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  • Sunday, December 20, 2009

    Abu Dhabi - From Mark to Mancini

    Much has been made about the billions in bailout money that Abu Dhabi has provided to Dubai. So, when we're talking a few piddly hundred million, it shouldn't be too much of a big deal. But there you would be wrong, because the Abu Dhabian's want a return for their money. They have proved it in the past with shrewd investments, timely, and lucrative - and with supposedly the largest sovereign wealth fund in the world, they don't mess around.

    So what to do with the quandry of Manchester City. The return would be claiming a place in next season's champions league. The intangible value of having Etihad beamed to millions as well as the other obvious benefits would be fantastic. However, with an investment in players of 200m+ sterling, Sheikh Mansour wants returns today and not tomorrow - and so the man that they had faith in when they took over, didnt deliver in time. While progress was being made, those draws were not success enough. If they had turned from draws to wins, there wouldn't be the headlines of the sacking of Mark Hughes and the appointment of Roberto Mancini.

    And so to Mancini - although very successful in the Italian gamed both as a player and as a manager, he has limited experience of the Premiership. Could the appointment of Mancini be an inspired one for the future of Manchester City and the investments of Abu Dhabi, or is he really 3rd choice to Mourinho and Hiddink - who both didn't want to drink from the poisoned chalice. The Abu Dhabi royalty have a penchant for Serie A football, so they will know the risk they are taking.

    As far as Abu Dhabi goes, the investment in Manchester City was a gamble, and now that the chips are down, here comes another gamble. No doubt more money will be available but for now the hot seat belongs to Mr Mancini. Good Luck to you My Friend. Let's hope the stress is worth the 9 million pounds.

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    Tuesday, December 15, 2009

    Hyatt Abu Dhabi

    You would think to hear "Hyatt" and "Abu Dhabi" spoken together when the hotel at capital gate launches next year....but it has taken on a new meaning. The Abu Dhabi Wealth Fund has taken a 10.9% stake in Hyatt's class A shares that were floated last month:

    The filing said the Abu Dhabi Investment Authority bought nearly 4.8 million, or 10.9 percent, of Hyatt's Class A common shares. Its overall stake in the company is considerably lower, however, because the wealthy Pritzker family holds the bulk of other stocks known as Class B shares that give it voting control over the company. ADIA spokesman Euart Glendinning confirmed the purchase Tuesday. He said the fund intends to remain a minority shareholder. Financial terms were not disclosed. Hyatt shares closed at $29.05 apiece Friday, the last trading day before the deal became public. At that price, ADIA's stake is worth about $139.4 million. ADIA is the largest of several investment funds Abu Dhabi uses to invest its oil wealth. It is perhaps best known for agreeing to pump $7.5 billion in Citigroup Inc. in late 2007.

    Hyatt is a reputable hotel brand - and Abu Dhabi are shrewd investors, most of the time. Nice little transaction. Apparently, the leaning tower of Abu Dhabi is still on track for completion at the end of next year.

    Abu Dhabi wealth fund takes stake in Hyatt Hotels


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    The Fallout from the Dubai Yoyo

    One back story that is starting to get traction around the bigger story of bailouts and defaults in Dubai is the story of insider trading. One commentator has his rant:

    This is the crazy real world. A month ago Nakheel bonds were trading at 110%. They fell below 40 cents two weeks ago. This morning the bonds were trading north of 70. Some of the bonds look to be paid at par. That is enormous price action in a very short period of time. The opportunity to make money on both the downside and the upside was there. Another way to have played the Nakheel bond story was through the CDS market. Pricing in that market mirrored the action for the bonds. Very big bucks were made and lost as this played out. To take advantage of this one would have had to have been an insider. No outsider could have sold high and bought low. So the question is how many insiders were there on this deal? My guess: A few thousand.

    Is there something else going on or is this pure coincidence? Can it be pure coincidence?

    Dubai Story Reeks of Insider Trading

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    Monday, December 14, 2009

    Dubailout V.2

    Many commentators are expressing surprise at the apparent bailout of Dubai by Abu Dhabi. Those of you that read this blog will know two things:

    1. That there is a deep tie between the Emirates
    2. This is not the first bailout

    Although $10bn is a lot of money, back in february this is what we had to say:

    Whatever you want to call it - the world sees it that Abu Dhabi has saved Dubai. Lex has coined the phrase Dubailout. We predict that there will be more dubailouting happening over the next year or so. The markets think otherwise, with trading up on announcement of the injection/bonds/bailout. But that might just be because there is now an acceptance that Dubai and Abu Dhabi are now bound by more than just being neighbours.

    At the time, Lex, from the FT stated that this gave Dubai valuable breathing room. Until the shenanigans at the beginning of the month. And now we have that same situation again. Bailout, markets reacting well. This is ridiculous volatility. What does that mean for markets. As a direct result of this yoyoing, someone has made a lot of money while someone has lost a lot. And this is not the first time it has happened.

    This, to put it quite simple, is unsustainable.

    The breathing room that has now been established until April needs to be put to making some difficult decisions:

    - Will there be an asset sell off by Dubai World?
    - Will Dubai World be left for bankruptcy?
    - How can Dubai reestablish its reputation?
    - How can this sort of freefall be prevented from happening again?

    So what now? The $4.1 sukuk will be paid off. The rest of the money will support Dubai World until April. There will now be more speculation about swapping control of assets, but the real question is the rest of the debt that is still outstanding. This story is only part told.

    Abu Dhabi provides Dubai $10 bln in bailout money

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    Wednesday, December 02, 2009

    Dubai, unity and the aftermath

    On the day before UAE National Day, Sheikh Mohammed bin Rashid Al Makhtoum addressed the UAE and the rest of the world. Ever the poet, he talked in metaphor of unity and reemergence:

    "People try to pelt stones or anything else within their reach at a fruit bearing tree. Then how it will be when we have seven fruit-bearing trees or more? It is natural that we are exposed to all these exaggerations, which are far from reality. The diligent waves have amazing patience....amazing."

    And although not worried by the hype, he chastised the media, who had dragged Dubai into the quagmire of debt conundrum. But the key point he made was this:

    "This company is independant of the government"

    Talking of Dubai World, this is distancing Dubai, the Emirate from the debt. Since Dubai World is the majority of the total debt, this makes sense. If DW is $60bn, say, then the rest of the debt, the true sovereign debt, is small cheese. That doesn't explain the fact that Dubai World is wholly owned by the state of Dubai. No matter, Sheikh Khalifa talked of unity ahead of UAE National Day, the magic men are restructuring the debt, and bar the billions lost on the regional markets, the world has moved on to discussion of US unemployment, GM and Obama's do or die strategic play in Afghanistan, to bring a happy UAE National Day. In the very small chance the magic men have to start hiving off Dubai World's Assets, Reuters have put together the list to help them out. Of course that wont happen

    Happy National Day! UAE Forever.

    "Dubai model" was the vision of one man
    Dubai ruler plays up strength as Gulf markets fall


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