Emirates NBD, DP World and Bourse Dubai raise cash with asset sales

The UAE’s largest bank today announced the $555 million sale of a 49 per cent stake in its payments arm to Abraaj Capital, the local private equity group in the largest such deal since the global financial crisis, while yesterday the quoted port operator DP World agreed to sell 75 per cent of its Australian subsidiary for $1.5 billion. This follows close on the raising of $673 million by Borse Dubai last week from the sale of half its interest in Nasdaq OMX.

Dubai business is clearly still in deleveraging mode as it faces up to $20 billion in loans falling due in 2011. The sale of Emirates NBD’s Network International smacks of caution over possible bad loan provisions as the bank is pretty flush with funds after selling car loans to Japanese investors earlier this year.

Selling family silver

Networking International handles credit-card processing services to 70 regional banks with 45,000 machines in 28,000 stores as well as 700 ATMs across the Gulf. It is a well regarded business with excellent growth prospects given the long-term switch away from cash payments and the demographics of this wealthy region.

However, UAE businesses are chastened by the recent bust that followed the 2003-8 property boom, and while debt refinancing appears well in hand, there are widespread fears about what another leg to the global financial crisis might mean for the UAE as it was hardest hit in the region by the first crisis.

2011 challenges

If what ArabianMoney sees for 2011 comes true then such caution is only prudent, and for once the immediate problems do not concern the United States.

The main worries are that a euro zone financial crisis will raise global interest rates significantly and produce another banking crisis that will interupt credit flows; and that the Chinese economy is overheating, and may face a Dubai-style bust very soon, with clear implications for oil prices and trade.

With prudent and pragmatic balance sheet management the UAE should be able to negotiate through these crises and even come out on top as one of the world’s few net creditor countries, actually owed more money by others than it owes to them.

That said the big financial stories of 2011 in the emirates are likely to continue to surround the rescheduling of debts and major asset sales. Whether that will include IPOs or privatizations remains to be seen but the equity markets will probably be too weak to support them.