The Dean

Amlak, Tamweel to merge under UAE govt bank

Two of Dubai's biggest property lenders, Amlak <AMLK.DU> and Tamweel <TAML.DU>, will be merged under a government-owned bank, the UAE ministry of finance said on Sunday, as the financial crisis bites Gulf Arab states.

Trading in both companies' shares were suspended after the
United Arab Emirate's finance ministry said it would supervise
the merger under the federal government's Real Estate Bank to
ensure a fair valuation and protect shareholders.

The combined market value of the firms is 2.5 billion dirhams
($681 million) -- roughly one-third of their worth since the two
Dubai-based companies first announced merger plans in Oct. 4.

Lenders and developers in the UAE have been battered by the
credit crisis after market financing evaporated, property values
plunged and buyers fled a market where land values have ballooned
during a five-year boom.

Speculation has grown, as the financial crisis squeezes
credit and hits stocks and real estate markets, that the federal
government may step in to help shore up confidence in Dubai.

Real Estate Bank is a government-owned entity aimed at
supporting the real estate sector and provide housing for UAE
nationals, the ministry's statement said.

Becoming a licensed bank would enable the two mortgage
lenders to take deposits and access emergency federal funds.
Amlak, the biggest Islamic mortgage lender in the UAE, cut off
new loans this month.

UAE lenders have responded to the credit crisis by shutting
off consumer credit to some clients and tightening conditions for
mortgages in a move that threatens to choke off a five-year
economic boom.

"It would make the market more efficient to have one entity
that can take deposits and have a banking licence," said a
Dubai-based equity analyst. "The funding issue will be solved."

Amlak declined to comment and Tamweel was not immediately
available to comment.

MELTDOWN

The UAE, the world's fifth-largest oil-exporter, is a
seven-member federation that includes the Gulf trade and tourism
hub of Dubai and is led by the emirate of Abu Dhabi, which is
home to most of the country's oil.

Amlak, whose shares have fallen 80 percent this year, last
week said it had stopped issuing new mortgages while Tamweel,
whose shares have fallen 85 percent, said it continued to operate
despite deteriorating property market conditions.

The companies will be combined as the UAE Real Estate Bank to
create the largest real estate finance institution in the
country, the state news agency WAM said.

Amlak, an affiliate of major Dubai developer Emaar Properties
<EMAR.DU>, earlier this year renewed its application to convert
into a bank, which would allow it to take deposits.

Amlak is already the largest publicly held Islamic finance
company in the UAE.

The two companies first said they intended to merge in
October. A newspaper reported at the time that the merged entity
would be a bank with a limited licence that would allow the
combined unit to raise liquidity by taking deposits.

admon

Trading in both companies' shares were suspended after the
United Arab Emirate's finance ministry said it would supervise
the merger under the federal government's Real Estate Bank to
ensure a fair valuation and protect shareholders.


I would imagine thats a difficult decision to make.

Can imagine all the dish dashes around the table, all seriously discussing:
1 dirham, or 2?

and I'm not talking about per share..

IndieG

Amlak and Tamweel, whose stocks have fallen more than 80 percent this year, will “merge under” Abu Dhabi’s state- owned Real Estate Bank, the United Arab Emirates’ Ministry of Finance said late yesterday in a statement. The transaction has the “blessing” of Dubai ruler Sheikh Mohammed bin Rashid al- Maktoum. No terms were disclosed, though the deal will be based on “international best practices,” the statement said.


The below statement is complete tosh....

“It seems to be a direct federal intervention to support the struggling entities,” said Dubai-based Raj Madha, senior banking analyst at EFG-Hermes Holding SAE, the largest Arab investment bank by market value. “The move will provide substantial federal support to these lenders and access to cheap funding.”

admon

Its just a bail out. At least this time the silver wasn't worth anything..

bimcnorth

So Abu Dhabi is bailing them out really...

But by doing it under the name of the Ministry of finance it´s less obvious and face is saved.
But it´s a logical step and we might see several similar deals in the coming year.

admon

Might as well rename the place right now Abu Dhabai

The Dean

"Cheap funding"? Well cheaper than they can raise it under their own name, perhaps.............

............. but where is this money coming from? Are they just tapping ADIA? Or do Ab Dab have a finance deal, with suitable terms for onward funding to Dubai?

More to this than meets the eye...........

bimcnorth

Abu Dhabis SWF:s (ADIA, MUBADALA, IPIC etc etc) got around $130bn in cash deposits right now, it´s not like they have been eager to invest much in stocks the last months..

And as much of their holdings are income generating bonds and treasury bills they are accumulating cash at an astonishing rate, cash that might be put to use in say...Dubai?

The Dean

But even Ab Dab doesn't have a bottomless pit of money..........

If they bail out Dubai, they risk catching the Dubai disease - i.e. a dodgy credit spread for their own future borrowings........

bimcnorth

Well, it´s not that Abu Dhabi are a borrower really, more a lender...but it might affect local companies perhaps.

As for credit ratings there´s much of soul searching within that community as most of the big guns are desperately trying to avoid to lower the ratings of USA and most other western countries because it might tip the scales.

To be honest there is no reasonable justification to having USA rated AAA while UAE is rated AA+ given that the US GDP vs National public debt makes USA looks worse than Argentina, Ethiopia, Pakistan etc.