Lebanon’s debt closes in on $50 billion
Lebanon’s official gross public debt inched closer to $50 billion, reaching $49.9 billion at the end of October 2009, according to the latest available figures from Byblos Bank. This represents a rise of 8.3 percent since the end of October 2008 and is mostly made up of interest payments on debt and over-budget spending by the government. Domestic debt, held mostly by local banks, increased by 14.8 percent over the same period to reach $28.7 billion, while externally held debt decreased 0.5 percent to register at $21.2 billion. Commercial banks continued to hold an increasing amount of the debt, accounting for 58.2 percent of the total value, followed by the central bank at 19.4 percent. Residents of Lebanon held 88.1 percent of the internal debt at the end of October 2009, according to Byblos Bank. The debt of the central bank, the National Social Security Fund, bilateral and multilateral loans, and that of Paris II and Paris III accounted for 35 percent of the total debt.
Abu Dhabi bails out Dubai
The government of Abu Dhabi stepped in with a $10 billion bond sale bail-out for Dubai on December 14, the day Nakheel — the property development arm of government-owned Dubai World — was to pay back a $3.5 billion sukuk (an Islamic bond). This Abu Dhabi bond sale was on similar terms to the previous $10 billion bond Dubai issued to the United Arab Emirates Central Bank earlier in 2009, as part of a $20 billion fund program set up in February 2009 to help struggling state-owned entities. Abu Dhabi had also granted Dubai $5 billion through a bond and sukuk fully subscribed to by two government-linked Abu Dhabi banks in November 2009. Global markets rallied after the announcement, with Dubai’s surging 10.4 percent and Abu Dhabi’s gaining 7.9 percent.
The total amount to be repaid on the sukuk came to $4.1 billion when interest was calculated. The repayment brought the total amount of Dubai World’s debt rescheduling down to some $22 billion, and is seen as the first move of what is expected to be a long process. Dubai still holds a substantial amount of debt, with estimates ranging between $80 billion and $150 billion due to a lack of transparency.
Lebanese exports and BOP continue to rise
The balance of payments (BOP) reached an all time high of $6 billion in October, the latest figures available, from $4.8 billion in September due to an increase of net foreign assets held by the central bank (up $886 million) and those of local banks and financial institutions (up $281 million). During the first 10 months of 2009 the BOP has gained a surplus of $7.04 billion. Fears that decreased foreign demand caused by the global economic downturn would impact the BOP were proved unfounded as import and export activity dropped a total of just 1 percent in the first 10 months of 2009 to reach an aggregate level of $16 billion.
Exports, which registered a year on year third quarter plunge of 25.3 percent in 2009, recovered in October, resulting in a net year-on-year loss of 3.9 percent in the first 10 months of the year.
Iraq completes second round of oil bids
Iraq has held the second round of oil bids in a move that is expected to more than quadruple the country’s output when projects from both rounds are completed, according to the Iraqi oil minister quoted in The Wall Street Journal. Of the 10 groups of fields available to be auctioned, a total of seven were snatched up by several multinational companies. Arguably the most significant bids were awarded to Royal Dutch Shell and Malaysia’s Petronas, which were jointly granted permission to develop the Majnoon field, one of the world’s largest untapped oil fields. Some other winners were the China National Petroleum Company, France’s Total, Russia’s Lukoil, Norway’s Statoil and relative newcomer to the international oil production scene, Angola’s Sonangol. If completed as-per the oil minister’s projection, the projects will put Iraq on or near par with Saudi Arabia in terms of oil production. The deals were based on a fee basis in which oil companies would get a set amount for each barrel produced from the fields. Shell’s bid guarantees the company just $1.39 per barrel for the Majnoon field. Iraq is exempt from the Organization of Petroleum Exporting Countries’ quota levels, which are loosely used to regulate supply in the global market. The latest bidding round attracted many more investors, mainly due to a “clarification” by the Iraqi government which reduced taxes for bidders retroactively. Iraq, however, still does not have an oil law that would protect the investments of foreign firms. Moreover, it is not expected to pass any legislation on the matter until after general elections in March.
Etisalat puts Lebanon in the crosshairs
The Emirates Telecommunications Company, Etisalat, has stated that it is interested in pursuing investment opportunities in the telephone services of Lebanon when the government starts to sell off state-owned assets, according to a report issued by Bank Audi, which quoted “company sources.” Etisalat is the latest in a series of telecom companies to voice their interest in Lebanon’s telecom infrastructure. The report said that the sources expressed their intent to make Etisalat one of the 10 largest telecom companies in the world and acquire stakes to meet this end. Etisalat acquired Sri Lanka’s Trigo in October for $207 million and is expected to begin operating in India in the first quarter of 2010.
Creditors give TID room to breathe
The Investment Dar (TID), a Kuwaiti investment house, announced on December 7 that it had reached an agreement with creditors regarding the restructuring of $3.5 billion of its debt. The endorsed program, decided upon by a panel of investors, agreed to restructure the debt over the next five years.
“The proposed plan is based on a restructuring of the existing financial arrangements with scheduled amortizations over a five-year period,” said Dar in a statement.
It continued, “TID will satisfy its financial arrangements in full over the five-year period. In addition, the proposed plan would provide TID’s banks and investors with an enforceable security package.”
The process was also overseen by a supervisor from the Kuwait Central Bank who had been assigned to the case in September.
On December 10, another Kuwaiti firm, Global Investment House, announced a restructuring deal after defaulting on its $3 billion of liabilities in late 2008. Global will repay $1.72 billion of its debt over the next three years and will place $1.7 billion in investments into two closed-end funds to act as collateral on the rest of its liabilities until they can be paid.
“It has been a time of a lot of pain and a lot of criticism, but today is a day of celebration,” said Chairwoman and Managing Director Maha al-Ghunaim to British daily The Financial Times.
