ABL adjusts benchmark lending rates
The Association of Banks in Lebanon (ABL) has recommended an adjustment of local and foreign currency benchmark lending rates to its member banks. In a circular dated April 12, ABL urged Lebanese banks to lower the Beirut Reference Rate (BRR) on lending in Lebanese lira (LL) from 7.27 percent to 7.21 percent. At the same time, it recommended raising the BRR on US dollar (USD) lending to 4.79 percent from 4.72 percent. The BRR on USD lending replaced the London Interbank Offered rate (LIBOR) as the national reference rate for lending in foreign currency in 2009, after the ABL had judged the LIBOR to no longer reflect the cost of funding and lending in Lebanon. The new benchmarks were adopted on both USD and LL lending in March and May 2009, respectively. Both BRRs constitute the basis to calculate the Beirut Prime Lending rate. ABL’s latest recommendations are part of efforts by Banque du Liban, Lebanon’s central bank, and the association to stimulate lending in local currency. The proposed adjustments will be effective as of May 2011.
El Zein group acquires controlling stake in MedGulf
Lutfi El Zein (LFZ) Holding, the investment vehicle owned by the insurance sector personality of the same name, has acquired a 51 percent stake in Mediterranean and Gulf Insurance and Reinsurance Group (MedGulf Group) in a transaction valued at $400 million. El Zein, long-time chairman and chief executive officer of MedGulf Group and previous holder of a minor shareholding in the group, purchased the stake from Saudi Oger, the conglomerate owned by the family of Lebanese caretaker Prime Minister Saad Hariri. The acquisition is the largest leveraged buy-out (LBO) in the Middle East since 2007 and the largest ever insurance LBO in the Middle East and North Africa region. A consortium of 16 banks arranged the deal, which includes a $175 million syndicated loan facility, part of a multi-tranche financing package. Lead arranger on the acquisition was Bank Audi; Deutsche Bank was the book runner. MedGulf Group, which is Lebanon based, is stakeholder in MedGulf Bahrain, which in turn owns 32 percent of MedGulf Saudi, a listed company.
Moody’s raises DP World debt to investment grade
Moody’s ratings agency raised the credit ratings of DP World, a leading global port operator and subsidiary of Dubai World, to investment grade with a stable outlook, citing the company’s rapid recovery in terms of operating performance in 2010 and into 2011. The upgrade to Ba1 from Baa3 includes DP World’s long-term foreign and domestic currency ratings, and the rating on its $1.5 billion Sukuk Islamic bond, due in 2017, with a total of $3.25 billion in debt affected. The positive rating action follows DP World’s late March announcement of 35 percent increase in 2010 net profits to $450 million, buoyed largely by strong volume growth in the second half of the year. According to Moody’s, the ratings are sustained by the company’s diversified global operations, expected growth in container traffic, as well as solid profitability and a strong liquidity profile.
Auction for Syria’s third mobile license postponed
Syria has suspended plans to auction off the country’s third mobile license due to political tensions and changes in its government. Scheduled for April 17, the license auction could not proceed due to a change in the supervisory committee overseeing the auction after Syrian President Bashar al-Assad replaced his prime minister and cabinet and promised to introduce new electoral and media laws in response to popular revolts. By the time of the auction’s suspension, the number of bidders had already shrunk from five to two companies. In March, the United Arab Emirates’ mobile giant Etisalat pulled out of the bidding, stating disappointment with the stipulated 25 percent revenue share allocation to the Syrian government. Etisalat’s bid was estimated at $122 million. Also citing Syria’s revenue terms, potential bidders France Telecom and Turkcell quickly followed suit and dropped out. By early April, Qatar Telecom Company (Qtel) and Saudi Telecom Company (STC) were the only bidders left. At the time, both companies reconfirmed their bidding commitments. Following postponement of the auction, Qtel said it was still firmly interested in pursuing the license despite the delay.
Plastic payment
on the rise in LebanonFigures released by Banque du Liban (BDL), Lebanon’s central bank, for February 2011 show that payment cards are still gaining favor with Lebanese consumers. According to BDL, the number of payment cards in the country reached 1.69 million in February 2011, up by 7.3 percent from the same time last year. Of all plastic payment methods, credit cards experienced the highest year-on-year increase in February of 15.4 percent, now totaling 395,000, or around 23 percent of all issued cards. Prepaid and charge cards were up 9 percent from the year before, amounting to 10 percent of all payment cards. Debit cards still held 66 percent of the market — with 1.12 million in all — though they recorded just a 4.5 percent increase year-on-year. Point of sale purchases in February jumped 24 percent year-on-year.
Kafalat guarantees fall
Guarantees issued under the Lebanese Kafalat loan guarantee program dropped 23.21 percent year-on-year in first quarter of 2011. However, the average value per guarantee rose to $139,200, up 17.76 percent from an average of $118,200 a year earlier. The face value of guarantees issued in the first quarter of 2011 reached $41.9 million. Allocation of loans by sector saw the industrial sector in the lead with 39.87 percent of total guarantees. Loans to the agricultural sector, comprising 37.21 percent of total guarantees, took the biggest hit as they declined 41.97 percent from a year earlier. In contrast, tourism sector guarantees increased by a yearly 38.10 percent since end-March 2010, accounting for 19.27 percent of total guarantees. Geographic distribution of loans at the end of the first quarter showed that companies in Beirut and Mount Lebanon accounted for 50.5 percent of Kafalat loans. The Kafalat scheme has been noted internationally for its quality, including praise as best performing credit guarantee scheme in the Middle East and North Africa in a March 2011 report by the World Bank.
Lebanon’s life premiums up 15 percent in 2010
Total life insurance premiums in Lebanon increased 14.8 percent to $356.7 million in 2010, according to the annual insurance sector survey by Al Bayan magazine. The report said the 2010 growth was double the 7 percent increase achieved the previous year, adding that life insurance penetration in Lebanon stood at 0.9 percent of gross domestic product for 2010, at an insurance density of $89.2 per capita. Firms reporting higher life premiums vastly outnumbered losers as 27 out of 33 life providers posted gains, led by two firms claiming triple-digit gains. Market share concentration by Lebanon’s top five life insurers dropped by about five percentage points year-on-year to 59 percent in 2010, representing an aggregate value of life premiums of $210.3 million. Metlife ALICO ranked first in life premiums volume with $70.7 million, or 19 percent market share. The other companies in the top five for 2010 were Allianz SNA, Bancassurance, Arope and LIA with life premiums of $40.8 million, $37.5 million, $36.5 million and $24.8 million, respectively. Arabia Insurance reported the biggest growth, an 829 percent leap that propelled it from 15th to 7th place in one year. MedGulf saw the sharpest decline among the country’s top 10 insurers; its life premiums dropped 14.4 percent in 2010.
UAE IPOs rising, but slowly
In signs of life for Gulf Cooperation Council primary markets, three companies in April announced plans to sell shares through Initial Public Offerings (IPOs) in 2011. Between May 1 and May 11, United Arab Emirates’ Eshraq Properties will be offering 55 percent of the company in an IPO worth $220 million, the first IPO on a UAE exchange by a real estate developer since Dubai’s Deyaar in 2007. Funds raised are expected to finance Eshraq’s developments, including the $2 billion Marina Rise on Al Reem Island. After a dry spell of no public offerings in more than two years in the UAE, the Eshraq flotation will be the Abu Dhabi Exchange’s third IPO in 2011, following two insurance-related offerings in February and April. While financial observers judge the return of primary markets positively, international firms have warned recently that political risk could deter investors. In the two other new IPO announcements, Saudi Integrated Telecommunication Company (ITC) received approval from the country’s Capital Market Authority to offer 35 percent of its shares between May 2 and 8 in a bid to raise $93 million. In Oman, electricity producer SMN Power Holding said it is planning a 35 percent offering on the Muscat Securities Market in 2011; further details on the offering’s size and timing were not available.
