DUBAI: The government of Abu Dhabi is looking at proposals to restructure some $1.2 billion of troubled bonds that were issued by Abu Dhabi state-owned carrier Etihad Airways in partnership with other airlines, sources familiar with the matter said.
Etihad issued $700 million of bonds through a special purpose vehicle (SPV) called Equity Alliance Partners (EAP) in 2015, and $500 million in 2016. Proceeds of the paper went to Etihad and other airlines it partially owned at the time, including Alitalia and Air Berlin, which are now both insolvent.
The notes were seen as strengthening Etihad's partnerships with those airlines after it spent billions of dollars in acquisitions.
The EAP bonds have been trading at a significant discount for over a year, however, after Alitalia entered special administration and Air Berlin filed for bankruptcy.
Etihad has no legal responsibility to bail out the portion of the bonds which benefited the two European airlines as the notes have no cross-default provision.
But with over $500 million of the paper held by United Arab Emirates investors, it has asked the Abu Dhabi Department of Finance to find a way to reduce losses for investors and limit any damage to the reputation of the local debt market, sources familiar with the matter said.
The department is now working with a financial adviser to find restructuring solutions, said the sources. One option being discussed could involve adjusting the structure of the paper to obtain a better credit rating. Rating agency Fitch has been involved in some of the discussions, the sources said.
Etihad declined to comment while a spokesman for the Abu Dhabi Department of Finance did not respond to a request for comment. Fitch declined to comment.
Any type of restructuring would require bondholders’ approval.
Etihad agreed to cover Alitalia’s portion of the debt, equivalent to around $230 million, at maturity through an agreement between the airlines which was signed before Alitalia entered special administration. But Air Berlin’s portion, of roughly the same amount, has no such guarantee.
Any intervention by the Abu Dhabi government, which could materialise before the end of this year, might see Abu Dhabi inject around $200-300 million into the issuing vehicle, said the sources.
This amount would be applied towards a partial early redemption of the notes at a discount of around 15 percent to par value for note holders seeking an early exit, the sources said. That would imply a write-off of Air Berlin’s obligation under the structure, while Alitalia’s debt would be honoured.
Creditors unwilling to exit at a discount might swap their notes into new instruments with a higher credit rating. The notes could feature a credit enhancement in the form of a guarantee of the obligations of Air Serbia and Air Seychelles, which are part of the borrowing structure, the sources said.
The first tranche of the notes, due 2020, is rated CC by Fitch, while the second tranche due 2021 is rated C.
With an Abu Dhabi intervention, the notes would become investment grade because of the oil-rich emirate's strong credit profile, so any capital injection by the government could be partially offset by a reduction in interest payments.
Last month, the SPV said it received a bid of just over $4 million in cash for the debt obligations of Alitalia and Air Berlin across the two EAP bond tranches.
The bid included around $6 million that would become payable to the SPV in case of recovery of an equivalent amount from the obligations, and a payment of 60 percent of money recovered after a 35 percent recovery threshold was reached.
The bid had an expiry date of Aug. 31; the SPV asked the bidder to extend the deadline to give note holders time to review terms. Since then, the SPV has given no update on the bidding process.
Abu Dhabi said to study restructuring options for $1.2bn Etihad-linked bonds
Abu Dhabi said to study restructuring options for $1.2bn Etihad-linked bonds
- Bonds issued through SPV with other airlines
- Etihad asks Abu Dhabi government for help
Closing Bell: TASI up for 3rd consecutive day to close at 12,804
RIYADH: Saudi Arabia’s Tadawul All Share Index edged up for the third consecutive day, as it gained 31.54 points to close at 12,804.
The total trading turnover of the benchmark index on Tuesday was SR9.87 billion ($2.63 billion), with 95 of the listed stocks advancing and 128 declining.
The parallel market Nomu shed 59.11 points to close at 27,145.56.
The MSCI Tadawul Index was steady, as it gained a marginal 2.71 points to end the trading at 1,609.67.
The best-performing stock on the main market was Chubb Arabia Cooperative Insurance Co., whose share price increased by 8.72 percent to SR34.90.
Another top performer was Leejam Sports Co., which announced its financial results on Tuesday. The company reported a net profit of SR356 million in 2023, representing a rise of 39.6 percent compared to the preceding year.
Driven by its rising net profit, the share price of Leejam Sports Co. surged by 8.10 percent to SR243.
In a Tadawul statement, the company attributed the jump to an increase in the number of members and operating centers.
Leejam Sports Co. said that its net profit for the fourth quarter also witnessed a 22.85 percent rise to SR154 million compared to the same period of the previous year.
The worst performer was Alkhorayef Water and Power Technologies Co., who share price dipped by 9.27 percent to SR236.80.
National Shipping Co. of Saudi Arabia also announced its financial results on Tuesday. The company, also known as Bahri, reported a net profit of $1.61 billion in 2023, up 55 percent compared to the previous year.
It said that this surge in net profit was driven by the growth in the chemicals transportation segment’s revenue.
In a separate statement, Bahri said that its board of directors has recommended a cash dividend at 5.5 percent, or SR0.55 per share, for 2023.
Saudi Arabia offers $182m incentive package for mining investors
RIYADH: Investors eyeing opportunities in Saudi Arabia’s mining sector stand to gain from a new incentive package totaling nearly SR685 million ($182 million) in financial facilitation.
The Ministry of Industry and Mineral Resources has launched the scheme aimed at supporting mining exploration in the Kingdom.
These initiatives, developed in collaboration with the Ministry of Investment, intend to reduce risks for exploration companies during their initial stages and foster funding in this crucial sector, aligning with the goals of Vision 2030, as reported by the Saudi Press Agency.
Elaborating on the latest measures, the ministry highlighted that the comprehensive financial support package is intended to assist companies and investors interested in venturing into mineral resource exploration within the Kingdom. These initiatives represent a significant opportunity for growth in the sector.
Furthermore, the government stressed its dedication to prioritizing investors who show a commitment to nurturing local talent and expertise, thus playing a pivotal role in fostering sustainable development within the mining industry.
It also confirmed that the new measures encompass assistance for companies holding exploration licenses valid for less than five years. Under this provision, each license is eligible for support of up to SR7.5 million maximum.
Furthermore, the ministry added that each company can qualify for support for up to 15 licenses, subject to the terms and conditions of the program.
Saudi PIF ranked 2nd among GCC’s sovereign wealth funds with $925bn in assets
RIYADH: Saudi Arabia’s Public Investment Fund has soared in an annual global ranking of sovereign wealth organizations, thanks to a 55 percent increase in assets under management.
The value of PIF’s portfolio now stands at $925 billion, according to US-based Sovereign Wealth Fund Institute, up from $595.6 billion in 2022.
This means the organization has surged past Kuwait’s sovereign wealth fund on this metric, and is now only behind Abu Dhabi Investment Authority in the Gulf region.
This climb was further bolstered by PIF’s deal in March where it raised its stake in Aramco by 8 percent to approximately $328 billion. This move represents 37 percent of its portfolio and elevates it to fifth place overall in the global sovereign wealth funds rankings.
“The value of the Aramco stake could grow as the government releases more shares to the public, which will help boost PIF’s financial clout and its credit rating as it helps develop on the Vision 2030 ambitions,” SWFI stated.
According to the Global SWF, the Saudi sovereign fund’s ability to access borrowing markets is vital for achieving its objectives. Estimates by the institute suggest PIF’s total debt stands at approximately $36 billion, with recent fundraising of $7 billion from two sales in the early months of 2024.
In its March report, the industry specialist added that PIF became the world’s largest sovereign investor in 2023, deploying $31.6 billion across 49 deals, a 33 percent increase from 2022.
In January, PIF acquired a 23.1 percent stake in the Middle East Paper Co. for SR522 million ($139.1 million), enhancing Mepco’s growth and bolstering its role as a regional provider of paper products for construction while strengthening the local supply chain.
Additionally, the fund entered the transportation sector, launching Riyadh Air with a $30 billion investment in 2023, and investing in Saudia Technic for aviation services.
PIF is set to finalize the acquisition of the Saudi Iron and Steel Co., also known as Hadeed, from SABIC for $3.3 billion. Collaborating with South Korea’s POSCO, the wealth fund is also promoting green hydrogen production, aiming to foster a low-carbon steel sector.
PIF’s ambitious goal is to manage $2 trillion in assets by 2030, with 83 percent in domestic holdings.
Meanwhile, the UAE’s Abu Dhabi Investment Authority, also known as ADIA, maintained its formidable presence this year, securing the leading position in the region with assets under management totaling $993 billion, a significant increase from $790 billion in 2022.
In third position among Gulf states, the Kuwait Investment Authority showcased a total of $846 billion in assets, up from $750 billion in 2022.
Qatar also upheld its standing as the fourth largest sovereign wealth fund in the region, with the Qatar Investment Authority reporting a 7.36 percent increase from $475 billion to $510 billion in assets in 2024.
As per the Global SWF, Middle Eastern wealth funds oversee $4.8 trillion in financial capital. Out of the 60 mega-deals recorded in 2022, Gulf funds executed 25, with only 17 involving US or European businesses.
In the fifth place for the region, Investment Corp. of Dubai boasted a total of $341 billion in assets followed by Abu Dhabi’s Mubadala and Developmental Holding Co., known as ADQ, reaching $276 billion and $199 billion, respectively.
Saudi Arabia’s National Development Fund secured the eighth position across the Gulf, reporting $132 billion, followed by the Emirates Investment Authority with $91 billion and Dubai World with a total of $47 billion.
S&P upgrades Egypt’s economic outlook to positive
RIYADH: Egypt’s economy witnessed an uptick in ratings as S&P Global upgraded its outlook for the country to positive from stable.
The US-based firm also affirmed Egypt’s debt rating at “B-/B,” according to a statement.
This move is indicative of the fact that the country currently has the capacity to meet its financial obligations but faces ongoing uncertainties.
In a statement, the agency said: “We see the exchange rate liberalization, alongside Egypt’s stated commitment to stick to ambitious budgetary consolidation targets, as a key step in shoring up confidence and growth in Egypt’s economy and its debt sustainability.”
However, S&P expects the country’s gross domestic product growth to dwindle to about 3 percent in the current fiscal year, driven by the limited foreign currency availability, high inflation, and tight monetary policy, but to rebound from 2025 onward to 3.8 percent.
The agency also forecasted that increased foreign currency availability resulting in reduced restrictions on foreign exchange could also prompt an upgrade.
Earlier this month, the International Monetary Fund approved increasing a support program for the country from $3 billion to $8 billion following the liberalization of the exchange rate and the raising of interest rates.
This also comes after the nation obtained an investment worth $35 billion from the UAE in February to develop a stretch of its Mediterranean coast.
The agreement with Abu Dhabi Developmental Holding Co., the smallest of the emirate’s three main sovereign investment funds, seeks to develop the Ras El Hekma peninsula, potentially attracting as much as $150 billion in investments, Egyptian Prime Minister Mostafa Madbouly said in press conference at that time.
Similarly, Egypt is set to receive €7.4 billion ($8 billion) in aid from the EU to support its economy until 2027 amidst conflicts in Gaza and Sudan, according to reports.
GCC telecommunication firms reinventing themselves as ‘techcos’: S&P Global
RIYADH: Telecommunication companies in the Gulf Cooperation Council region are redefining themselves as technology firms to diversify their revenue streams, S&P Global said.
In its latest report, the credit rating agency noted that moderate growth prospects for core telecom operations are one of the key drivers which compel these firms to rebrand as techcos.
Techcos can be defined as telecommunication companies that focus more on technology. These firms provide connectivity through newer channels, such as cloud computing platforms, making integrating hardware, connectivity and applications easier.
According to the S&P Global report, “techcos are gaining ground” in the region, adding: “Rated GCC telcos – including Beyon, e&, Ooredoo, and stc – aim to enhance their techco services and have already expanded their non-telecom businesses over the past few years.”
According to the report, telecommunication firms in the region provide a plethora of non-telecom services, with cybersecurity, cloud services, the Internet of things, as well as artificial intelligence, and data centers primarily targeting business-to-business customers.
Moreover, the GCC region’s mature telecom markets, with mobile penetration rates of 130 percent to 210 percent, offer limited organic growth prospects for telecommunication companies.
“The GCC telcos we rate are typically major local players, operate in a relatively favorable and stable regulatory environments, and benefit from their leading market positions and well-invested asset base. Even so, they suffer from a decline in some core telecom services, including fixed voice telephone and messaging services,” said S&P Global.
Additionally, these companies are also offering fintech services aimed at both business-to-business and business-to-consumer customers.
“Fintech offerings capitalize on digitalization trends, tech-savvy young populations in the Middle East, and underbanking in emerging markets,” said S&P Global.
The report further noted that telecommunication companies in the region are also venturing into media, entertainment and e-gaming sectors.
S&P Global also highlighted some recent acquisitions made by telecommunication firms in the GCC region to diversify their businesses.
In 2022, Saudi Telecommunications Co. secured significant stakes in systems integrator firms Giza Systems and Giza Arabia Systems.
Moreover, last year, UAE-based e& acquired over 50 percent of Careem Super App, an application that provides food and grocery delivery, micro-mobility, digital wallet, as well as fintech services.
The study pointed out that GCC governments’ digitalization and economic development agendas will support digital businesses and boost consolidated revenues of telecommunication firms.
“We estimate non-telecom operations currently contribute about 15 percent to 16 percent to rated GCC telcos’ combined revenues,” the report said.
It added: “While core telecom services will continue to account for most revenues and remain the overwhelming profit generators in the short term, we expect digital businesses will grow at a significantly faster pace.”
The report noted that telecommunication firms in the region will witness low single-digit growth for telecom revenues and organic growth of 10 percent to 20 percent per year in non-telecom revenues.
Mergers and acquisitions could compound organic growth in the non-telecom sector, resulting in much faster revenue accretion from tech-related services, the study stated.