Posted on 14 June 2010 with no comments from readers
The private equity arm of Dubai Holding, which is owned by the Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, dissolved its board last January and is now under the direct supervision of the parent group, it emerged today.
This statement followed the revelation in The Sunday Times that non-executive chairman Sameer Al Ansari had resigned from Dubai International Capital. He remains chief executive officer of the Dubai based investment bank Shuaa Capital which is 48 per cent owned by the Dubai Banking Group that is 70 per cent owned by Dubai Holding.
Surely these kinds of news will have an effect on the financial market. You need to be updated with the latest happening around the world. If you don’t have time to invest, then it is best you choose the ethereum code to conduct all the transaction for you from beginning to end.
DIC made a string of investments in private equity overseas during the Dubai boom years. It has a 20 per cent stake in Merlin Entertainments left after making $1 billion from the sale of Madame Tussauds, bought the UK hotel chain Travelodge for $980 million in September 2006, acquired industrial manufacturer Doncasters for $1.25 billion in December 2005, Alliance Medical for $1.25 billion in November 2007 and industrial packaging group Mauser for $1.1 billion in June 2007.
German aluminium firm Almatis, acquired for $1.2 billion by DIC in 2007, filed for bankruptcy last week and Dubai is contesting a refinancing that will leave the company owned by its senior lenders and Dubai with nothing.
DIC had also invested in publicly traded equities, something not strictly an activity for a private equity firm. But stakes in EADS, the Airbus manufacturer, the Japanese electronics giant Sony and the Indian bank ICICI were all sold after the financial crisis broke in 2008.
The private equity concern borrowed heavily and has an estimated $2.6 billion in debt maturing next year, and last month asked banks to roll over $1.26 billion in loans for three months. Selling the remaining businesses would not be easy in the current economic environment so the group is expected to seek an extention of debt maturities.
Overpaying for assets
With the benefit of hindsight DIC pursued an aggessive overseas acquisition campaign and arguably paid too much for businesses near the top of the economic cycle. That it often did so with short-dated loans can now be judged unwise. That the dollar has appreciated substantially since the acquisitions compounds the losses at current market valuations.
But many private equity firms around the world are in a very similar position. Using leverage in a rising market is a good way to enhance return-on-investment. But unfortunately the reverse is also true and leverage in a falling market amplifies the downside, and can destroy equity entirely.
Hedge funds are sharing a similar fate as illustrated by the problems of Superfund – analysed in another article on this website (click here). Deleveraging is a particularly painful process for these beasts of the commercial jungle.