkInvest Ltd., a London-based investment firm that holds bonds of the Dubai World unit Nakheel PJSC. “This is what it takes to get the U.A.E. and Dubai back on its feet again.” Concern that the fallout from the global financial crisis may leave some countries unable to pay their debts was reignited after Dubai World said Dec. 1 it wanted to restructure $26 billion of securities. Treasuries advanced, paring a decline yesterday that sent the 10-year yield to the highest level since January as demand at an auction from a group of investors that includes foreign banks fell to the lowest level in eight months. The yield slipped 3 basis points today to 3.83 percent. The 10-year U.S. swap spread was minus 9.2 basis points today. It turned negative for the first time on record three days ago. Crude oil for May delivery was little changed at $80.78 a barrel, 17 cents up, on the New York Mercantile Exchange. To contact the reporters on this story: Gavin Serkin at gserkin@bloomberg.net

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Dubai World to Get $9.5 Billion of Government Funding to Restructure Debt

March 25, 2010

By Arif Sharif and Anthony DiPaola March 25 (Bloomberg) — Dubai government will support Dubai World’s debt restructuring with as much as $9.5 billion in new funds after the state-owned holding company roiled global markets when it sought to renegotiate $26 billion of debt. “The government of Dubai, acting through the Dubai Financial Support Fund, will support these proposals with significant financial resources, including a commitment to fund up to $9.5 billion in new funding over the business plan period,” the government said in a statement today. “This will be funded by $5.7 billion remaining from the loan previously made available from the government of Abu Dhabi and from internal Dubai government resources.” Dubai World and Nakheel PJSC will discuss these proposals in detail with their creditors, the government said. “The restructuring process is expected to take several months to implement,” it said. “The tribunal process remains available to protect the companies, their creditors and other stakeholders.” Dubai World said in November it would seek to delay repaying all loans until May, sparking a plunge in developing- nation stocks and doubling the cost to protect against a default by Dubai. Dubai World and its property units Nakheel PJSC and Limitless LLC used loans to finance real-estate projects such as palm tree-shaped islands off the emirate’s coast, which it struggled to refinance amid the credit crisis. Debt Estimates Dubai, the second-biggest of seven states that make up the United Arab Emirates, and its state-owned companies ran up debt to transform the sheikhdom into a tourism, trade and financial services hub. The International Monetary Fund estimates Dubai has outstanding loans of $109.3 billion, some of it used to fund a property boom that ended in 2008. The seizure of debt markets after the credit crisis hampered the ability of Dubai-based companies to raise loans and led to a 50 percent decline in property prices in the city. Dubai World will present creditors a “fair” plan to preserve long-term relations with banks and contractors, the emirate’s Supreme Fiscal Committee Chairman Sheikh Ahmed Bin Saeed Al Maktoum said March 16. U.A.E. Central Bank Governor Sultan bin Nasser al-Suwaidi said March 15 Dubai isn’t likely to need more central bank aid. Nakheel, one of the emirate’s three main state-owned business groups, paid $4.1 billion to settle an Islamic bond in December after Dubai received a $5 billion loan from Abu Dhabi, the U.A.E.’s richest emirate that holds about 7 percent of the world’s proven oil reserves. The central bank and two Abu Dhabi- owned banks also lent Dubai’s financial support fund $15 billion in 2009 to help state-related companies. Banks Owed More than 90 banks are owed money by Dubai World. Seven of its biggest creditors, HSBC Holdings Plc , Royal Bank of Scotland Group Plc, Lloyds Banking Group Plc, Standard Chartered Plc , Bank of Tokyo-Mitsubishi UFJ Ltd., Emirates NBD PJSC and Abu Dhabi Commercial Bank PJSC, are negotiating with Dubai World on behalf of the lenders, according to bankers. Moelis & Co., the U.S.-based advisory firm started by former UBS AG investment banking President Kenneth Moelis , and investment bank NM Rothschild & Sons Ltd. are advising the Department of Finance on the Dubai World restructuring. AlixPartners LLP is separately advising the company. In December, Aidan Birkett , a partner at Deloitte LLP, was appointed Dubai World’s chief restructuring officer. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a country fail to repay debt. A rise in the contracts signals a deterioration in perceptions of credit quality. For Related News and Information: For Top stories: TOP For Top Gulf: TOP GULF For U.A.E. banking: TNI UAE BNK For U.A.E. real estate: TNI UAE REL For Dubai credit crunch: TNI DUBAI CRUNCH

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Finance Bonds Beating Industrials as JP Morgan Sells Debt: Credit Markets

March 18, 2010

By Bryan Keogh March 18 (Bloomberg) — Financial company bonds are outperforming industrial debt by the most this year after lagging behind in February, encouraging investors to snap up new issues from JPMorgan Chase & Co. and Credit Suisse Group AG . Debt sold by banks, insurers and brokers returned 0.81 percent this month through yesterday, compared with 0.48 percent for the rest of the market, according to Bank of America Merrill Lynch index data. The cost to borrow for banks is the cheapest since February 2008, with yields falling to within 1.95 percentage points of Treasuries on March 17. Bond offerings today by JPMorgan, the second-largest U.S. bank by assets, and Zurich-based Credit Suisse helped drive global financial debt issuance this month to at least $120 billion, already surpassing February’s total, according to data compiled by Bloomberg. The MSCI World index of stocks shows financial company earnings exceeding economists’ estimates by an average 13 percent this year. “Very few people are underweight banks and finance right now,” said Brian Machan , a money manager at Aviva Investors North America with more than $50 billion in assets under management in Des Moines, Iowa. Given the demand, “why not come to market?” he said. Elsewhere in credit markets, the Federal Home Loan Bank system, the 12 government-chartered cooperatives owned by U.S. financial companies, sold $3 billion of 2-year global notes, according to a statement from its finance office in Reston, Virginia. The bonds priced to yield 21 basis points more than similar-maturity Treasuries. Its last sale of benchmark 2-year notes in November was issued at a spread of 29 basis points. Commercial Paper Declines Holdings of agency securities sold by companies including Fannie Mae and Freddie Mac by official foreign institutions such as central banks climbed $3 billion last week, the most this year, to $770.9 billion, according to Federal Reserve data . U.S. commercial paper outstanding fell to the lowest in eight weeks, the Fed said on its Web site . The market for short- term IOUs declined $22.4 billion to $1.12 trillion in the week ended March 17, the least since the period ended Jan. 20, according to data compiled by Bloomberg. Commercial paper, which typically matures in 270 days or less, is used to finance everyday business activities such as payroll and rent. A unit of Avis Budget Group Inc. sold $580 million of bonds backed by rental-car debt, according to a person familiar with the offering. A $400 million top-rated portion, the largest in the sale, priced to yield 2.1 percentage points more than the benchmark swaps rate, said the person, who declined to be identified because terms aren’t public. The sale was the first by Avis since the Fed’s Term Asset-Backed Securities Loan Facility ended this month. Bondholder Protection National Bank of Abu Dhabi PJSC is planning to sell bonds, according to a person familiar with the matter. A deal would make NBAD the first United Arab Emirates borrower to tap capital markets since state-owned Dubai World said last year it was seeking to restructure $26 billion of debt. The U.S. economy will keep expanding without a pickup in inflation that would require the Fed to raise interest rates, reports today indicated. Consumer prices were unchanged in February, the first time they didn’t increase since March 2009, Labor Department figures showed in Washington. The index of leading indicators rose 0.1 percent last month, the 11th straight gain, according to the Conference Board, a New York research group. Credit-Default Swaps A benchmark indicator of corporate credit risk in the U.S. rose from a two-month low. The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses on corporate debt, climbed 1.5 basis point to a mid-price of 84 basis points, according to Markit Group Ltd. The index typically increases as investor confidence deteriorates and falls as it improves. In London, the Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 2.75 basis points to 76.25, JPMorgan prices show. Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting $10 million of debt. Global financial issuance in March compares with $99 billion in all of February, Bloomberg data show. ‘Look Attractive’ U.S. banks issued the most unsecured debt in March since May 2008, with sales in all currencies totaling about $17 billion, Bloomberg data show. Overall global corporate bond sales surged to at least $190 billion, from $162 billion in February. Average spreads on financial issuers’ bonds dropped 16 basis points this month to 195 basis points as of yesterday, compared with a premium of 130 basis points on bonds issued by industrial companies, the indexes show. Financial-company bonds returned 0.28 percent in February, compared with 0.49 percent for industrial debt, according to Bank of America index data. “Bank bond yields versus industrials look attractive,” said Andreas Fischer , a money manager at London & Capital Group Ltd. in London, which has $3 billion of assets under management. “Banks are also benefiting from the recent rebound in profits.” JPMorgan raised $2.75 billion in its biggest offering since April 2009, according to Bloomberg data. The sale included $1.25 billion in an add-on to its 3.7 percent notes due in 2015 that priced to yield 110 basis points more than Treasuries. The debt traded on March 17 at 101.9 cents on the dollar, paying a spread of 89.9 basis points, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Credit Suisse New York-based JPMorgan also issued $1.5 billion of 4.95 percent bonds due in 2020 that paid a spread of 127.5 basis points. Bank of America Corp. of Charlotte, North Carolina, is the largest U.S. bank by assets. Credit Suisse’s New York branch issued $1.5 billion of 3.5 percent, 5-year notes that paid a spread of 112.5 basis points, its first benchmark deal in the currency since Jan. 11, Bloomberg data show. Switzerland’s largest bank by market value last issued 5-year debt in dollars in April 2009, paying 362.5 basis points more than government securities. Finnish lender Pohjola Bank Oyj sold 750 million euros ($1 billion) of five-year bonds in its first benchmark fixed-rate note sale since May 2009. The Helsinki-based bank priced the notes at 78 basis points more than midswaps. Lloyds TSB Bank Plc , Britain’s biggest mortgage provider, sold 1.5 billion euros of subordinated debt March 17 as Standard & Poor’s said bad loans will hurt the lender’s earning for the next two years. The so-called lower Tier 2 notes were priced to yield 325 basis points over swaps, according to Bloomberg data. Nordea Bank AB , the Nordic region’s largest lender, also issued 1 billion euros of 10-year junior bonds on March 17, with a spread of 123 basis points, Bloomberg data show. Greece’s Budget Crisis Financial company bond issuance slowed in early February amid concern Greece’s struggle to contain the largest budget deficit in the European Union would prompt a regional debt crisis. The global market picked up again later in the month after Prime Minister George Papandreou promised spending cuts of as much as 4.8 billion euros and the nation was able to use the capital markets to raise 5 billion of new 10-year bonds. Papandreou challenged Germany to drop its doubts about a financial rescue package from the European Union after Chancellor Angela Merkel ruled out “overly hasty” aid pledges, and said he may turn to the International Monetary Fund. To contact the reporter on this story: Bryan Keogh in London at bkeogh4@bloomberg.net

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Dubai real estate development sees handover of 100th unit

March 17, 2010

17 Mar 2010 A development in Dubai has reached the milestone of passing over the 100th unit to new owners. Emerald Palace Group announced the figure today (March 17th) for its Kempinski Hotel Resid…

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Dubai Property Market to Recover by the End of 2011, Dubai Pearl CEO Says

March 17, 2010

By Zainab Fattah March 17 (Bloomberg) — Dubai’s property market will recover by the end of 2011 as mortgages become easier to obtain and more people move to the city, according to the developer of a $4 billion hotel and residential project. “Banks can’t stay away for long,” Santhosh Joseph , 45, chief executive officer of Dubai Pearl , said in an interview. “They have to lend and, historically, most of this region’s lending goes into property.” Dubai, the second-biggest sheikhdom in the United Arab Emirates , experienced the world’s worst property slump during the global recession, with selling prices falling by more than 50 percent and project cancellations exceeding $300 billion. To sustain itself, Dubai Pearl is relying on $1.5 billion paid for apartments in advance and another $500 million that has been committed by Al Fahim Group, Joseph said. “We’re not expecting to sell substantially in 2010 and 2011,” said Joseph. “We are a zero-debt company but we may look into leveraging at a later date,” he said. Joseph has a 20 percent stake in Dubai Pearl while the rest is owned by a group of investors led by Al Fahim Group , one of Abu Dhabi’s wealthiest families. Artificial Beach Dubai Pearl is building four 73-story towers connected by a single roof less than a mile from the emirate’s palm-tree shaped man-made islands shaped like palm-trees. The project, which has the same name as the company, will have 20 million square foot (1.9 million square meters) of hotel and residential space. MGM Grand , SkyLofts, Bellagio, and Baccarat are among the six hotels that will have 1,400 rooms. The main structure will be surrounded by an artificial beach and low-rise buildings containing malls and theaters. The project is scheduled for completion 2013. The property crisis prompted Dubai Pearl to review the project and add entertainment and health components to the design, Joseph said. The company also renegotiated terms with buyers, such as longer payment schedules, to reduce the chance of defaults. “In 2010 and until the second half of 2011, I’m not expecting the international markets to be liquid or mortgages to be widely available,” he said. “Real-estate cycles are usually three years peak-to-peak and the best locations tend to bounce quickly.” Dubai Pearl is at the center of a newly developed part of the city, surrounded by populated areas such as Palm Jumeirah , Dubai Media City and Dubai Internet City where international media and technology companies are based. The densely populated Dubai Marina is also nearby. The project has the “best location with a captive clientele in a six-mile radius,” Joseph said. “Our area lacks communities where residents can walk from end to end.” The company is selling residential space at 2,250 dirhams ($613) a square foot, while furnished and serviced Baccarat- branded apartments are selling starting at $1,000 a square foot. The prices have been slashed by about 30 percent, he said. To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net .

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Dubai Real Estate – Indian Investors To The Rescue?

March 17, 2010

17 Mar 2010Sanjay Dutt, CEO – Business, Jones Lang LaSalle Meghraj Post the Dubai real estate market crash, there has suddenly been a resurgence of interest by foreign investors there. A not inconsi…

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$800m mall opens in Dubai

March 17, 2010

17 Mar 2010 A new shopping centre development worth over $800 million opened in Dubai yesterday (March 17th). The Mirdif City Centre has been built by shopping outlet specialists Mijid Al Futtaim P…

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Dubai’s DIFC In Top Three EMEA Office Rental Markets

March 17, 2010

17 Mar 2010 Dubai, UAE – Office occupiers in a number of markets across Europe, the Middle East and Africa (EMEA) remain well-placed to negotiatefavourableterms with landlords, according to the latest…

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Stocks, Commodities Gain as S&P Affirms Greek Rating, Fed Seen Staying Put

March 16, 2010

By Rita Nazareth and David Merritt March 16 (Bloomberg) — Stocks and commodities rose after Standard & Poor’s affirmed Greece’s credit rating and amid speculation the Federal Reserve will signal plans to keep interest rates at a record low for much of the year. The dollar weakened and 10-year Treasury yields fell to a one-week low. The S&P 500 increased 0.4 percent to 1,155.15 at 1:30 p.m. in New York, maintaining its highest level in 17 months. The Stoxx Europe 600 Index gained 0.9 percent. Gold jumped the most in a month and copper and oil climbed for the first time in three days. The Dollar Index lost 0.5 percent as the U.S. currency weakened against 13 of 16 major counterparts. The 10- year note yield decreased to 3.68 percent. The U.S. central bank’s Federal Open Market Committee meets today amid forecasts that inflation will remain subdued and as White House officials predict the jobless rate will remain elevated for an extended period. Senate Banking Committee Chairman Christopher Dodd diluted a proposed overhaul of bank rules yesterday, while European finance ministers worked out a strategy for possible emergency loans to Greece. “Inflation remains very mild; that suggests the Fed can stay on hold for longer,” said Jeffrey Kleintop , who helps oversee about $279 billion as chief market strategist at LPL Financial in Boston. “Still, the stock market is holding its breath a little bit ahead of the FOMC statement, especially when it relates to the purchases of mortgage-backed securities, which are expected to end at the end of this month.” 17-Month High Fed Chairman Ben S. Bernanke may keep the target rate for overnight loans between banks in a range of zero to 0.25 percent, according to Bloomberg News surveys. The Federal Open Market Committee will release its statement at about 2:15 p.m. New York time. U.S. equities gained as a report showed prices of goods imported into the U.S. declined more than anticipated, pointing to few signs of inflation pressure from abroad. The import price index fell 0.3 percent, the first decline in seven months, Labor Department figures showed. Economists forecast a 0.2 percent drop, according to the median estimate in a Bloomberg survey. Intel Corp. rallied 3.2 percent after saying it shipped more than 100,000 of its new chips, while General Electric Co. gained 2.7 percent after saying it may resume dividend increases in 2011. Global Advance The MSCI World Index of 23 developed nations’ stocks advanced 0.8 percent. Barclays Plc, Britain’s second-largest bank, and BNP Paribas SA, France’s biggest, rose more than 2 percent after Morgan Stanley raised its price estimates. BHP Billiton Plc, the world’s biggest mining company, helped lead gains by basic-resources shares, rising 0.6 percent in London. The Dubai Financial Market General Index climbed 2.1 percent. United Arab Emirates Central Bank Governor Sultan bin Nasser al-Suwaidi said in an interview that Dubai isn’t likely to need more central bank aid, while a Dubai World restructuring plan will be discussed “very soon.” The MSCI Emerging Markets Index rose 0.7 percent after tumbling the most in more than two weeks yesterday. The euro appreciated 0.5 percent to $1.3742 and climbed 0.5 percent versus the yen after Germany’s ZEW Center for European Economic Research said investor confidence declined less than analysts had estimated. Gold, Copper Gold futures for April delivery rose 1.8 percent to $1,124.90 an ounce in New York. A close at that price would be the biggest gain for a most-active contract since Feb. 16. Copper for delivery in three months rose 1.5 percent to $7,416 a metric ton on the London Metal Exchange, while zinc added 1.3 percent to $2,309 a ton. Crude oil for April delivery rose 2.3 percent to $81.65 a barrel in New York as Saudi Arabia’s oil minister said the Organization of Petroleum Exporting Countries will probably maintain output at a meeting tomorrow in Vienna. The Reuters/Jefferies CRB Index of 19 commodities climbed 1 percent to snap a six-day losing streak, its longest in 13 months. To contact the reporters on this story: Rita Nazareth in New York at ritanazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net .

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Stocks, Commodities Gain as S&P Affirms Greece’s Rating Following EU Plan

March 16, 2010

By Rita Nazareth and David Merritt March 16 (Bloomberg) — Stocks and commodities rose after Standard & Poor’s affirmed Greece’s credit rating and amid speculation the Federal Reserve will signal plans to keep interest rates at a record low for much of the year. The dollar weakened and 10-year Treasury yields fell to a one-week low. The S&P 500 increased 0.5 percent to 1,155.92 at 11:12 a.m. in New York, maintaining its highest level in 17 months. The Stoxx Europe 600 Index gained 0.9 percent. Gold jumped the most in a month and copper and oil climbed for the first time in three days. The Dollar Index lost 0.5 percent as the U.S. currency weakened against 13 of 16 major counterparts. The 10- year note yield fell to 3.68 percent. The U.S. central bank’s Federal Open Market Committee meets today amid forecasts that inflation will remain subdued and as White House officials predict the jobless rate will remain elevated for an extended period. Senate Banking Committee Chairman Christopher Dodd diluted a proposed overhaul of bank rules yesterday, while European finance ministers worked out a strategy for possible emergency loans to Greece. “Inflation remains very mild; that suggests the Fed can stay on hold for longer,” said Jeffrey Kleintop , who helps oversee about $279 billion as chief market strategist at LPL Financial in Boston. “Still, the stock market is holding its breath a little bit ahead of the FOMC statement, especially when it relates to the purchases of mortgage-backed securities, which are expected to end at the end of this month.” 17-Month High U.S. financial shares reversed declines in the final hour of trading yesterday after Dodd outlined his proposals to overhaul banking rules. The plans for the biggest Wall Street changes since the 1930s drop provisions he sought in November and dilute others as he seeks bipartisan support. Fed Chairman Ben S. Bernanke may keep the target rate for overnight loans between banks in a range of zero to 0.25 percent, according to Bloomberg News surveys. The Federal Open Market Committee will release its statement at about 2:15 p.m. New York time. U.S. equities gained as a report showed prices of goods imported into the U.S. declined more than anticipated, pointing to few signs of inflation pressure from abroad. The import price index fell 0.3 percent, the first decline in seven months, Labor Department figures showed. Economists forecast a 0.2 percent drop, according to the median estimate in a Bloomberg survey. American International Group Inc. led U.S. financial shares higher, while Cliffs Natural Resources Inc. rallied 5.3 percent to help boost commodity producers after Deutsche Bank AG lifted its share price estimate and added the stock to its short-term “buy” list. Global Advance The MSCI World Index of 23 developed nations’ stocks advanced 0.6 percent. Barclays Plc, Britain’s second-largest bank, and BNP Paribas SA, France’s biggest, rose more than 1 percent after Morgan Stanley raised its price estimates. BHP Billiton Plc, the world’s biggest mining company, helped lead gains by basic-resources shares, rising 0.6 percent in London. The Dubai Financial Market General Index climbed 2.1 percent. United Arab Emirates Central Bank Governor Sultan bin Nasser al-Suwaidi said in an interview that Dubai isn’t likely to need more central bank aid, while a Dubai World restructuring plan will be discussed “very soon.” The MSCI Emerging Markets Index rose 0.6 percent after tumbling the most in more than two weeks yesterday. The euro appreciated 0.4 percent to $1.3736 and climbed 0.3 percent versus the yen after Germany’s ZEW Center for European Economic Research said investor confidence declined less than analysts had estimated. Gold, Copper Gold futures for April delivery rose $19.50, or 1.8 percent, to $1,124.90 an ounce in New York. A close at that price would be the biggest gain for a most-active contract since Feb. 16. Copper for delivery in three months rose 1.6 percent to $7,424 a metric ton on the London Metal Exchange, while zinc added 1.7 percent to $2,319 a ton. Crude oil for April delivery rose 1.7 percent to $81.18 a barrel in New York as Saudi Arabia’s oil minister said the Organization of Petroleum Exporting Countries will probably maintain output at a meeting tomorrow in Vienna. The Reuters/Jefferies CRB Index of 19 commodities climbed 0.7 percent to snap a six-day losing streak, its longest in 13 months. To contact the reporters on this story: Rita Nazareth in New York at ritanazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net .

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Stocks, Metals Advance as Greece Default Concerns Ease; Swiss Franc Gains

March 16, 2010

By David Merritt March 16 (Bloomberg) — Stocks rose, led by mining companies, as metals rallied and plans for an emergency European loan package eased concern that Greece might default. The Swiss franc strengthened for a third day against the euro. The Stoxx Europe 600 Index of equities gained 0.8 percent at 9:58 a.m. in London while futures on the Standard & Poor’s 500 Index increased 0.2 percent. Copper climbed for the first time in three days. The Swiss franc advanced to its strongest level since October 2008 against the euro. Greek bonds gained and the cost of insuring against default declined. European finance ministers worked out a strategy for emergency loans to Greece should the nation’s plan to raise taxes and lower wages fail to reduce the region’s biggest budget deficit. In Washington, Senate Banking Committee Chairman Christopher Dodd diluted proposed bank rules, while the Federal Reserve meets amid predictions inflation will remain subdued. “The idea is to give the market confidence that the EU would be the lender of last resort to Greece,” said Gary Jenkins , head of credit strategy at Evolution Securities Ltd. in London. “We shall see over the next couple of months whether this game of poker plays out positively for Greece when they next approach the market for funds.” The MSCI World Index of 23 developed nations’ stocks advanced 0.4 percent. Rio Tinto Group led gains by basic- resources shares, rising 1.3 percent in London. Barclays Plc, Britain’s second-largest bank, and BNP Paribas SA, France’s biggest, rose more than 1 percent after Morgan Stanley raised its price estimates. Asian Gains The MSCI Asia Pacific Index advanced 0.2 percent. Sony Financial Holdings Inc. surged 14 percent in Tokyo after saying it will hold more bonds to reduce risk. Sun Hung Kai Properties Ltd. fell 1.6 percent in Hong Kong after the city’s government took steps to cool real-estate prices. U.S. futures rose after the S&P 500 yesterday closed at the highest level since October 2008. Financial shares reversed declines in the final hour of trading after Dodd outlined his proposals to overhaul banking rules. The plans for the biggest Wall Street changes since the 1930s drop provisions he sought in November and dilute others as he seeks bipartisan support. Fed Chairman Ben S. Bernanke may keep the target rate for overnight loans between banks in a range of zero to 0.25 percent, according to Bloomberg News surveys. The Federal Open Market Committee will release its statement at about 2:15 p.m. New York time. Greek Aid Greek bonds rose, with the yield on the 10-year security falling as much as 17 basis points to 6.16 percent, after officials from the 16 euro nations came up with a strategy for providing emergency loans to Greece. The government of Prime Minister George Papandreou is struggling to narrow a deficit that reached 12.7 percent of gross domestic product last year. The Dubai Financial Market General Index climbed 2.2 percent, the steepest advance among benchmark equity indexes worldwide. United Arab Emirates Central Bank Governor Sultan bin Nasser al-Suwaidi said in an interview that Dubai isn’t likely to need more central bank aid, while a Dubai World restructuring plan will be discussed “very soon.” The MSCI Emerging Markets Index rose 0.3 percent after tumbling the most in more than two weeks yesterday. The Swiss franc rose 0.1 percent versus the euro, trading at its strongest since the month following the collapse of Lehman Brothers Holdings Inc., on speculation the central bank’s resistance to the currency’s advance is waning. The SNB started selling francs a year ago to contain declines in consumer prices and safeguard exports, intervening at about 1.4578 per euro, according to UniCredit SpA. Euro Strengthens The euro appreciated against the dollar and the yen after Germany’s ZEW Center for European Economic Research said investor confidence declined less than analysts had estimated. Copper for delivery in three months rose 0.9 percent to $7,373.25 a metric ton on the London Metal Exchange, while zinc added 0.9 percent to $2,300 a ton. Crude oil for April delivery fell 0.3 percent to $79.57 a barrel in New York after Saudi Arabia’s oil minister said the Organization of Petroleum Exporting Countries will probably maintain output at a meeting tomorrow in Vienna. U.S. builders probably broke ground in February on the fewest homes since October, partly because of record snowfall in parts of the country, economists said before a government report due at 8:30 a.m. in Washington. Housing starts fell 3.6 percent to an annual rate of 570,000 last month, according to the median forecast of 71 economists in a Bloomberg News survey. A separate report may show the cost of imported goods dropped 0.2 percent, signaling price pressures will be contained. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net .

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Stocks in U.S. Climb as Financials Reverse Drop, Consumer Companies Rally

March 15, 2010

By Whitney Kisling March 15 (Bloomberg) — U.S. stocks erased losses in the final hour as financial shares reversed declines, while consumer companies rallied on an analyst upgrade of Wal-Mart Stores Inc. and PepsiCo Inc.’s plan to return more money to investors. American International Group Inc. erased a 2.7 percent slide after investor Bruce Berkowitz said he bought a stake in the bailed-out insurer. Financial shares in the Standard & Poor’s 500 Index recovered most of a 1.1 percent slide after Senator Christopher Dodd outlined a plan to overhaul banking rules. Wal-Mart rallied 2.8 percent on Citigroup Inc.’s recommendation to buy the shares, while PepsiCo gained 1.6 percent on plans to boost its dividend and buy back shares. The S&P 500 increased 0.1 percent to 1,150.51 at 4:08 p.m. in New York after earlier sliding as much as 0.7 percent. The Dow Jones Industrial Average advanced 17.46 points, or 0.2 percent, to 10,642.15. “We did get some clarity on financial regulation, so the market’s bouncing around and back up at the end,” said Walter Todd, who helps manage $775 million of assets at Greenwood Capital Associates in South Carolina. “The fact that we did get an outline of what’s going to be included in this type of bill, I’m sure some people look at that and say, ‘Well, at least I know what I’m dealing with.’” The SPDR S&P 500 ETF Trust, an exchange-traded fund linked to the benchmark index for U.S. stocks, rallied for a 12th straight day, the longest winning streak since September 1995. The ETF rose less than 0.1 percent to $115.49 and has advanced 4.4 percent since Feb. 25. Small Caps Slip The S&P 600 SmallCap Index slipped 0.2 percent, ending a streak of 10 days in which it rose, as declines in the smallest U.S. stocks pushed the number of falling shares above rising ones in New York. The streak through the end of last week was the small-cap gauge’s longest in more than six years. Earlier losses in equities were limited by reports showing an unexpected increase in industrial production and an eighth straight month of growth in New York manufacturing. Investors area also awaiting the Federal Reserve’s statement on interest rates and the economic outlook tomorrow. “With the Fed meeting tomorrow, we’re going to continue to bounce around this very important technical level of 1,150,” said Greenwood Capital’s Todd. The rally that lifted the S&P 500 by 8.9 percent since Feb. 8 was led by the same industries as the advance that started a year ago. Financial companies have gained 14 percent over the last five weeks and 149 percent since the index’s 12-year low in March 2009 for the biggest increase over both periods. Industrial and consumer shares were second and third, gaining 12 percent in the latest advance after doubling since March 2009. AIG Gains AIG rose 0.3 percent to $34.32 and jumped as much as 6.3 percent after Berkowitz said he bought “significant” stakes in the company’s shares, convertible debt and bonds. Berkowitz is the head of Fairholme Capital Management who was named Morningstar Inc.’s domestic stock mutual fund manager of the decade. “Some improvement in AIG may be a factor in the move,” said Alan Gayle , a money manager at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. “I would still say investors have been somewhat cautious today. Wells Fargo & Co., Bank of New York Mellon Corp. and U.S. Bancorp also reversed earlier declines to gain at least 0.7 percent. Dodd’s legislation includes a version of the Volcker Rule to require regulators to ban proprietary trading, investment in and sponsorship of hedge funds and private equity funds and to limit relationships with the funds. The plan would also empower the Federal Reserve to break up large firms that pose a “grave threat” to U.S. economic stability. ‘No Big Surprises’ “There’s no big surprises in the new financial proposals being rehatched,” said Matthew McCormick, a banking-industry analyst and portfolio manager at Bahl & Gaynor Inc. in Cincinnati, which oversees $2.8 billion. “The perception is that the changes will be less onerous than expected. They seem to be making some compromises.” Wal-Mart led gains in the Dow, adding 2.8 percent to $55.42 as the stock was raised to “buy” from “hold” at Citigroup, which said the retailer is set to win market share with price cuts. PepsiCo advanced 1.6 percent to $66.15, the fifth straight day of gains. The world’s second-largest soda maker said its directors approved an increase in the annual dividend. Directors also authorized the repurchase of as much as $15 billion of common stock through June 2013. Beazer Upgraded Beazer Homes USA Inc., an Atlanta-based builder of entry- level homes, was rated a new “buy” at Citigroup, which said there is “considerable upside” for the stock compared with its valuation. The shares rose 4 percent to $4.73. St. Jude Medical Inc. rose the most in the S&P 500, gaining 8.2 percent to $40.56. The medical-instruments company, along with larger rival Medtronic Inc., may benefit from Boston Scientific Corp. ’s suspension of cardiac defibrillator sales, according to Sanford C. Bernstein & Co. Boston Scientific had to halt sales of its heart-rhythm devices because of a documentation error in regulatory filings. Medtronic rallied 4.3 percent to $45.81. Boston Scientific lost the most in the S&P 500, falling 13 percent to $6.80. Chordiant Software Inc., the maker of customer-relationship programs, rose the most in the Russell 2000 Index after Pegasystems Inc. agreed to acquire it for $5 a share. The stock surged 31 percent to $4.99, the most since 2003. Earlier Declines Earlier declines in equities came amid concern China will take steps to restrain economic growth to combat inflation. Exxon Mobil Corp. lost 0.8 percent to pace declines in 38 of 40 energy companies in the S&P 500 as oil dropped 1.8 percent to $79.80 in New York. U.S. lawmakers and economists say the China’s reluctance to let its currency appreciate is threatening global competitiveness at a time when Premier Wen Jiabao also is taking steps to rein in growth in the world’s third-largest economy. Wen rebuffed calls yesterday for a stronger yuan, while Morgan Stanley said it expects increases in bank-reserve ratio requirements and higher interest rates as early as April. Google Inc. tumbled 2.8 percent to $563.18, while Baidu Inc. gained 4.8 percent to $576.84, marking the first time Baidu’s stock has topped Google’s. Google advertisers in China are being advised to switch to rivals such as Baidu as speculation grows the owner of the most popular Internet search engine will shut its Web site in the country. China’s government last week said Google’s plan to end censorship at the Google.cn site was “irresponsible.” ‘Turn Their Back’ “It’s really pretty remarkable that Google has stated they’re going to turn their back on the largest single growth- market in the Internet,” said Robert Lutts , who manages $450 million as president of Cabot Money Management in Salem, Massachusetts, and said he owns both stocks. “That’s really a boost to Baidu and a short-term negative for Google.” MGM Mirage lost 3.6 percent to $11.38 as the casino operator and Dubai World said the primary general contractor for their Las Vegas joint venture CityCenter intends to file mechanics’ liens claiming about $492 million. European shares slipped today, with the Stoxx Europe 600 Index dropping 0.7 percent, as the region’s finance ministers plan work on still-secret plans to help Greece overcome its debt crisis today, while counting on the country’s belt-tightening steps to make a bailout unnecessary. Government Debt Concern The governments of the U.S. and the U.K. must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview. Under the ratings company’s baseline scenario the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, according to Moody’s. “The focus now is going to come back to the U.S. and what our debt is, and our companies, and how they performed for the first quarter,” said Jason Cooper , who manages $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. “I still have some hesitancy to put money fully back into the market.” To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net .

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Al-Suwaidi Says Dubai Isn’t Likely to Need Additional Central Bank Support

March 15, 2010

By Camilla Hall March 15 (Bloomberg) — United Arab Emirates Central Bank Governor Sultan bin Nasser al-Suwaidi said that Dubai isn’t likely to need more central bank aid as one of its companies restructures $26 billion in debt. “They haven’t discussed this issue with us and I don’t think it will be necessary,” al-Suwaidi said today in an interview in Abu Dhabi. His answer came in response to a question on whether Dubai would need further federal support. Dubai, the second-biggest of the U.A.E.’s seven emirates, and its state-owned companies borrowed money to transform the sheikhdom into a tourism, trade and financial services hub. The central bank, the Abu Dhabi government and two Abu-Dhabi-based banks pledged $20 billion to support Dubai’s companies after global credit markets froze. Dubai World, one of the biggest state-owned holding companies, is in talks to delay $26 billion in debt. It will ask banks for permission to delay loan repayments when it presents a plan this month, three bankers familiar with the negotiations said on March 8. The company will present a restructuring proposal to its creditors after its advisers complete valuing the company’s assets, a person close to the Dubai government said on Feb. 17. Treated Equally “They’re mindful that the restructuring package does not impact the reputation of the emirate,” al-Suwaidi said. “All banks will be treated equally and in a fair way. There will be no discrimination between local or international banks.” The central bank is taking an advisory role in the talks, he said. It is not part of the committee charged with the restructuring. Credit default swaps linked to Dubai fell 26 basis points to 440.5 basis points today, according to prices provided by CMA DataVision in London. Nakheel PJSC’s $750 million Islamic bond maturing in January gained 1.375 cents to 63 cents on the dollar at 4:28 p.m. in Dubai, according to Citigroup Inc prices. The bond headed for the highest close since Jan. 15. Nakheel is a property unit of Dubai World that is building palm-shaped islands off the coast of the emirate. U.A.E. banks are well capitalized and won’t “be impacted in a major way,” by the debt restructuring, al-Suwaidi said today. U.A.E. banks have a capital adequacy ratio of 19.2 percent, he said. The International Monetary Fund estimates Dubai borrowed $109.3 billion, about 130 percent of the emirate’s gross domestic product, during a real-estate boom that ended in 2008. “Once the restructuring is put in front of banks I think they will have their own decisions whether to accept or not,” he said. “It’s best to make it attractive and acceptable to banks,” he said. The proposal will be discussed with banks “very soon.” To contact the reporter on this story: Camilla Hall in Abu Dhabi at chall24@bloomberg.net

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Oaktree Set to Take Control of Almatis Under $1 Billion Debt Restructuring

March 10, 2010

By Patricia Kuo March 10 (Bloomberg) — Oaktree Capital Management LLC , a Los Angeles-based investment fund, is poised to take control of alumina products-maker Almatis under the terms of the company’s $1 billion debt restructuring. Oaktree will take 86.5 percent of Almatis’s equity under the plan, which has been approved by two thirds of the Frankfurt-based company’s senior lenders, according to a presentation seen by Bloomberg News. In exchange, senior lenders will write down Almatis’s loans to between 45 cents and 86.5 cents on the dollar in a so-called debt-for-equity swap. Almatis said in a statement today it’s “pleased that a consensus has been reached by a majority of its senior lenders and is presently considering its response to this development.” Banks including UBS AG and Bahrain-based Arab Banking Corp. helped finance Almatis’s buyout in 2007 with $970 million of loans, including $235 million in junior debt. The company breached terms of the loans in the first half of last year as the global economic slowdown hurt demand for its products. Dubai International Capital LLC, the state-owned investment company that bought the alumina maker for an undisclosed amount in 2007, won’t recover its investment in Almatis unless it’s sold, according to the presentation, which was sent to senior lenders by their adviser, N.M. Rothschild & Sons Ltd., today. Junior lenders may recoup some of their money if the company is later sold for $325 million or more, according to the presentation. The proposal will allow Almatis to cut its debt to about $420 million and to seek protection from creditors under Chapter 11 bankruptcy, according to the presentation. Fiona Mulcahy , a London-based spokeswoman for Dubai International, declined to comment. An official at Oaktree Capital, which was founded in 1995 and has about $73 billion under management, also declined to comment. To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net

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Citigroup Plans $2 Billion TruPS Sale After Repaying U.S.: Credit Markets

March 9, 2010

By Pierre Paulden and Caroline Salas March 9 (Bloomberg) — Citigroup Inc. , seeking to bolster capital after repaying bailout funds to the Treasury, is selling trust preferred securities as rising investor demand drives borrowing costs to near the lowest in almost five years. The 30-year fixed-to-floating rate securities may initially yield about 8.875 percent, according to a person familiar with the offering who declined to be identified because terms aren’t set. Citigroup plans to issue as much as $2 billion of the securities as soon as tomorrow, another person said. Citigroup, 27 percent owned by the government, is selling the debt as borrowers marketed $13.2 billion of U.S. corporate bonds today, poised to be the busiest in more than a month. The New York-based bank’s offering shows that liquidity is improving in the markets, which in turn will help the economy, said Daniel Fuss , vice chairman at Loomis Sayles & Co. in Boston. “It’s wonderful news for Citigroup and also shows markets are functioning very well,” said Fuss, whose Loomis Sayles Bond Fund is in the 97th percentile among peers this year, according to data compiled by Bloomberg. Citigroup is selling the securities following a $7.6 billion loss in the fourth quarter after repaying $20 billion of trust preferred securities issued under the Treasury’s Troubled Asset Relief Program, set up in late 2008 to support financial firms and markets. “It’s a capital structure need,” said David Hendler , head of U.S. financial services research at CreditSights Inc. in New York. “It’s not as dilutive like common equity issuance and they’ve already done a ton of that. Part of their earnings-per- share problem is they have a ton of shares from all that equity issuance they did last year.” Novartis, MGM Mirage Yields on corporate bonds are near five-year lows, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. They fell to 4.015 percent on Feb. 26, the lowest since May 31, 2005, and were 4.054 percent as of March 8. Elsewhere in credit markets, Novartis AG, Switzerland’s second-biggest drugmaker, and MGM Mirage, the largest casino owner on the Las Vegas strip, led what was poised to be the busiest day for U.S. corporate bond sales since Feb. 4, Bloomberg data show. Novartis sold $5 billion of 3-, 5- and 10- year senior notes for its acquisition of Alcon Inc., the world’s largest eye-care company. MGM Mirage issued $845 million of 10- year bonds to repay some of its loans. In Europe, Goldman Sachs Group Inc. led the busiest day for corporate issuance this year, with 10 sales totaling 7 billion euros ($9.5 billion) Bloomberg data show. New York-based Goldman Sachs, the most profitable securities firm in Wall Street history, priced 1.25 billion euros of seven-year debt in its first benchmark deal in the currency in five months. Sales in Asia Asian companies are selling record amounts of dollar- denominated bonds amid the lowest relative borrowing costs in more than two years and demand from international investors. BOC Hong Kong (Holdings) Ltd., the Hong Kong unit of Bank of China Ltd ., and Chinese developer Evergrande Real Estate Group Ltd. led Asia-Pacific borrowers selling $38.4 billion of dollar debt this year, the fastest start on record, according to data compiled by Bloomberg. Sales climbed 35 percent from $28.4 billion in the same period last year, when they slumped 22 percent in the aftermath of the seizure in credit markets. Nakheel PJSC bonds, part of parent Dubai World’s planned $26 billion debt restructuring, climbed the most in two months after JPMorgan Chase & Co. said creditors may get paid face value. The developer’s $750 million sukuk, or Islamic bond, added 5 cents, the most since Jan. 6, to 56.25 cents on the dollar, prices compiled by Bloomberg show. Low Interest Rates Federal Reserve Bank of Chicago President Charles Evans said low interest rates are likely to be needed “for some time” as high unemployment lingers and inflation stays below his goal. “With the unemployment rate at 9.7 percent and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals,” Evans said in the text of a speech in Arlington, Virginia. Weakness in the job market, including long-term unemployment, means that “this accommodation will likely be appropriate for some time.” In the loan market, Anheuser-Busch InBev NV, the biggest beer maker, will cut at least $90 million from annual interest costs by refinancing $17.2 billion of debt it took when the company was formed in 2008. Lenders to the maker of Budweiser set interest at 117.5 basis points over benchmark rates on three-year term loans, and 97.5 basis points on a five-year revolving credit line, according to two people with direct knowledge of the deal. That compares with a margin of 175 basis points the company is paying on its existing debt. Credit-Default Swaps The cost of protecting against U.S. corporate defaults rose. The Markit CDX North America Investment-Grade Index, linked to credit-default swaps on 125 companies, increased 1.2 basis point to 83.7 basis points, according to CMA DataVision. The Markit iTraxx Europe index of swaps on 125 companies with investment-grade ratings was little changed at 74 basis points. Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting against default on $10 million of debt for five years. Citigroup shares rose 26 cents, or 7.3 percent, to $3.82 in New York Stock Exchange composite trading, the biggest rise since August, Bloomberg data show. ‘Screaming Bargain’ “People are looking at Citi more as a stable to hopefully gradually growing entity,” Hendler said. The stock is a “screaming bargain,” CreditSights analysts wrote in a March 8 report. The bank raised more than $80 billion of new capital last year, increasing the number of shares outstanding during the last three years by sixfold to almost 30 billion. Its book value per share — its net worth, divided by total shares outstanding — tumbled to $5.35 as of Dec. 31 from $24.18 at the end of 2006. Citigroup is the sole bookrunner on the sale, the company said today in a prospectus filed with the U.S. Securities and Exchange Commission. The filing didn’t specify the amount of the sale. Citigroup’s $2.35 billion of 8.3 percent fixed-to-floating bonds due in 2057 rose 1.4 cent to 96.5 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The hybrid debt has more than tripled in price in the last year from 30.5 cents, Trace data show. To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net ; Caroline Salas in New York at csalas1@bloomberg.net

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Nakheel Bonds Advance as JPMorgan Says Creditors May Be Paid at Face Value

March 9, 2010

By Haris Anwar and Dana El Baltaji March 9 (Bloomberg) — Nakheel PJSC bonds, part of parent Dubai World’s planned $26 billion debt restructuring, climbed the most in two months after JPMorgan Chase & Co. said creditors may get paid face value. The developer’s $750 million sukuk, or Islamic bond, added 5 cents, the most since Jan. 6, to 56.25 cents on the dollar at 4:31 p.m. in Dubai, prices compiled by Bloomberg show. The bond due in January 2011 has climbed from a low of 46.5 cents on Feb. 17 and traded as high as 85.5 cents on Nov. 25, when Dubai World said it may delay debt payments. Nakheel’s debt “may not warrant haircuts, and restructuring may only involve long maturity extensions,” JPMorgan said in a report. United Arab Emirates Economy Minister Sultan bin Saeed al-Mansouri said today he’s confident state- owned holding Dubai World will reach an accord with creditors, while Finance Minister Sheikh Hamdan Bin Rashid Al Maktoum said the seven-emirate U.A.E. stands by Dubai. The bank’s “report is very positive and it gives some clarity,” Louis Gargour , the London-based chief investment officer at hedge fund LNG Capital LLP and a holder of Nakheel debt, said in an interview. “You might have a situation where you have sovereign assistance in paying off at maturities.” Dubai World, one of the emirate’s three main state-owned business groups, said Nov. 25 it would seek to delay repaying debt until at least May 30. The announcement sparked the biggest plunge in developing-nation stocks and the largest increase in emerging-market bond yields over U.S. Treasuries in four weeks, while the cost to protect against a default by Dubai doubled. Neutral Rating Dubai World may propose to creditors excluding Nakheel holders a 20 percent cut in face value, a 10-year extension on maturities and a government repayment guarantee, the bank said. A spokesman for Dubai World declined to comment. JPMorgan maintained its neutral rating on Nakheel’s bonds, citing the “unpredictable nature” of the restructuring and “the small probability that sukuks get paid at par upon stated maturity.” The debt “would also have some potential upside if the government guarantees principal repayment under a restructuring plan that involved little or no haircut,” Zafar Nazim , a London-based analyst at the bank, wrote in the report dated yesterday. Dubai avoided a default in December on $4.1 billion of payments due for Nakheel’s 2009 bond after Abu Dhabi and its banks provided $10 billion of loans. ‘Precedent’ “There was a precedent set in 2009 when Nakheel’s debt was settled,” said Jamil Hallak , head of credit trading at Standard Chartered Plc in Dubai. ’’Investors assume that the same will happen in 2010 and 2011, although it’s less likely that they redeem it in full. I think the default is not a scenario that I expect, and that a rollover is more likely.” Dubai, the second-biggest of seven emirates that make up the U.A.E., and its state-owned companies racked up $109.3 billion of debt during a real-estate boom that ended in 2008, according to International Monetary Fund estimates, as the sheikhdom sought to transform into a tourism, trade and financial services hub. The seizure of debt markets after the onset of the global credit crisis led to a 50 percent decline in property prices in the city and hampered the ability of Dubai- based companies to raise new loans to refinance maturing debt. Swap Option All restructuring options are being considered, including swapping Nakheel’s $1.73 billion bonds with new securities, a person close to the Dubai government said on Feb. 17. Nakheel, a developer of palm-shaped islands, has two outstanding Islamic bonds, a 3.6 billion-dirham ($980 million) floating-rate note due May 13 and a 2.75 percent, $750 million sukuk maturing in January 2011. Moody’s Investors Service estimated last month that U.A.E. banks hold about $15 billion of Dubai World debt. ’’Dubai’s domestic banks’ exposure to Dubai World would be an argument that goes against the government demanding steep haircuts,’’ New York-based JPMorgan said in the report. “Assuming two-thirds or $10 billion of this amount relates to Dubai’s banks, a 40 percent haircut implies provisioning of $4 billion,” the bank said. To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.net ;

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Stocks Drop as Earnings Miss Estimates; Commodities Fall, Yen Strengthens

March 9, 2010

By David Merritt March 9 (Bloomberg) — Stocks fell as companies reported earnings that missed analysts’ estimates, raising concern the yearlong rally in equities can’t be sustained. Commodities weakened while the yen and government bonds rose. The MSCI World Index of 23 developed nations’ stocks fell 0.4 percent at 11:57 a.m. in London. Futures on the Standard & Poor’s 500 Index declined 0.5 percent. Crude oil lost 1.7 percent. The yen advanced against all 16 of its most-traded counterparts, while 10-year Treasury yields slid 3 basis points. European Aeronautic, Defence & Space Co., owner of planemaker Airbus SAS, posted a wider-than-expected annual loss and scrapped its dividend for the first time in its 10-year history. Copper producer Antofagasta Plc’s full-year profit plunged 61 percent because of lower prices and output. The results show the risks still associated with the economic recovery, one year after the S&P 500 started its best rally in 76 years buoyed by low interest rates and more than $12 trillion committed by governments worldwide to revive growth. “The global economy is far from equilibrium,” said Tim Brunne , a credit strategist at UniCredit SpA in Munich. “Risky assets” are being supported by “ample liquidity and low interest rates.” More than four shares fell for every one that rose on the Stoxx Europe 600 Index, which dropped 0.7 percent. The gauge has rallied 61 percent since its low a year ago. EADS plunged 4.7 percent in Paris, its biggest drop since November. Antofagasta fell 1.4 percent in London. Declines were limited as Nestle SA , the world’s biggest food company, rose 1 percent in Zurich after JPMorgan Chase & Co. raised its recommendation on the stock to “overweight” from “neutral.” Asian Stocks Most Asian stocks fell, even as the MSCI Asia Pacific Index gained 0.2 percent. Fujitsu Ltd. declined for a second day in Tokyo, slumping 3.9 percent after altering its explanation for the resignation of its former president. China Life, the nation’s biggest insurer, gained 3 percent in Hong Kong after saying profit may have climbed more than 200 percent in 2009. U.S. futures signaled the S&P 500 may decline from near a six-week high. The index, which has rallied 68 percent since March 9, 2009, climbed in three of the last four weeks as reports on employment and consumer spending added to evidence that economic growth is strengthening. The yen rose 1.2 percent to 121.68 per euro and appreciated 0.6 percent to 89.79 against the dollar. Bonds rose, sending the yield on the 10-year Treasury note down to 3.69 percent, and the German bund yield 4 basis points lower to 3.12 percent. The U.S. sells a record-tying $40 billion of three-year notes today, part of $74 billion of auctions this week. Greek Bonds The 10-year Greek yield declined 5 basis points to 6.17 percent, with the premium investors demand to hold the securities instead of bunds little changed at 305 basis points, according to Bloomberg generic yields. Greek Prime Minister Minister George Papandreou will press U.S. President Barack Obama to help Europe combat “unprincipled speculators,” who he said have roiled markets and threaten a new global financial crisis. Papandreou, struggling to convince investors his government is serious about taming Europe’s biggest budget deficit, meets Obama and Treasury Secretary Timothy F. Geithner today in his first U.S. visit since being elected in October. Emerging Markets Hungary’s forint fell 0.9 percent against the euro. Turkey’s lira weakened 0.7 percent and the South African rand dropped 1 percent against the dollar. The MSCI Emerging Markets Index lost 0.3 percent, its first decline in three days. Abu Dhabi’s ADX index gained 0.7 percent and Dubai’s DFM General Index advanced 0.8 percent on speculation Dubai World, the state-owned holding company in talks to renegotiate about $26 billion of debt, is making progress in the talks. Crude oil for April delivery dropped $1.39 cents, or 1.7 percent, to $80.48 a barrel in electronic trading on the New York Mercantile Exchange as analysts forecast an industry report later today will show a weekly increase in U.S. crude supplies. Oil is up 71 percent over the past year. White, or refined, sugar dropped 2.7 percent to $574 a metric ton on the Liffe exchange in London, the lowest price since Nov. 10, while copper was down $70 at $7,400 a metric ton on the London Metal Exchange. The LME index of six industrial metals including copper and zinc has climbed 96 percent in the past year. Copper and nickel have more than doubled and gold has increased 22 percent. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net .

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Yen Strengthens as Exporters Bring Home Profits; Most Asian Stocks Slide

March 9, 2010

By Sandy Hendry March 9 (Bloomberg) — The yen strengthened against all 16 of the most-traded currencies as Japanese companies brought home profits before the fiscal year ends, while the British pound weakened on disappointing housing data. Most Asian stocks fell. Japan’s currency climbed 0.7 percent against the pound and 0.6 percent versus the South Korean won at 3:08 p.m. Tokyo time on speculation exporters are taking advantage of a tax break enacted last year on repatriated overseas earnings. Commodity shares slid on concern China’s metals demand may stagnate. “Companies may repatriate as much as 1.5 trillion yen ($16.6 billion) of overseas profit in March,” said Tohru Sasaki , chief currency strategist in Tokyo at JPMorgan Chase & Co. “There’s a need to be aware of the high possibility for yen appreciation pressure, at least on a temporary basis.” The inflow of dollars reflects a recovery in Asian export earnings as the global economy recovers from its worst recession since World War II. While futures on the U.S. Standard & Poor’s 500 Index retreated 0.2 percent today, the index has climbed 68 percent since March 9 last year, when the gauge reached its lowest level following the bankruptcy of Lehman Brothers Holdings Inc. The yen appreciated to 90.00 per dollar from 90.31 yesterday in New York. It gained to 122.54 per euro from as low as 123.90 yesterday, the weakest since Feb. 23. The currency strengthened to 12.61 won and to 135.15 yen per pound. An appreciation in China’s currency would also benefit the yen, said Takashi Kudo , general manager of market information in Tokyo at NTT SmartTrade Inc. The yuan, pegged at 6.83 per dollar, faces pressure to appreciate because of a widening interest-rate differential, the State Administration of Foreign Exchange said today. Pound Declines Sterling declined on a weaker-than-expected home values report. The number of real-estate agents and surveyors saying U.K. house prices rose exceeded those reporting declines by 17 percentage points, the Royal Institution of Chartered Surveyors said today. Economists predicted 30 points, according to a Bloomberg News survey. Sterling, the worst performer among major currencies this year, fell to $1.5015 from $1.5066 as opinion polls stoked concern the U.K. may elect a minority government that will be unable to control the record budget deficit. National elections must be held by June. “There are still lingering worries over the sustainability of the U.K.’s economic recovery,” said Nobuaki Kubo , vice president of foreign exchange in Tokyo at BBH Investment Services Inc. Greece, Dubai The euro traded at $1.3618 from $1.3634. Losses in the currency were tempered on speculation wealthier European nations will rescue Greece financially if needed. U.S. President Barack Obama will meet with Greek Prime Minister George Papandreou in Washington today. Yesterday, the difference in yield between the five-year Greek note and its German equivalent fell to its lowest in six weeks on optimism Greece can reduce its budget deficit. Dubai World, the state-owned holding company trying to renegotiate about $26 billion of debt, will present a plan to creditors this month, three bankers familiar with the talks said yesterday. The Dubai Financial Market General Index of stocks fell 0.7 percent, after rising 1.7 percent yesterday. Credit default swaps linked to Dubai fell 27 basis points to 480 basis points yesterday, prices provided by CMA DataVision show. The swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. Treasury yields were near the highest level in two weeks as the U.S. prepared to sell a record-tying $40 billion of three- year notes today, the first of three auctions this week totaling $74 billion. The three-year notes scheduled for sale today yielded 1.45 percent in pre-auction trading, rising from 1.377 percent at the previous sale of the securities on Feb. 9. Declining Stocks The MSCI Asia Pacific Index was little changed at 122.67, with 561 stocks falling and 339 rising. Rio Tinto Group , the world’s third-largest mining company, lost 1 percent in Sydney after metal prices dropped yesterday. BHP Billiton Ltd., the biggest, retreated 0.3 percent. “There are seeds of risk everywhere around us,” said Kiyoshi Ishigane , a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $67 billion. “At the same time, we’re seeing some positive news among the risk seeds.” China’s Shanghai Composite Index added 0.5 percent as developers gained after a central bank deputy governor Su Ning said there’s no need for new measures to cool the property market and China Life Insurance Co. boosted its profit forecast. China’s Shares Poly Real Estate Group Co. , China’s second-largest developer by market value, jumped 4.5 percent. China Life, the nation’s biggest insurer, advanced 3.1 percent after forecasting 2009 profit more than tripled. Developers have led a 6.5 percent loss by the gauge this year on concern growth in the world’s third-largest economy will slow as the government reins in stimulus. “Fears the government will impose harsh property measures seem overstated,” said Zhang Xiuqi , a Shanghai-based strategist at China International Fund Management Co., which oversees about $10.2 billion. “Developers are cheap at this level.” Copper for three-month delivery increased 0.5 percent to $7,510 a metric ton. Gold for immediate delivery was little changed at $1,123.69 an ounce, after dropping 1 percent yesterday, the most since Feb. 17, on speculation Greece’s fiscal crisis will be resolved. Oil declined for the first day in three as the dollar strengthened and analysts forecast an increase in U.S. crude supplies last week, signaling demand from the world’s biggest energy consumer may be slowing. Crude for April delivery dropped 0.5 percent to $81.50 a barrel in electronic trading on the New York Mercantile Exchange. Yesterday, the contract rose 37 cents to $81.87, the highest settlement since Jan. 11. To contact the reporter on this story: Sandy Hendry at shendry@bloomberg.net .

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Dubai World Said to Ask Banks to Delay Repayment in $26 Billion Debt Talks

March 8, 2010

By Arif Sharif March 8 (Bloomberg) — Dubai World, the state-owned holding company in talks to renegotiate about $26 billion of debt, will ask banks for permission to delay loan repayments when it presents a plan this month, said three bankers familiar with the negotiations. Banks may be able to avoid a so-called haircut, where they receive less money than they’re owed, if they wait to be repaid, said two of the bankers, who declined to be identified because the talks are private. The banks may also receive a guarantee from Dubai’s government, one of the bankers said. Dubai World and its Nakheel PJSC and Limitless LLC property units used loans to finance real estate projects such as palm tree-shaped islands off the emirate’s coast, which they struggled to refinance amid the credit crisis. Dubai World said in November it would seek to delay repaying all loans until May, sparking the biggest plunge in developing-nation stocks. “The proposal will be a meaningful one,” said Saud Masud , Dubai-based head of Middle Eastern research at UBS AG . “I would highly doubt that what they come out with will be accepted and everyone moves on.” The emirate’s benchmark Dubai Financial Market General Index rose 1.7 percent to 1,649.14 today. Credit default swaps linked to Dubai fell 20 basis points to 487 basis points, prices provided by CMA DataVision in London show. Nakheel PJSC’s 2.75 percent $750 million sukuk bond maturing in January gained 2 percent to 51.25 cents on the dollar. It closed at 50.25 cents on the dollar on March 5. Deloitte, Moelis Deloitte LLP and Moelis & Co., Dubai World’s advisers, are asking the Dubai Financial Support Fund for more money to fund interest payments on the loans in the meantime, the bankers said. Dubai World will primarily rely on asset sales to finance the payments, bankers said. Spokesmen for Dubai World and the Dubai Financial Support Fund declined to comment. Dubai World will approach lenders for the first time this week with a plan to restructure its debt, the Financial Times reported today. The company has asked creditors to meetings in London from today, the FT said. Dubai World will present a restructuring proposal to its creditors after its advisers complete valuing the company’s assets, a person close to the Dubai government said Feb. 17. The final proposal will be made after consultations with the Abu Dhabi government and the United Arab Emirates’ central bank, which along with two Abu Dhabi-owned banks lent $20 billion last year to Dubai’s financial support fund to help state-owned companies during the credit crisis, he said. Bond Swap Nakheel’s $1.73 billion of bonds may be swapped for new securities, the person said. Under another option, banks seeking early repayment would get less than those that wait, he said. More than 90 banks are owed money by Dubai World. Seven of its biggest creditors, HSBC Holdings Plc , Royal Bank of Scotland Group Plc, Lloyds Banking Group Plc, Standard Chartered Plc , Bank of Tokyo-Mitsubishi UFJ Ltd., Emirates NBD PJSC and Abu Dhabi Commercial Bank PJSC, are negotiating with Dubai World on behalf of the lenders, according to bankers. To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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Emerging-Market Stocks, Commodities Rise as Greece, Dubai Tackle Deficits

March 8, 2010

By Michael Patterson March 8 (Bloomberg) — Emerging-market stocks rose to a six-week high, currencies of commodity-producing nations strengthened and oil and metals advanced as Greece and Dubai moved closer to resolving their debt woes. The MSCI Emerging Markets Index climbed 1.2 percent at 10:30 a.m. in London, while Greece’s ASE Index gained 0.9 percent. The gap between Greek and German two-year notes narrowed 14 basis points to 364. Futures on the Standard & Poor’s 500 Index fluctuated between gains and losses. The Australian and New Zealand dollars strengthened against the U.S. currency and the yen. Copper increased more than 1 percent. French President Nicolas Sarkozy said the euro region is ready to rescue Greece should the government struggle to fund Europe’s biggest budget deficit, while former Federal Reserve Chairman Paul Volcker said the challenges posed by Greece’s debt aren’t “insuperable.” Dubai World, the state-owned holding company that’s trying to renegotiate about $26 billion of debt, will present a plan to creditors this month, said three bankers familiar with the negotiations. “Investors are returning to the market,” said Jacques Porta , a money manager at Ofi Patrimoine in Paris, which oversees about $425 million in equities. “Economic news is becoming more positive. Speculation on Greece has calmed.” Poland, Malaysia The MSCI emerging gauge extended last week’s 4.2 percent rally, climbing to within 0.2 percent of erasing its loss for the year. Poland’s WIG20 Index rose for a seventh day, the longest stretch of gains since December 2005. The FTSE Bursa Malaysia KLCI Index jumped 1.9 percent to the highest level in two years as the ringgit strengthened 0.7 percent against the dollar, leading gains in developing-nation currencies. Greece’s ASE gauge posted the biggest gain among 18 western European benchmark equity indexes, while yields on the government’s two-year notes dropped as much as 20 basis points to 4.69 percent. While Greece doesn’t need assistance now, “we have measures, we are ready, we are determined,” Sarkozy said in Paris yesterday after a meeting with Greek Prime Minister George Papandreou . U.S. President Barack Obama will meet with Papandreou in Washington tomorrow. The Dubai Financial Market General Index climbed 1 percent, rebounding from early losses after two bankers familiar with the negotiations said lenders may be repaid in full if they’re willing to wait for their money. The banks may also receive a guarantee from Dubai’s government, one of the bankers said. Nissan, Arrow The MSCI World Index of 23 developed nations’ stocks gained 0.3 percent. Asian stocks rallied, sending the MSCI Asia Pacific Index up 1.9 percent to its highest level in six weeks. Nissan Motor Co. advanced 4.7 percent in Toyko. Arrow Energy Ltd. surged 47 percent in Sydney after receiving a takeover offer exceeding A$3.3 billion ($3 billion) from Royal Dutch Shell Plc and PetroChina Co. The Stoxx Europe 600 Index fluctuated between gains and losses, and futures on the S&P 500 Index were little changed after the benchmark gauges last week erased their losses for the year. BHP Billiton Ltd. led basic-resource producers higher, rising 1.1 percent in London. Credit-default swaps on the Markit iTraxx Europe index of swaps on 125 companies with investment-grade ratings fell 2 basis points 76 basis points, the lowest level since Jan. 19, according to JPMorgan Chase & Co. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 12 basis points to 413. Aussie, Loonie The New Zealand dollar climbed 0.7 percent to 63.34 yen and Australia’s dollar strengthened 0.6 percent to 91.29 U.S. cents. The Canadian dollar appreciated 0.2 percent to C$1.0265 per U.S. dollar. Treasuries declined, sending the yield on the 10-year note 1 basis point higher to 3.69 percent, according to BGCantor Market Data, near the highest in almost two weeks. The Treasury is scheduled to auction $40 billion in three-year notes tomorrow; $21 billion in 10-year debt the following day; and $13 billion in 30-year bonds on March 11. The three-year sale ties a record. Copper for delivery in three months rose 1 percent to $7,618 a metric ton on the London Metal Exchange, extending last week’s 4.9 percent gain that erased this year’s decline. Zinc advanced as much as 2.6 percent to $2,410.75 a ton, the highest price since Jan. 22 and lead rallied 2.7 percent to $2,291 a ton, the highest price since Feb. 23. Crude oil for April delivery rose as much as 91 cents, or 1.1 percent, to $82.41 a barrel in after-hours electronic trading on the New York Mercantile Exchange. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net .

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Dubai firm ‘to deliver major projects on time’

March 3, 2010

03 Mar 2010 Dubai real estate developer Al Mazaya has reported two major projects are set to be delivered on time during the coming year. Construction of Mazaya Business Avenue is now 85 per cent c…

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Dubai Stocks Climb as U.S. Growth Spurs Oil Price; Emaar, Arabtec Advance

February 28, 2010

By Zahra Hankir Feb. 28 (Bloomberg) — Dubai shares climbed to the highest level in almost a week as oil gained on prospects for increased fuel demand in the U.S. after the economy of the world’s biggest energy-consuming country grew the most in six years. Emaar Properties PJSC , the developer of the world’s tallest skyscraper in Dubai, advanced the most in a month. Arabtec Holding PJSC, the biggest construction company in the United Arab Emirates, rose to the highest in almost two weeks after it agreed with Aabar Investments PJSC to extend the due diligence process. Dubai’s DFM General Index advanced 0.7 percent to 1,592.91, rising for a second day. The measure gained 0.2 percent in February, the first monthly gain since October. Markets are being helped by “resilient oil,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. Locally, “market volumes are not that convincing and, from what we could see, there was limited participation from international clients.” About 143 million shares traded in Dubai today, 57 percent below the index’s six-month daily average of 331 million shares, according to Bloomberg data . Crude oil rose 1.9 percent to $79.66 a barrel on Feb. 26 after a report showed the U.S. economy grew at an annual rate of 5.9 percent in the fourth quarter. Oil, which accounts for 75 percent of the revenue of the six monarchies in the Gulf Cooperation Council, advanced 9.3 percent in the month, the biggest gain since May. Prices have more than doubled from their February 2009 low of $34 a barrel. Due Diligence Emaar advanced 3.5 percent to 2.98 dirhams, the most since Jan. 28. Arabtec added 1.4 percent to 2.17 dirhams, the highest since Feb. 17. The company said it approved extending a due diligence process with Abu Dhabi government-owned Aabar to April 16. Aabar said in January it plans to make an offer to buy 70 percent of Arabtec by buying mandatory convertible bonds. Saudi Arabia’s Tadawul All Share Index fell 0.6 percent to 6,437.50. Oman’s MSM30 measure dropped 0.2 percent. Abu Dhabi’s gauge added 0.1 percent and Qatar’s Doha Securities Market 20 Index increased 0.4 percent. Markets in Kuwait and Bahrain were closed for a holiday. To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

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Thai Police Deployed as Courts Mull Seizing $2.3 Billion Thaksin Fortune

February 25, 2010

By Daniel Ten Kate Feb. 26 (Bloomberg) — Thai police manned checkpoints near strategic locations in Bangkok as a court prepares to rule later today whether the government can seize about $2.32 billion from fugitive Prime Minister Thaksin Shinawatra ’s family. The verdict from nine Supreme Court judges will conclude a case that began after the army ousted Thaksin in 2006, sparking a power struggle that may shape how the country is governed. Rival camps disagree on how much authority appointed soldiers, judges and royal advisers should wield over elected politicians. Police added reinforcements around the court, Parliament and Prime Minister Abhisit Vejjajiva ’s offices, the site of violent street protests from both sides in the past two years. The political turmoil has weighed on Thai stocks, which trade at 10.8 times 2010 earnings, the third-cheapest in Asia. “There are so many moving parts here that you’d have to be a very brave investor” to put money in Thailand at the moment, said Sriyan Pietersz , head of research for JPMorgan Chase & Co. in Bangkok. “Foreign investors will want to scope it out and see how the politics goes over the next couple of months.” So far this year, foreigners have been net sellers of $156 million of Thai stocks, the second-most in Asia after Taiwan, according to data compiled by Bloomberg. Thailand’s SET Index has lagged benchmarks in Indonesia, Malaysia, the Philippines and Vietnam in that time. Prosecutors are seeking to confiscate the 76.6 billion baht ($2.32 billion) that Thaksin’s children and relatives earned from the 2006 sale of holding company Shin Corp. to Temasek Holdings Pte, Singapore’s state-owned investment firm. Judges will start reading the verdict at 1:30 p.m. local time. More Protests Planned Since the coup, courts have disbanded parties linked to Thaksin that won the past two elections. The rulings have eroded confidence in the judicial system among Thaksin’s supporters, who say different standards are applied to opponents who seized the prime minister’s offices and the airports two years ago. Prosecutors have yet to bring those cases to trial. Anti-government protesters, who wear red shirts and support Thaksin, plan to rally in Bangkok starting from March 12 to push for a fresh election. Abhisit took power in December 2008 after a court dissolved the pro-Thaksin party that won a 2007 election, citing a clause in the constitution drafted after the coup. An election must be called by the end of next year. “Thaksin was very successful at reaching out to the poor in his first election,” Vikas Kawatra , head of institutional broking at Kim Eng Securities (Thailand) Pcl, the biggest brokerage by trading volume, wrote in a Feb. 24 report. “So this dispute is not likely to go away even if the red-shirts lose Thaksin because of an inability to fund supporters.” Advanced Info, Thaicom After Thaksin founded Shin Corp. in 1983, its units were awarded one of two mobile-phone concessions and an exclusive satellite franchise. The company controls Advanced Info Service Pcl , Thailand’s top mobile-phone operator, and satellite services monopoly Thaicom Pcl . Thaksin transferred his Shin stake to his children and relatives before taking office in 2001. Seven years earlier he disclosed that he was worth 60 billion baht — about $2.4 billion at the time. The Attorney-General says Thaksin concealed ownership of his stake in Shin during his five years as prime minister and used his position to increase the value of its holdings. He stands accused of changing Advanced Info’s royalty payments to the state-owned telecoms operator and approving a government loan to Myanmar, part of which was used to buy equipment from Thaicom. Thaksin denies all allegations, according to Noppadon Pattama , a former foreign minister who is part of his legal team. Thaksin plans to watch the verdict from Dubai, where he has lived most of the time since fleeing Thailand in 2008 to avoid a two-year jail sentence for corruption. Shin shares gained 121 percent from when Thaksin took office on Feb. 9, 2001, to when his family sold the company on Jan. 23, 2006, compared with a 128 percent gain in the benchmark SET index, according to data compiled by Bloomberg. Siam Cement Pcl , Thailand’s fourth-biggest company, which is controlled by the monarchy’s investment arm, gained 717 percent in that time. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ; Shiyin Chen in Singapore at schen37@bloomberg.net

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Thai Police Deployed as Courts Mull Seizing $2.3 Billion Thaksin Fortune

February 25, 2010

By Daniel Ten Kate Feb. 26 (Bloomberg) — Thai police manned checkpoints near strategic locations in Bangkok as a court prepares to rule later today whether the government can seize about $2.32 billion from fugitive Prime Minister Thaksin Shinawatra ’s family. The verdict from nine Supreme Court judges will conclude a case that began after the army ousted Thaksin in 2006, sparking a power struggle that may shape how the country is governed. Rival camps disagree on how much authority appointed soldiers, judges and royal advisers should wield over elected politicians. Police added reinforcements around the court, Parliament and Prime Minister Abhisit Vejjajiva ’s offices, the site of violent street protests from both sides in the past two years. The political turmoil has weighed on Thai stocks, which trade at 10.8 times 2010 earnings, the third-cheapest in Asia. “There are so many moving parts here that you’d have to be a very brave investor” to put money in Thailand at the moment, said Sriyan Pietersz , head of research for JPMorgan Chase & Co. in Bangkok. “Foreign investors will want to scope it out and see how the politics goes over the next couple of months.” So far this year, foreigners have been net sellers of $156 million of Thai stocks, the second-most in Asia after Taiwan, according to data compiled by Bloomberg. Thailand’s SET Index has lagged benchmarks in Indonesia, Malaysia, the Philippines and Vietnam in that time. Prosecutors are seeking to confiscate the 76.6 billion baht ($2.32 billion) that Thaksin’s children and relatives earned from the 2006 sale of holding company Shin Corp. to Temasek Holdings Pte, Singapore’s state-owned investment firm. Judges will start reading the verdict at 1:30 p.m. local time. More Protests Planned Since the coup, courts have disbanded parties linked to Thaksin that won the past two elections. The rulings have eroded confidence in the judicial system among Thaksin’s supporters, who say different standards are applied to opponents who seized the prime minister’s offices and the airports two years ago. Prosecutors have yet to bring those cases to trial. Anti-government protesters, who wear red shirts and support Thaksin, plan to rally in Bangkok starting from March 12 to push for a fresh election. Abhisit took power in December 2008 after a court dissolved the pro-Thaksin party that won a 2007 election, citing a clause in the constitution drafted after the coup. An election must be called by the end of next year. “Thaksin was very successful at reaching out to the poor in his first election,” Vikas Kawatra , head of institutional broking at Kim Eng Securities (Thailand) Pcl, the biggest brokerage by trading volume, wrote in a Feb. 24 report. “So this dispute is not likely to go away even if the red-shirts lose Thaksin because of an inability to fund supporters.” Advanced Info, Thaicom After Thaksin founded Shin Corp. in 1983, its units were awarded one of two mobile-phone concessions and an exclusive satellite franchise. The company controls Advanced Info Service Pcl , Thailand’s top mobile-phone operator, and satellite services monopoly Thaicom Pcl . Thaksin transferred his Shin stake to his children and relatives before taking office in 2001. Seven years earlier he disclosed that he was worth 60 billion baht — about $2.4 billion at the time. The Attorney-General says Thaksin concealed ownership of his stake in Shin during his five years as prime minister and used his position to increase the value of its holdings. He stands accused of changing Advanced Info’s royalty payments to the state-owned telecoms operator and approving a government loan to Myanmar, part of which was used to buy equipment from Thaicom. Thaksin denies all allegations, according to Noppadon Pattama , a former foreign minister who is part of his legal team. Thaksin plans to watch the verdict from Dubai, where he has lived most of the time since fleeing Thailand in 2008 to avoid a two-year jail sentence for corruption. Shin shares gained 121 percent from when Thaksin took office on Feb. 9, 2001, to when his family sold the company on Jan. 23, 2006, compared with a 128 percent gain in the benchmark SET index, according to data compiled by Bloomberg. Siam Cement Pcl , Thailand’s fourth-biggest company, which is controlled by the monarchy’s investment arm, gained 717 percent in that time. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ; Shiyin Chen in Singapore at schen37@bloomberg.net

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Thai Court May Seize $2.3 Billion Thaksin Fortune, Risking Public Backlash

February 23, 2010

By Daniel Ten Kate and Shiyin Chen Feb. 24 (Bloomberg) — A Thai court will decide this week whether to seize about $2.32 billion from fugitive Prime Minister Thaksin Shinawatra ’s family, a verdict that may widen a societal divide that has deterred investors for four years. Nine Supreme Court judges will conclude Feb. 26 if Thaksin controlled the country’s top mobile-phone operator and other firms during his five-year tenure and used his position to boost their value. Since the army ousted Thaksin in 2006, courts have disbanded parties linked to him that won the past two elections. The power struggle has split Thailand into rival camps that disagree on how much authority appointed soldiers, judges and royal advisers should wield over elected politicians. Protests by the two sides, one wearing yellow and the other red, have led to airport blockades, rioting and bombings since the coup. “We’re avoiding Thailand,” said Burkhard P. Varnholt , who manages about $30 billion as chief investment officer of Switzerland-based Bank Sarasin & Co . “It’s a very attractive market that we would like to get back into, but we need to get more comfortable with the political situation.” Since the coup, Thailand’s SET index has trailed benchmarks in Singapore, Malaysia, Indonesia and the Philippines. Foreigners have been net sellers of $205 million of Thai stocks this year, the most in Southeast Asia after Vietnam, according to data compiled by Bloomberg. The baht has gained 2.7 percent against the dollar over the past six months, sixth-highest among Asia’s 10 most-actively traded currencies. Bonds have performed better, returning 2 percent so far this year, the second-best performance among 10 Asian local-currency debt indexes compiled by HSBC Holdings Plc. ‘Vastly Positive’ “If the political situation clears up it would be vastly positive for a number of Thai assets, including the currency and equities,” said Rajeev de Mello , Singapore-based head of Asian investment at Western Asset Management Co., which oversees $506 billion globally. “For government bonds, it’ll probably be a bit more negative.” The case to seize Thaksin’s assets was started after the coup. Prosecutors are seeking to confiscate the 76.6 billion baht ($2.31 billion) that Thaksin’s family received from its 2006 sale of Shin Corp. to Temasek Holdings Pte, Singapore’s state-owned investment firm. The court is “widely expected” to seize the money, Suwat Bumrungchatudom , an analyst with Bualuang Securities Pcl, which has a tie-up with Morgan Stanley for Thai research, said in Feb. 9 report. An acquittal “would not only be very embarrassing for the government, it would throw its legitimacy into question,” he wrote. Abuse of Power Prosecutors argued that Thaksin concealed ownership of his stake in Shin Corp., which controls companies including Advanced Info Service Pcl , Thailand’s biggest mobile-phone operator. They accused him of abusing his power to benefit the firm, including influencing changes to Advanced Info’s royalty payments to its concession holder. Thaksin refutes all the charges against him, and will “keep all options open” after the verdict, including filing an appeal if necessary, said Noppadon Pattama , a former foreign minister and a member of Thaksin’s legal team. During the verdict Thaksin will be in Dubai, his home for most of the time since he left Thailand in 2008 to avoid a two-year jail term, Noppadon said. “We hope that the court would be impartial and offer a fair judgment,” Noppadon said. “Thaksin has been known as a billionaire several years before becoming prime minister.” Billionaire Businessman Thaksin, 60, worked at a Kentucky Fried Chicken outlet in the 1970s while studying in the U.S. for a master’s degree. Two decades later in Thailand, he won one of two mobile-phone concessions and an exclusive satellite franchise. When appointed foreign minister in 1994, Thaksin disclosed that he and his wife were worth 60 billion baht — $2.4 billion at the time. The couple transferred their Shin Corp. stake to their children and relatives before he became prime minister. Shin shares gained 168 percent from when Thaksin was elected in January 2001 to when he was ousted in September 2006, compared with a 161 percent gain in the benchmark SET index, according to data compiled by Bloomberg. Siam Cement Pcl , Thailand’s fourth-biggest company that is controlled by the monarchy’s investment arm, gained 733 percent in that time. Thaksin’s red-shirted supporters have threatened large demonstrations after the verdict to repeat demands that Prime Minister Abhisit Vejjajiva call an election. The army has placed about 5,400 soldiers on standby and police have set up about 170 checkpoints in the capital to inspect vehicles for weapons. Abhisit took power in December 2008 after a court dissolved the pro-Thaksin ruling party for vote buying under a clause in the 2007 constitution drafted after the coup. An election must be called by the end of next year. “We cannot talk about the case in legal terms because it stems from the coup, which is wrong from the beginning,” said Kanin Boonsuwan , a law lecturer at Bangkok’s Chulalongkorn University. “The only way to make people trust again in the judicial process is to return the political process to the people and let them decide for themselves.” To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ; Shiyin Chen in Singapore at schen37@bloomberg.net

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Asian Stocks Rise on Report of Dubai World Support; Copper, Oil Decline

February 23, 2010

By Darren Boey and Anna Kitanaka Feb. 23 (Bloomberg) — Asian stocks rose, reversing an earlier decline, amid speculation Dubai World will be able to fix its finances. Copper fell on concern increasing stockpiles may signal slowing global demand. The MSCI Asia Pacific Index rose 0.2 percent to 118.58 as of 3 p.m. in Tokyo, after falling 0.7 percent earlier. Five stocks rose for every four that declined. Copper for three-month delivery dropped 0.2 percent to $7,3165.75 a metric ton, down from $7,450 a ton on Feb. 19, the highest price since Jan. 26. Oil declined below $80 a barrel. Futures for the Standard & Poor’s 500 stock index rose 0.1 percent. Stocks rallied after the Al-Ittihad newspaper reported that Dubai’s government had allocated 18.3 billion dirhams ($5 billion) to Dubai World. The report didn’t reflect a new development, a spokeswoman of the emirate’s Department of Finance said. Concerns over budget deficits in Europe had contributed to the MSCI Asia Pacific’s 6.4 percent drop from a 17-month high on Jan. 15. “Investors might be taking comfort that the government is providing support for Dubai World,” said Shane Oliver , Sydney- based head of investment strategy at AMP Capital Investors, which oversees about $90 billion globally. “Sovereign debt issues have been weighing on the markets for some time.” The MSCI Asia Pacific Index climbed 2.6 percent yesterday as concerns the U.S. Federal Reserve will raise interest rates eased, taking the average price of the gauge’s companies to 1.55 times book value, the highest level since Feb. 3. Fed Chairman Ben S. Bernanke is due to deliver his semi-annual report on the economy and interest rates to House and Senate panels Feb. 24-25. Land Auction Hong Kong’s Hang Seng Index rose 1.2 percent. Japan’s Nikkei 225 Stock Average declined 0.5 percent. China’s Shanghai Composite Index dropped 0.8 percent. Sun Hung Kai Properties Ltd. , the world’s biggest developer by market value, climbed 3.6 percent to HK$105.80. The company yesterday won Hong Kong’s first land auction of the year with a bid that exceeded most analysts’ estimates. Sun Hung Kai said separately that it bought a site in Foshan, in China’s southern Guangdong province, for 4.7 billion yuan ($688 million). Aristocrat Leisure Ltd. tumbled 4 percent to A$4.28 in Sydney. The company posted a second-half loss A$124.5 million ($112 million) due to provisions for damages from a U.S. lawsuit. “There are a few speed humps on the recovery path,” said Jason Teh , who helps manage $3.2 billion at Investors Mutual in Sydney. “The market is expecting a recovery in earnings. Some companies have disappointed, and some have delivered.” Metal Stockpiles Epistar Corp., Taiwan’s largest maker of light-emitting diodes, dropped 4 percent to NT$90.30, the fourth-biggest decline on the MSCI Asia Pacific Index . There is speculation that Samsung Electronics Co. is reducing orders, said Yuanta Securities Co. analyst Dale Gai . Epistar spokesman Chang Shie- Shien didn’t answer calls to his office. Copper futures for May delivery dropped 0.4 percent to $3.3165 a pound in New York after-hours trading. Stockpiles in warehouses monitored by the London Metal Exchange have climbed 10 percent this year after jumping 48 percent in 2009. Production outpaced demand by 144,000 tons in the first 11 months of last year, according to the International Copper Study Group. The LME’s index of six industrial metals fell 1 percent yesterday from its highest level since Jan. 20. Crude oil dropped as much as 0.7 percent to $79.73 a barrel in New York as analysts forecast that U.S. stockpiles probably rose 1.9 million barrels last week from 334.5 million, according to the median of seven estimates in a Bloomberg News survey. That would be the highest inventory level since November. Gasoline supplies probably also increased, analysts said. Bearish Signal “Given the fundamentals, they don’t justify crude prices above $80 a barrel,” said Ben Westmore , a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “The trend in gasoline stocks has got to levels that are a lot higher in the U.S. than can be explained by a seasonal stock increase, and it probably is another bearish signal for the oil price.” The Treasury yield curve was near the steepest on record before a private report forecast to show U.S. consumer confidence fell, feeding speculation the Fed will refrain from raising interest rates. The difference between two- and 10-year yields was 2.90 percentage points, versus the high of 2.94 percentage points set Feb. 18. “People are more confident that a rate hike is not coming soon,” said Tomohisa Fujiki , an interest-rate strategist at BNP Paribas Securities Japan Ltd. in Tokyo. “Investors are buying short-term bonds. Supply concern is sending longer-term yields higher.” Consumer Sentiment Consumer sentiment dropped in February for the first time since October, according to a Bloomberg News survey of economists before the New York-based Conference Board reports the figure today. Home prices in the U.S. declined at the slowest pace since May 2007, a separate report may show. The government is scheduled to sell $44 billion of two-year debt today. It will also auction, $42 billion in five-year securities tomorrow and $32 billion of seven-year notes on Feb. 25. It sold $8 billion in 30-year Treasury Inflation Protected Securities yesterday. The dollar fell against the euro on prospects the Fed will hold its target interest rate near zero to sustain an economic recovery. The U.S. currency dropped against 12 of its 16 major counterparts on speculation the Fed’s Bernanke will tell Congress tomorrow that last week’s increase in the discount rate isn’t intended to drive up borrowing costs. The dollar fell to $1.3635 per euro in Tokyo from $1.3596 in New York yesterday. It touched $1.3444 on Feb. 19, the highest since May 18. The greenback fetched 91.08 yen from 91.14 yen. The euro rose to 124.19 yen from 123.92 yen. “Fed rate-hike expectations have continued to ease,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “This is providing something of a drag for the dollar.” To contact the reporters for this story: Darren Boey in Hong Kong at dboey@bloomberg.net ; Anna Kitanaka in Hong Kong at akitanaka@bloomberg.net .

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China New Village in the Sky Makes Chanos Predict Dubai One Thousand Times

February 22, 2010

By William Mellor (Corrects lending figure in eighth paragraph to 1.39 trillion yuan.) Feb. 22 (Bloomberg) — The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades. Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) — almost four times the national average — allows Huaxi to claim it’s China’s richest village. Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue. Marc Faber , publisher of the Gloom, Boom & Doom Report, says China is overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you already have overcapacity,” Faber told Bloomberg Television on Feb. 11. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.” Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-meter skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai. Dubai Times a Thousand Such undertakings figured in warnings hedge fund manager Jim Chanos delivered in January that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls and in underutilized infrastructure will weigh on China, Chanos, president of New York-based Kynikos Associates Ltd., said in a speech at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.” China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 percent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off. Risk for Commodities Last month, banks lent a further 1.39 trillion yuan — almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 percent to $8.13 billion. While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets. In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign, in part, of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On Feb. 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 percent year-to-date, after gaining 80 percent in 2009. Bidding Up Prices “If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. The stimulus tap that Beijing turned on has flowed to projects such as its 2 trillion yuan high-speed-rail network. The 221 billion yuan Beijing-Shanghai line has surpassed the Three Gorges Dam as the single most expensive engineering project in Chinese history. Some beneficiaries of the government efforts have plowed their loans into real estate and stocks. Property prices across 70 cities jumped 9.5 percent in January from a year earlier, according to government data. Bridge of Strength Instead of concentrating on their core businesses, giant state-owned enterprises, or SOEs, have bet on real estate, according to Zhang Xin , a former Goldman Sachs Group Inc. analyst who’s chief executive officer of Soho China Ltd. , the biggest property developer in Beijing’s central business district. “All the SOEs are bidding the prices up to the sky,” Zhang told China International Business, a magazine backed by China’s Ministry of Commerce, in December. That’s despite office vacancies in China’s capital being at record highs, according to Boston-based commercial real estate company Colliers International. Chanos, a short-seller who was early to warn about Enron Corp., is one of a growing number of investors sounding the alarm. “Right now, the Chinese market is overheating,” George Soros said in a Jan. 28 interview. Local-government officials have wasted stimulus funds by replacing infrastructure that was fine in the first place. State media complained in May 2009 that party chiefs in Jianyang, Sichuan province, decided to help boost the local economy by rebuilding a bridge that was in such good condition it had emerged unscathed a year earlier from the earthquake that killed 70,000 people. The so-called Bridge of Strength withstood a demolition crew that tried to blast it to pieces with dynamite, the official China Daily reported. Real Estate or Soybeans? Another example Chanos has cited is the city of Ordos, where party officials have built an entire new downtown on the windswept grasslands of Inner Mongolia , 25 kilometers (15 miles) outside the existing municipality of 1.5 million people. Mark Mobius , meanwhile, is sticking with China. The executive chairman of Templeton Asset Management is encouraged that the government is pulling back some of its extraordinary economic support. “We see the government’s tightening of lending as a positive because it moderates the risk to some degree,” says Mobius, who oversees $34 billion. “This is a correction in an ongoing bull market.” Chris Ruffle , who helps manage $19 billion for Edinburgh- based Martin Currie Ltd., also remains confident China will avoid a bust. “It’s not a highly leveraged situation,” says Ruffle, who works in Shanghai. “I was in Japan in the 1980s, and that was a bubble. Here in China, we are nowhere near that.” Still, even Mobius says investors have to be wary. He got rid of an investment in a Chinese food company after discovering that it was using funds to buy apartments instead of to process soybeans. To contact the reporter on this story: William Mellor in Sydney at wmellor@bloomberg.net

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China’s New Village Makes Chanos See Dubai

February 22, 2010

By William Mellor (Corrects lending figure in eighth paragraph to 1.39 trillion yuan.) Feb. 22 (Bloomberg) — The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades. Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) — almost four times the national average — allows Huaxi to claim it’s China’s richest village. Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue. Marc Faber , publisher of the Gloom, Boom & Doom Report, says China is overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you already have overcapacity,” Faber told Bloomberg Television on Feb. 11. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.” Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-meter skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai. Dubai Times a Thousand Such undertakings figured in warnings hedge fund manager Jim Chanos delivered in January that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls and in underutilized infrastructure will weigh on China, Chanos, president of New York-based Kynikos Associates Ltd., said in a speech at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.” China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 percent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off. Risk for Commodities Last month, banks lent a further 1.39 trillion yuan — almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 percent to $8.13 billion. While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets. In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign, in part, of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On Feb. 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 percent year-to-date, after gaining 80 percent in 2009. Bidding Up Prices “If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. The stimulus tap that Beijing turned on has flowed to projects such as its 2 trillion yuan high-speed-rail network. The 221 billion yuan Beijing-Shanghai line has surpassed the Three Gorges Dam as the single most expensive engineering project in Chinese history. Some beneficiaries of the government efforts have plowed their loans into real estate and stocks. Property prices across 70 cities jumped 9.5 percent in January from a year earlier, according to government data. Bridge of Strength Instead of concentrating on their core businesses, giant state-owned enterprises, or SOEs, have bet on real estate, according to Zhang Xin , a former Goldman Sachs Group Inc. analyst who’s chief executive officer of Soho China Ltd. , the biggest property developer in Beijing’s central business district. “All the SOEs are bidding the prices up to the sky,” Zhang told China International Business, a magazine backed by China’s Ministry of Commerce, in December. That’s despite office vacancies in China’s capital being at record highs, according to Boston-based commercial real estate company Colliers International. Chanos, a short-seller who was early to warn about Enron Corp., is one of a growing number of investors sounding the alarm. “Right now, the Chinese market is overheating,” George Soros said in a Jan. 28 interview. Local-government officials have wasted stimulus funds by replacing infrastructure that was fine in the first place. State media complained in May 2009 that party chiefs in Jianyang, Sichuan province, decided to help boost the local economy by rebuilding a bridge that was in such good condition it had emerged unscathed a year earlier from the earthquake that killed 70,000 people. The so-called Bridge of Strength withstood a demolition crew that tried to blast it to pieces with dynamite, the official China Daily reported. Real Estate or Soybeans? Another example Chanos has cited is the city of Ordos, where party officials have built an entire new downtown on the windswept grasslands of Inner Mongolia , 25 kilometers (15 miles) outside the existing municipality of 1.5 million people. Mark Mobius , meanwhile, is sticking with China. The executive chairman of Templeton Asset Management is encouraged that the government is pulling back some of its extraordinary economic support. “We see the government’s tightening of lending as a positive because it moderates the risk to some degree,” says Mobius, who oversees $34 billion. “This is a correction in an ongoing bull market.” Chris Ruffle , who helps manage $19 billion for Edinburgh- based Martin Currie Ltd., also remains confident China will avoid a bust. “It’s not a highly leveraged situation,” says Ruffle, who works in Shanghai. “I was in Japan in the 1980s, and that was a bubble. Here in China, we are nowhere near that.” Still, even Mobius says investors have to be wary. He got rid of an investment in a Chinese food company after discovering that it was using funds to buy apartments instead of to process soybeans. To contact the reporter on this story: William Mellor in Sydney at wmellor@bloomberg.net

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Real estate shares help Dubai index edge upwards

February 21, 2010

Thin volumes reported as investors wait for more details of Dubai debt position

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LBO Debt Lags Behind Junk as Stock Investors Reject IPOs: Credit Markets

February 17, 2010

By Bryan Keogh and Patricia Kuo Feb. 18 (Bloomberg) — Debt used to fund buyouts is lagging behind the rest of the high-yield market as a slump in demand for initial public offerings thwarts efforts by private-equity firms to pare borrowings. Bonds issued by Blackstone Group LP’s Travelport Ltd. fell 3.1 percent on Feb. 11 after the world’s largest LBO-fund manager postponed a share sale for the provider of travel- reservation systems. New Look Group Ltd. loans declined after the fashion retailer owned by Permira Advisers LLP and Apax Partners Worldwide LLP put a $1 billion stock sale on hold. At least 15 IPOs were postponed or withdrawn this year, bolstering concern private-equity firms won’t be able to raise equity and slash debt from some of the $2 trillion of deals made since 2004. Junk-rated companies face “huge uncertainties” as they try to refinance more than $800 billion of borrowings in the next five years, according to Moody’s Investors Service. “The IPO cancellations are a significant negative for debt investors,” said Andrew Wilmont , who helps oversee $5 billion of speculative-grade debt as a London-based investment manager with Axa Investment Managers U.K. Ltd. Loans of companies rated below investment grade and owned by private-equity sponsors have returned 1.83 percent this year through Feb. 16, below the 2.34 percent gain for similarly-rated debt of borrowers without ties to buyout firms, according to Standard & Poor’s LCD data. Leveraged loans and junk bonds are rated below Baa3 by Moody’s and less than BBB- by S&P. Yield Spreads The extra yield investors demand to own company bonds instead of government debt held at 171 basis points yesterday, or 1.71 percentage points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. While that’s 10 basis points more than a month ago, the so-called spread compares with 449 basis points a year ago. The difference on U.S. junk-rated debt narrowed 22 basis points to 680 basis points yesterday, the biggest drop since Sept. 16, when spreads tightened 26 basis points. Elsewhere in credit markets, loans from Six Flags Inc. and IMS Health Inc. rose in their first day of trading, said investors familiar with the transactions. The Federal Reserve said its top officials last month debated how and when to shrink the central bank’s $2.26 trillion balance sheet, with some pushing to start selling assets in the “near future.” Duane Reade Holdings Inc.’s $300 million of 11.75 percent bonds due in 2015 soared 17.1 cents to 124.1 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Walgreen Co., the biggest U.S. drugstore chain, agreed to buy Duane Reade from affiliates of Oak Hill Capital Partners for $618 million to expand in metropolitan New York. Dubai World Credit-default swaps on Dubai tumbled 29 basis points to 610 basis points yesterday, according to CMA DataVision. A basis point equals $1,000 a year on a contract protecting $10 million of debt. Dubai World will present a proposal to creditors in March to restructure about $22 billion of debt after its advisers complete valuing the assets of the state-owned company, a person close to the Dubai government said. Dubai World, one of three main state-owned business groups, said in November it would seek to delay repaying debt until at least May 30. The Markit CDX North America Investment Grade Index fell 2 basis points to 96 basis points yesterday, according to broker Phoenix Partners Group. In London, the Markit iTraxx Crossover Index, which is linked to the debt of 50 European companies with mostly high-yield credit ratings, dropped 11 basis points to 495 basis points, according to JPMorgan Chase & Co. prices. A decrease signals improving perceptions of credit quality. Greece Fiscal Crisis Debt used in LBOs weakened amid a wider credit-market pullback, prompted by concern that European governments including Greece and Spain won’t be able to trim their budget deficits, slowing economic growth. Spreads for companies ranked CCC and below, the lowest tier, have widened 1.18 percentage points since Jan. 11, adding an extra $1.18 million of annual interest on every $100 million of bonds sold, according to Bank of America Merrill Lynch index data. Credit markets began sliding Jan. 11 when Olli Rehn , the European Union’s commissioner-designate for economic and monetary affairs, said Greece’s fiscal crisis is very serious and has a “potential spillover effect” for the euro area. Greece, representing 2.7 percent of the euro region’s $13 trillion economy, had a budget deficit of 12.7 percent of gross domestic product in 2009, the highest in the euro’s 11-year history and more than four times the EU’s 3 percent limit. ‘Not as Robust’ In a leveraged buyout, private-equity firms typically take over a company by putting up one third of the purchase price in cash and borrowing the rest. The firms considered IPOs earlier this year as rebounding stock markets gave them an opportunity to sell assets and distribute profits to their investors. The companies generally use proceeds from an IPO to retire about one-third of the debt, Wilmont said. The IPO market “is clearly not as robust as it was expected to be,” said Georg Grodzki , head of credit research at Legal & General Investment Management in London. Travelport’s 9.875 percent notes due in 2014 declined 3.2 cents to 102 cents on the dollar on Feb. 11, Trace data show. A day earlier, the Dublin-based company postponed an IPO and canceled a related debt tender offer, saying it will consider a share sale when equity market conditions are “more favorable.” New Look’s Offering After New Look postponed its equity offering on Feb. 12, its pay-in-kind loan fell to a bid price as low as 91 pence on the pound from 94 pence a day earlier and 98 pence the prior week, according to London-based credit broker Guy Butler Ltd. The U.K. fashion retailer delayed plans for a $1 billion offering “in light of an unfavorable market backdrop.” Speculative-grade bonds have returned 0.69 percent since Feb. 11, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. The debt has gained 0.38 percent this year, index data show. The S&P/LSTA U.S. Leveraged Loan 100 Index, containing the most actively traded high-yield loans, lost 0.71 percent this month, the first monthly drop since October. A $730 million loan raised by Six Flags and sold at a discount of 99 cents on the dollar, began trading at 99.375 cents, said the people, who declined to be identified because the transactions are private. IMS Health’s $1.25 billion term loan, which was also sold at 99 cents on the dollar, started at 100.25 cents. Buyout firms are seeking to reduce debt at the companies they own as $550 billion of leveraged loans and $250 billion of high-yield bonds come due during the next five years, Moody’s analysts led by Kevin Cassidy wrote in a Feb. 2 report. “With equity investors pushing back on current IPOs on offer, private equity firms will need to focus more on trying to extend the LBO debt, buying time for company cash flows and the market to pick up,” said Mike Nawas , a London-based partner of the European structured finance adviser Bishopsfield Capital Partners. To contact the reporters on this story: Bryan Keogh in London at bkeogh4@bloomberg.net ; Patricia Kuo in London at pkuo2@bloomberg.net

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Stocks in Europe Rise on Outlook for World Economy as Euro Pares Declines

February 15, 2010

By David Merritt Feb. 15 (Bloomberg) — Stocks in Europe rose on the outlook for economic growth and earnings, while the euro pared declines as officials gathered to discuss how they plan to help Greece tackle the region’s largest deficit. The Dow Jones Stoxx 600 Index increased 0.8 percent at 12:02 p.m. in London. The euro was little changed after weakening as much as 0.4 percent against the dollar. U.S. markets are closed today for Presidents’ Day, while China, Taiwan, Hong Kong, Singapore and Malaysia were shut for the Lunar New Year holiday. Mining companies rallied as Goldman Sachs Group Inc. Chief Economist Jim O’Neill said China’s growth is fast enough that the government may let the yuan strengthen as much as 5 percent to curb inflation. About 72 percent of companies in the Standard & Poor’s 500 Index that have reported quarterly earnings since Jan. 11 have beaten analysts’ forecasts, according to Bloomberg data. Finance ministers of the 16 euro nations face investor pressure to explain measures agreed on last week to aid Greece. “Concerns over sovereign solvency are unlikely to have gone away for good, but there may be some calming of fears in the near term,” David Shairp , the global strategist at JPMorgan Asset Management in London, wrote in a note to clients today. “We anticipate episodic bouts of investor anxiety, as sentiment remains fragile. But for the time being, we stick with our strategy of overweight equities.” Asia Declines The MSCI World Index of 23 developed nations’ stocks rose 0.2 percent. The MSCI Asia Pacific Index fell for the first time in a week on concern Japan’s deflation will persist even after the economy expanded more than forecast in the fourth quarter. In Europe, all but three of the 19 industry groups on the Stoxx 600 advanced, extending the benchmark gauge’s first weekly gain in a month. Renault SA rose 4.4 percent in Paris after Morgan Stanley advised buying the shares. Air Liquide SA, the world’s biggest producer of industrial gases, climbed 1.8 percent after reporting earnings that beat analysts’ estimates. British Airways Plc and Iberia Lineas Aereas de Espana SA rose more than 3 percent after winning U.S. approval for an expanded alliance with AMR Corp.’s American Airlines. Fifty-six percent of companies in the Stoxx 600 that have reported earnings since Jan. 11 have beaten analysts’ estimates for net income, according to Bloomberg data. More than 350 companies in the S&P 500 have posted quarterly earnings in the same period, with companies beating estimates by an average of 12 percent, the data show. Emerging Markets Commodity producers led advances in developing-nation stocks, led by a 1.4 percent jump for Kazakhstan’s KASE Index and 1.2 percent increase in South Africa’s JSE All Shares Index. The MSCI Emerging Markets Index was 0.2 percent higher. The Australian dollar rose against all 16 of its most- traded peers, strengthening 0.2 percent to 88.98 U.S. cents, while the Canadian dollar climbed 0.1 percent to C$1.0494. The euro weakened against 12 of its 16 most-traded peers as European finance ministers prepared to meet in Brussels. Investors want details of a planned Greek bailout after European leaders last week pledged to support the nation, stopping short of committing public funds. “We do not expect a clarification of how Greece is going to be rescued in an emergency,” Ulrich Leuchtmann , the head of currency strategy at Commerzbank AG in Frankfurt, wrote in an e- mailed note today. “Uncertainty about this issue is therefore likely to continue putting pressure on the euro this week.” Greek bonds were little changed, with the yield on the two- year note falling 1 basis point to 5.11 percent. The 10-year yield also slipped 1 basis point at 6.16 percent. Dubai Swaps The cost to protect against a default by Dubai rose to the highest level since March as credit-default swaps rose 22.5 basis points to 650 basis points, according to CMA Datavision. Dubai World, the state-owned holding company seeking to restructure $22 billion of debt, may offer creditors 60 cents on the dollar after seven years, Zawya Dow Jones reported Feb. 14, citing unidentified people familiar with the plans. Dubai and Dubai World have not yet made an offer to creditors, a Department of Finance spokeswoman said. Copper for delivery in three months climbed $70, or 1 percent, to $6,880 a metric ton on the London Metal Exchange, extending last week’s 8.4 percent jump, the most since July. China is the biggest user of copper and Japan is the fourth- largest, according to estimates by the International Copper Study Group in Lisbon. Cocoa for March delivery climbed 25 pounds, or 1.1 percent, to 2,311 pounds ($3,629) a ton on Liffe in London on speculation exports from Ivory Coast, the world’s biggest grower, may be disrupted after President Laurent Gbagbo dissolved the government. Crude oil was little changed at $74.22 a barrel on the New York Mercantile Exchange. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net .

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