Interpreting Middle East Economic News and Analyzing Market Trends

Category: Bail-outs & Bail-ins

Dubai times it right: Abu Dhabi agrees to rollover $20 billion in Dubai’s debt

Downtown Dubai

The timing could not have been better for Dubai to have big brother Abu Dhabi agree to rollover $20 billion in debt.  The debt is part of a broader restructuring  leftover from the credit crisis.  Dubai still has a lot of debt outstanding.  The IMF estimates that there is over $85 billion of debt maturing between now and 2017.  Dubai is playing its cards right and the timing could not be better.

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Cyprus goes from bad to worse: Tourists stay away and Russian money heads to the Virgin Islands

Empty beach in cyprus

        

The good news this past week was that the recession in the Eurozone is over.  Click here for the Bloomberg article and here for the New York Times article.  I’m sure the people in Cyprus are relieved… as are the people in Greece, Ireland, Spain and Portugal.  The reality is that the recession (more like depression) is just beginning in countries like Cyprus.  Tourist arrivals are down, Russian money is moving to the Virgin Islands and capital controls are strangling what’s left of the economy.

 

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The next financial crisis will wipe out the lagest financial institutions. How will Islamic financial institutions fare?

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The headline in Forbes from this past March reads “Risk is Back.”  Financial institutions today are riskier and have more derivative exposure than they had prior to the Lehman failure in 2008.  More specifically, a handful of banks carry over 95% of the estimated $250 trillion global derivative exposure.  This is trillion with a ‘T’ and not billion with a ‘B’.  To put this in perspective, the total US GDP in 2012 was about $16 trillion.  It’s already a foregone conclusion that the next financial crisis will wipe out these mega-institutions as they will be too-big-to-save.  What will happen to Islamic banks and financial institutions as the dominoes begin to fall?

 

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The world’s local bank can’t seem to stop breaking the law

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HSBC Bank, formerly known as The World’s Local Bank, can’t seem to catch a break lately.  Barely six months since the bank was ordered to pay $1.9 billion to settle charges of money laundering, the bank is being sued again.  This time, the law suit is coming from New York State.  Here’s the story from BBC News:

 

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Dubai World urged to sell more assets to pay creditors

Dubai World, the Dubai government’s prized possession, is not out of the woods yet.  The company which owns DP World, the global ports operator, renegotiated debts and set a new repayment schedule in 2011 after the company ran into liquidity issues.  The company has an upcoming payment of $4.5 billion, which is not due for another two years.  However, some of its creditors are getting nervous at the speed the company is moving at selling assets to be able to meet this payment on time.

 

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