Weeks of talks ‘fail to resolve Dana Gas sukuk dispute’

The Dana Gas case moved to UAE and British courts, where legal proceedings are continuing. (Reuters)
Updated 17 January 2018

Weeks of talks ‘fail to resolve Dana Gas sukuk dispute’

DUBAI: Weeks of talks between UAE energy firm Dana Gas and some local holders of a disputed $700 million sukuk have failed to reach an agreement, sources told Reuters, leaving a potentially protracted legal battle as the only available option for now.
Last year, Dana refused to redeem $700 million of maturing Islamic bonds, arguing they were no longer valid under UAE law because of changes in Islamic financial practice over the last several years.
The move shocked the global Islamic finance industry, as some investors worried it could set a precedent for other sukuk issuers who might refuse to repay their obligations on the grounds of religious permissibility.
Dana proposed in June last year to swap its sukuk, held by international investors such as BlackRock as well as UAE investors, with new sharia-compliant bonds, but creditors rejected the proposal, saying the terms were unfavorable.
The case moved to UAE and British courts. Legal proceedings in both countries are continuing, but in November a British court ruled in favor of Dana’s creditors.
In the past few weeks Dana’s financial adviser in the dispute, US firm Houlihan Lokey, has been in talks with some of Dana’s UAE creditors to seek a potential out-of-court solution, several sources familiar with the matter said.
The UAE creditors, represented by Dubai-based Arqaam Capital, include National Bonds Corp., an investment company specializing in sharia-compliant financial products. National Bonds is owned by Investment Corp. of Dubai, an investment arm of the Dubai government.
National Bonds did not respond to a request for comment. Dana and a committee representing major international sukuk holders declined to comment.
Arun Reddy, a managing director at Houlihan Lokey, said: “Dana Gas’ financial adviser has been approached by various local and international creditors over this process. It’s clear from those discussions that creditors, including local creditors, prefer a consensual against a litigation-driven outcome.”
A legal source familiar with the matter said Dana held talks with UAE creditors because “there has always been the view that local creditors were more open than their international counterparts” to a settlement.
Moelis, the firm advising the creditors’ committee, was made aware of the discussions, the sources said.
The talks revolved around Dana’s original restructuring proposal from last June and no new, formal proposal was advanced, which is why they have not led to any meaningful result, the sources said, declining to be named because of commercial sensitivities.
“Discussions were about interest rates, amortizations, conversion rates, but Houlihan didn’t appear to have a mandate to negotiate on these sticky points conclusively,” said one of the sources.
According to two sources, since the talks were not leading anywhere, Moelis decided last week not to engage in them. A third source said, however, that local creditors were not aware of such a decision. Moelis declined to comment.
The lack of a resolution means that going through the courts — which could take many more months or even years, people familiar with the matter have said — may be the only option available, at least for the time being.
New proceedings are scheduled to take place in a British court this month to address issues such as injunctions, obtained in previous phases of the case, that prevent creditors from enforcing claims and limit Dana’s ability to pursue legal action in a court in Sharjah, where the company is headquartered.
“There are still legal mechanisms that the company can use, so the company is still acting as if they have legal ground to put themselves in a better negotiating position,” one creditor said.
— REUTERS


Stocks slip off record highs ahead of earnings, US data

Updated 13 April 2021

Stocks slip off record highs ahead of earnings, US data

  • Nasdaq futures were down 0.2 percent on Monday. S&P 500 futures edged 0.1 percent lower

LONDON: Global stock markets fell from record highs on Monday as investors waited to see whether US earnings would justify sky-high valuations, while a rally in bonds could be tested by what should be strong readings for US inflation and retail sales this week.

MSCI’s All Country World Index, which tracks stocks across 49 countries, was down 0.14 percent after the start of European trading, off Friday’s record high. The gauge’s price-to-earnings ratio is at its highest level since early 2010. Stocks hit record highs across the world last week on optimism that vaccination programs and the easing of lockdowns to combat COVID-19 would bode well for an economic rebound. Total market capitalization of global equities hit $90 trillion last week, according to Refinitiv data.

Morgan Stanley noted that despite the S&P 500 making all-time highs, small-cap stocks represented by the Russell 2000 small-cap index have underperformed the S&P 500 by 8 percent since peaking on March 12.

“In my view, the breakdown of small caps and cyclicals is a potential early warning sign that the actual reopening of the economy will be more difficult than dreaming about it,” said Michael Wilson, the bank’s chief US equity strategist.

“Small caps and cyclicals have been stellar outperformers over the past year. In essence, they were discounting the recovery and reopening that we are about to experience. However, now we must actually do it and with that comes execution risk and potential surprises that aren’t priced.”

Nasdaq futures were down 0.2 percent on Monday. S&P 500 futures edged 0.1 percent lower.

European shares eased off record highs as investors held off from making big bets before earnings season. The pan-European STOXX 600 index was down 0.2 percent.

Britain’s domestically focused FTSE mid 250 index held 0.2 percent below a record high as shops, pubs, gyms and hairdressers re-opened after three months of lockdown.

The UK’s more export-oriented FTSE 100 fell 0.3 percent, Germany’s DAX and France’s CAC 40 traded 0.1 percent and 0.2 percent higher respectively. Italy’s FTSE MIB gained nearly half a percent.

The VIX volatility index, also known as Wall Street’s “fear gauge,” ticked slightly higher to 17.48, having hit its lowest level since March 2020 on Friday.

“Renewed bouts of elevated volatility are likely over the coming months, in our view,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “Investors can take advantage of this backdrop, however. Low volatility at present reduces the cost of locking in downside protection.”

Earlier in Asia, Tokyo’s Nikkei edged down 0.6 percent. South Korean stocks were near flat.

India’s Nifty 50 index slid 2.4 percent as the country overtook Brazil with the second-highest number of COVID-19 cases globally.

Chinese blue chips lost 1.5 percent before the release of a series of economic data from China.

Shares in Alibaba Group Holding Ltd. surged 16 percent after China imposed a record 18 billion-yuan ($2.75 billion) fine on the e-commerce giant.


Saudi Arabia issued 117 permits for entertainment activities in 2020

Updated 13 April 2021

Saudi Arabia issued 117 permits for entertainment activities in 2020

  • Tarfeeh enables investors and companies operating in the sector to request licenses and permits for recreational activities and events

RIYADH: The National Committee for Digital Transformation announced on Monday it has officially chosen the online portal “Tarfeeh” to organize and develop the Kingdom’s entertainment sector.

Tarfeeh was chosen from more than 800 potential platforms under consideration, according  to a report by the Saudi News Agency.

Established by the General Entertainment Authority (GEA), Tarfeeh enables investors and companies operating in the sector to request licenses and permits for recreational activities and events, and to apply for accreditation certificates for specialized activities in the entertainment sector.

Using the portal, the GEA in 2020 issued 117 permits for entertainment activities, 219 licenses for operating entertainment facilities, and 398 permits for live shows in restaurants and cafes, despite the restrictions related to the coronavirus pandemic.

The portal also enabled 188 investors to obtain a license to manage and develop artistic and entertainment talents.

The number of restaurants and cafes registered in the portal in order to obtain permits for live performances was more than 410.


Oil ‘supercycle’ not on the cards: Energy experts

Updated 12 April 2021

Oil ‘supercycle’ not on the cards: Energy experts

  • Key triggers needed to push crude over $100 per barrel still missing: Report

DUBAI: Oil is unlikely to hit $100 per barrel on a sustainable basis in the near future, according to experts at the Oxford Institute for Energy Studies (OIES), a prestigious UK-based think tank.

In a report prepared by Bassam Fattouh and Andreas Economou of the OIES, the likelihood of an imminent oil “supercycle” — suggested by some commodities analysts — is downplayed because of the absence of key factors that might spark a surge in the price of crude.

“Some key triggers of an oil supercycle, such as an inelastic supply in the face of rampant demand and lack of spare capacity and refining constraints, which could push prices to $100 a barrel and keep them at those high levels, are still missing,” they argue.

Rather, oil will trade in a range of $59-$69 per barrel until the end of 2022, the authors said. “Sentiment could push prices beyond these boundaries, but they are not likely to be sustainable. For prices to reach anywhere close to $100/b, we need to consider other shocks,” they added.

The idea of a “supercycle” in oil and other commodities has gained traction in recent months, as the price of crude has recovered from the historic lows of last year’s pandemic collapse and some oil companies slashed investment in new fields.

Analysts at JP Morgan and Goldman Sachs — two of the biggest banks in the world — have suggested that the global market is on the brink of a run that could see oil top $100 per barrel.

But the Oxford experts, in their latest Oil Monthly report, conclude that this is unlikely. “While oil market dynamics and prices have markedly improved, the degree of uncertainty surrounding the outlook remains high. Following a challenging year, OPEC+ policy choices will keep dictating market outcomes, but the recent oil price rebound does not yet signal the start of the next oil supercycle,” they said.

The experts added that while April 2020 was “the bleakest month in the history of oil markets” with prices averaging $23 per barrel, the price has rebounded to above $60 as demand recovered, stocks were drawn down and OPEC+, the producers’ alliance led by Saudi Arabia and Russia, has kept a tight lid on supplies.

“This impressive recovery occurred despite wide uncertainty surrounding oil demand and the fact that it has yet to fully recover to its pre-pandemic level. Although the dominant expectation is for oil demand to rebound strongly in the second half of 2021 as countries lift restrictions and the global economic recovery accelerates, the uncertainty over the timing and pace of the rebound remains high,” the authors added.

The Oxford analysis provides support for the continued caution expressed by Saudi Energy Minister Prince Abdul Aziz bin Salman, who recently said he would not believe evidence of a recovery in demand “until I see it.”

OPEC+ policy is singled out as one of the main factors behind the recovery in crude prices, the Oxford experts said, noting a “more flexible and more effective OPEC+ in dealing with the adverse shock of COVID-19 and in influencing market expectations and shaping sentiment.”

They added: “Although it has become increasingly difficult to predict OPEC+’s next move, this unpredictability is part of a deliberate policy and has had the effect of increasing the market impact of OPEC+ decisions. At a more fundamental level, it shows a more assertive role for OPEC+ in dictating the pace of market rebalancing.”

Some analysts have forecast that higher oil prices will lead to a return of US shale supply, which was hammered by the pandemic lockdowns in America. But the Oxford analysis does not see this on the immediate horizon. “There is an emerging consensus that US shale growth will be rather limited or even decline in 2021,” the authors said.

The risk of Iranian oil flooding the market in the event of a deal between Tehran and Washington on nuclear policy is also overstated, the authors added. “Even if the Iran nuclear deal is revived, the export increase from current levels will be moderate,” they said.


Saudi food industry market leader 'performed exceptionally' despite pandemic

Updated 12 April 2021

Saudi food industry market leader 'performed exceptionally' despite pandemic

  • Almunajem Foods has expanded its agreement with Brazil-based JBS, the world’s leading chicken and beef producer

RIYADH: Almunajem Foods, one of Saudi Arabia’s largest private food companies, has reported a successful 2020 and is maintaining a positive outlook for 2021, despite the coronavirus pandemic continuing to affect the economy on a global scale.

The company, which has more than 70 years of experience in the Saudi food market, serves more than 22,000 customer outlets including retail, food services and wholesale channels. Their expertise lies in importation, marketing and the distribution of frozen, chilled and dry foodstuffs.

Almunajem operates 14 branches, 12 of which are equipped with temperature-controlled warehouses. They also work with more than 60 suppliers, and brands under the company’s umbrella include household names such as Coopoliva olives, President dairy products and their own in-house brand, Dari.

Thamer Abanumay, CEO of Almunajem Foods, told Arab News that business was flourishing despite the setbacks posed by the pandemic in 2020 and said the company had managed to minimize interruption of services.

“Our business was put to the test in 2020, but I can confidently say that on all fronts we performed exceptionally. Our operations maintained a high level of resilience despite the obstacles caused by COVID-19. Thanks to our strong logistical abilities, backed by technology, data and tools, we were able to move our products safely and in a timely manner,” he said.

Abanumay predicts significant growth in the food market as a whole over the next few years, and sees many potential opportunities to capitalize on. “The participation of women in the labor force, as well as the rapid growth of the inbound tourism industry in the Kingdom, will have a significant impact on the food consumption and food service industries. We will also focus on increasing our backward integration and produce more products in Saudi Arabia,” he said.

The company has also managed to forge new business deals with international partners, despite the uncertainty plaguing international trade.

The company on Sunday announced an expansion to its longstanding collaboration agreement with Seara, a subsidiary of Brazil-based JBS, the world’s leading chicken and beef producer. The agreement forms part of Almunajem Foods’ diversification strategy to service its business-to-business customer base across the Kingdom and to meet the increase in demand from the food industry.

The agreement includes Almunajem Foods distributing a wide variety of poultry products, including whole chicken grillers, chicken parts and other processed products.

Abanumay told Arab News that demand for poultry in the Kingdom, both for whole griller chickens as well as parts, would likely mean that despite fluctuations in the market there was strong demand for their produce.

The Brazilian Animal Protein Association reported in January that while poultry exports from Brazil had experienced a decline, some of the leading Arab importers “stepped up” their purchases. The figures showed that 35,800 tons of poultry was shipped to Saudi Arabia, up by 2 percent, with revenue climbing 4 percent year-on-year to $58.5 million.

Saudi Arabia was the premier Arab importer of poultry from Brazil in January, with the UAE ranked second. Total global raw and processed poultry exports from Brazil fetched $434.4 million in Jan. 2021, down 17.9 percent from Jan. 2020.

Abanumay said that the company was already making headway on plans to introduce new products to the market in 2021, as well as to bring new suppliers on board over the course of the year.


Pakistan’s central bank says studying feasibility of issuing its own digital currency

Updated 12 April 2021

Pakistan’s central bank says studying feasibility of issuing its own digital currency

  • State Bank governor says “comprehensive internal survey” being carried out to learn about trends in other countries
  • Global central banks developing digital currencies to modernise financial systems, ward off threat from cryptocurrencies, speed up payments

KARACHI: Pakistan’s central bank is conducting a “comprehensive internal survey” to study the feasibility of launching a digital currency in the country, the governor of the State Bank of Pakistan said on Monday.  

Global central banks are looking at developing digital currencies to modernise their financial systems, ward off the threat from cryptocurrencies like bitcoin and speed up domestic and international payments. China is one of the most advanced in its effort, and last month proposed a set of global rules for central bank digital currencies, from how they can be used around the world to highly sensitive issues such as monitoring and information sharing.
“There are many things involved and we are conducting a comprehensive internal study that what are the trends in other central banks,” governor State Bank Dr Reza Baqir said while speaking to journalists at the Pakistan Stock Exchange. “When our study would be completed the outcome will be shared … The experience of other central banks and may be the basis for our considerations.”

Pakistan central bank governor Dr. Reza Baqir speaks at a gong ceremony at the Pakistan Stock Exchange in Karachi, Pakistan, on April 12, 2021. (Photo courtesy: Pakistan Stock Exchange)

In an interview to international media last month, Baqir said introducing a digital currency would boost the government’s efforts at financial inclusion and allow it to make “progress in our fight towards anti-money laundering and towards countering terrorism financing.”
The Bank of Japan began experiments this month to study the feasibility of issuing its own digital currency, joining efforts by other central banks that are aiming to match the innovation in the field achieved by the private sector. The first phase of Japan's experiments, to be carried out until March 2022, will focus on testing the technical feasibility of issuing, distributing and redeeming a central bank digital currency (CBDC).

As digital currencies such as bitcoin gain more traction with mainstream companies and investors, and as private efforts like the Facebook-backed Diem seek approval, the onus is on central banks to accelerate plans to issue digital cash to fend off threats to their control over money.

The People's Bank of China is aiming to become the first major central bank to issue a CBDC, part of its push to internationalise the yuan and reduce dependence on the dollar-dominated global banking system.

The European Central Bank is also exploring the introduction of a digital euro, within the next five years. It’s running into opposition from Germany, though, where the Bundesbank worries that a digital euro could pose risks to banks.

A CBDC that gains wide acceptance in international trade and payments could ultimately erode the dollar’s status as the de facto currency of world trade and undermine US influence, many analysts say.

But cybersecurity experts also warn against threats to security as well as privacy risks.
“It provides opportunities for malicious hackers and cyber crooks to carry out frauds, scams, and theft through phishing and ransomware attacks,” Muhammad Khurram Khan, founder & CEO of the Washington DC-based Global Foundation for Cyber Studies and Research, told Arab News. “To build a secure, resilient and privacy-preserving ecosystem, the central bank of Pakistan needs to implement strong data security standards, processes, protocols, and technologies to protect against burgeoning cyber risks.”
“One major challenge associated with digital currencies is the consumer's privacy concerns,” Khan added. “Therefore, the central bank has to make sure to protect the rights of users for their privacy while they make transactions.”