By Jason Benham and Alastair Sharp
DUBAI/CAIRO, Dec 9 (Reuters) - A unit of Dubai Holding has sold a 7 percent stake in Egyptian investment bank EFG Hermes for $120 million, a TV station reported, in a sign the emirate's debt crisis is moving beyond troubled Dubai World.
Dubai's debt saga has shaken global investors since the emirate's Nov. 25 announcement it wanted a standstill on Dubai World debt. Fears are growing that Dubai Holding, which belongs to the ruler of the emirate, will be next to be restructured.
The 25 Egyptian pounds per EFG share sale to Western investment funds will leave Dubai Group with 75 percent of its holding in the investment bank, Al Arabyiya television reported on Wednesday.
The price was an 11 percent discount to Tuesday's close. EFG shares were down 7.2 percent at 26 Egyptian pounds ($4.75) at 1125 GMT, valuing the firm at just over 10 billion pounds.
The sale price indicated a 60 percent discount to the $1.1 billion Dubai Group paid in November 2007 for its nearly 25 percent stake.
Karim Hosny, a trader at Pharos Securities in Cairo, said: 'It (the stake sale) is logical, they need the money for the debt, so people are not worried. They think that buying at these levels is a catch for whoever is buying'.
Hosny said the trade was executed in two transactions, both above 26 pounds.
Soud Ba'alawy, Dubai Group's executive chairman, declined to comment. Executives at EFG also declined to comment.
Analysts have said they expect the Gulf emirate to offload further assets as it struggles to deal with debt obligations and capital markets become increasingly reluctant to lend to it.
'Dubai Holding is carrying quite a bit of debt -- about $13-14 billion -- and disposal to generate cash flow would not be unexpected,' said David Butter, regional director for Middle East and North Africa at Economist Intelligence Unit.
'Refinancing for anything with Dubai's name on it is now going to be very difficult. The crisis has exposed the difficulty Dubai authorities will have in trying to cordon off what they consider to be the real problem areas,' Butter said.
Dubai's finance chief said on Dec. 7 that while Dubai World might sell some assets to finance commitments, the government, which borrowed to transform the emirate from a desert backwater into the a major trading and tourism centre, would not make any disposals.
Dubai's government and Dubai World were not the same, suggesting the emirate's most valuable firms like Emirates, Dubai Aluminium (DUBAL) or its 21 percent London Stock Exchange stake would not be involved in a firesale, he said.
Dubai Holding is the most at risk of defaulting on debt after Dubai World, according to Barclays Capital. It has $1.9 billion due for repayment in 2010.
'International banks are not going to see this as a Dubai World problem. They will see it as a state problem, a regional problem,' said Keith Edwards, head of asset management at Doha-based investment company The First Investor.
'Dubai has to retrench and concentrate on what it wants. If it wants to retain its status as a financial hub it has to act very quickly,' he said.
The group started restructuring earlier this year by merging back office operations. Dubai Group has laid off more than 70 percent of its staff since the start of the financial crisis.
On Tuesday, Moody's downgraded six Dubai-linked issuers including Dubai Holding Commercial Operations Group.
Dubai Holding is merging three of its four property units with Emaar Properties, builder of the world's tallest tower in Dubai.
(Additional reporting by Matt Smith and Rachna Uppal; Writing by John Irish; Editing by Dan Lalor)
($1 = 5.470 Egyptian pounds) Keywords: DUBAIHOLDING EFGHERMES/ (inal.ersan@thomsonreuters.com; +971 4 366 4255; Reuters Messaging: inal.ersan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
DUBAI/CAIRO, Dec 9 (Reuters) - A unit of Dubai Holding has sold a 7 percent stake in Egyptian investment bank EFG Hermes for $120 million, a TV station reported, in a sign the emirate's debt crisis is moving beyond troubled Dubai World.
Dubai's debt saga has shaken global investors since the emirate's Nov. 25 announcement it wanted a standstill on Dubai World debt. Fears are growing that Dubai Holding, which belongs to the ruler of the emirate, will be next to be restructured.
The 25 Egyptian pounds per EFG share sale to Western investment funds will leave Dubai Group with 75 percent of its holding in the investment bank, Al Arabyiya television reported on Wednesday.
The price was an 11 percent discount to Tuesday's close. EFG shares were down 7.2 percent at 26 Egyptian pounds ($4.75) at 1125 GMT, valuing the firm at just over 10 billion pounds.
The sale price indicated a 60 percent discount to the $1.1 billion Dubai Group paid in November 2007 for its nearly 25 percent stake.
Karim Hosny, a trader at Pharos Securities in Cairo, said: 'It (the stake sale) is logical, they need the money for the debt, so people are not worried. They think that buying at these levels is a catch for whoever is buying'.
Hosny said the trade was executed in two transactions, both above 26 pounds.
Soud Ba'alawy, Dubai Group's executive chairman, declined to comment. Executives at EFG also declined to comment.
Analysts have said they expect the Gulf emirate to offload further assets as it struggles to deal with debt obligations and capital markets become increasingly reluctant to lend to it.
'Dubai Holding is carrying quite a bit of debt -- about $13-14 billion -- and disposal to generate cash flow would not be unexpected,' said David Butter, regional director for Middle East and North Africa at Economist Intelligence Unit.
'Refinancing for anything with Dubai's name on it is now going to be very difficult. The crisis has exposed the difficulty Dubai authorities will have in trying to cordon off what they consider to be the real problem areas,' Butter said.
Dubai's finance chief said on Dec. 7 that while Dubai World might sell some assets to finance commitments, the government, which borrowed to transform the emirate from a desert backwater into the a major trading and tourism centre, would not make any disposals.
Dubai's government and Dubai World were not the same, suggesting the emirate's most valuable firms like Emirates, Dubai Aluminium (DUBAL) or its 21 percent London Stock Exchange stake would not be involved in a firesale, he said.
Dubai Holding is the most at risk of defaulting on debt after Dubai World, according to Barclays Capital. It has $1.9 billion due for repayment in 2010.
'International banks are not going to see this as a Dubai World problem. They will see it as a state problem, a regional problem,' said Keith Edwards, head of asset management at Doha-based investment company The First Investor.
'Dubai has to retrench and concentrate on what it wants. If it wants to retain its status as a financial hub it has to act very quickly,' he said.
The group started restructuring earlier this year by merging back office operations. Dubai Group has laid off more than 70 percent of its staff since the start of the financial crisis.
On Tuesday, Moody's downgraded six Dubai-linked issuers including Dubai Holding Commercial Operations Group.
Dubai Holding is merging three of its four property units with Emaar Properties, builder of the world's tallest tower in Dubai.
(Additional reporting by Matt Smith and Rachna Uppal; Writing by John Irish; Editing by Dan Lalor)
($1 = 5.470 Egyptian pounds) Keywords: DUBAIHOLDING EFGHERMES/ (inal.ersan@thomsonreuters.com; +971 4 366 4255; Reuters Messaging: inal.ersan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
© 2009 AFX News
