Archive for the ‘SWF’ Category

Qatar’s sovereign wealth fund (SWF), the Qatar Investment Authority (QIA), is reported by the Financial Times to be interested in buying some of the U.S. Treasury’s 27% stake in Citigroup. Interestingly, while most other SWFs have shied away from bank investments after previously ill-timed ones in 2008, Qatar has fared well, notably from its investments in Credit Suisse and Barclays, according to the FT. QIA has $65 billion in assets, per a ranking of SWF assets on Wikipedia. There appears to be no mention of asset size on QIA’s website. In any event, the principals of TradeFlow21 view QIA’s potential investment as beneficial for all parties, including the capital markets at large.

Zuffla LLC’s Ultimate Fighting Championship (UFC) is potentially a billion dollar-plus company, based on reported prior buyout offers of similar amounts. Abu Dhabi’s 10% stake thus, while undisclosed, could be upwards of $100 million. UFC is the largest grossing PPV franchise in history, having beaten its own record in 2009 at $349 million. With seemingly plenty of growth still possible in the U.S., the UFC and Abu Dhabi have their eyes set on international growth — and of course on some MMA action in Abu Dhabi. See the clip (and link) from Yahoo! Sports below for more details.

clipped from sports.yahoo.com Zuffa LLC, the parent company of the Ultimate Fighting Championship, announced on Tuesday the completion of a deal in which a 10-percent interest in the company to the Abu Dhabi government-owned Flash Entertainment. Flash Entertainment was formed two years ago by the Abu Dhabi government’s Executive Affairs Authority, which brings big-name entertainment and sporting events to the United Arab Emirates and the city, including big-name concerts, Formula 1 racing, and in recent weeks, a Rihanna New Year’s Eve concert and the Capitala World Tennis Championship. Sheikh Tahnoon Bin Zayed Al Nahyan, who is affiliated with Flash Entertainment, is an MMA fanatic who promoted early world submission grappling championship events through the Abu Dhabi Combat Club. He was attending college in the U.S. and saw the first UFC event live in 1993.

The Dubai Exchange rallied 10.4 percent yesterday in the wake of a $10 billion credit line from Abu Dhabi, coagulating some of the recent hemorrhaging.  A portion of the funds will reportedly be used to meet a $4.1 billion bond payment owed by Nakheel–a real estate subsidiary of Dubai World.  Though seen as a positive step in restoring fiscal balance, the process, in the view of one market analyst, “is far from over.”  (See Financial Times coverage and also read TF21 Managing Partner Lew Nescott’s take on the viability of Dubai.) 

In a recent blog post at the Council on Foreign Relations, economist Brad Sester and a counterpart at Roubini Global Economics made their best estimate of the size of sovereign wealth funds (SWFs). The financial crisis of 2008 put a dent in Gulf funds, but collectively they are still sizable, exceeding $700 billion (easily $1 trillion-plus when including Saudi Arabia’s conservatively managed reserves), and growing, albeit slower — ultimately contingent on the price of crude and domestic financing needs. See the table below (accessible by clicking the link at the end of the post to continue reading) and take note of the first two listings, both of the UAE and the total figure for the GCC (Gulf Cooperation Council), as well as the SAMA (Saudi Arabian Monetary Agency), although again the latter is said to be predominately invested in traditional reserves as opposed to riskier assets. Finally, see also a post from last summer by TradeFlow21′s Steven Towns, which briefly explains the importance of SWFs and takes a look at top funds’ assets per capita. Read the rest of this entry »

On Thursday, shares of Providence, Rhode Island-based Textron (NYSE: TXT) soared 49% to $13.56 on a report by a Kuwaiti newspaper that said investors from the UAE and Kuwait were eying a takeover at $21/share. Textron, the maker of Cessna Aircraft corporate jets and also a defense contractor (Bell Helicopters), traded as high as $65 last year, before spiraling down to as low as $3.50 last month.  The problem with Textron is two-fold, although neither issue is likely to ground Middle East investors. First, its financial arm has effectively turned Textron into another victim of the credit crisis — a JP Morgan analyst says it has a negative value. Second, there is no chance Bell Helicopter will find itself under non-US ownership given its defense ties. Long story short, the emergence of Middle East investors, as opposed to earlier rumors of a potential takeover by a US defense player, should be welcomed by stakeholders. Trading under $7.50/share before the rumors began, the stock has already doubled, and could basically triple at the reported takeout price. Textron Financial will likely be absorbed by the new investors, while Bell will be sold, leaving Cessna flying high. The alternatives of muddling through, or a takeout at a lower price (as would be the case in a domestic deal), are certainly less palatable.

If not for U.S. Treasury Secretary Geithner’s latest toxic asset rescue plan — which actually finally tickled the stock market — Abu Dhabi’s Aabar Investments’ $2.66B (9.1% stake) investment in Daimler AG would have been the headline of the day. Instead of “cash for trash,” Aabar and Daimler are investing in R&D in fuel-saving technology. Aabar is now Daimler’s leading shareholder ahead of the Kuwait Investment Authority (6.9%).

Bloomberg reports that Aabar has already transferred the money. Although dilutive, Daimler shores up its balance sheet. Meanwhile, along with return on its capital investment, Abu Dhabi is striving to learn from Daimler’s expertise as it aims to develop its own cleaner energy technologies. Gulf region sovereign wealth has perhaps wisely sat on the sidelines in recent months as it concerns casting more capital at Western banks, but let’s not forget there was also a sizable investment in chipmaker AMD by Abu Dhabi last October.

Details below from MarketWatch, of an announcement by Barclays (UK: BARC) (NYSE: BCS) of an US$11.9B capital raising effort via convertible notes from Qatar Holdings, Sheikh Mansour Bin Zayed Al Nahyan, a member of the Abu Dhabi royal family, and among other existing shareholders. It’s reported that pending conversion rates, Al Nahyan is poised to become Barclay’s top shareholder with a 16.3% stake, followed by Qatar at 12.7%. Those convertibles have coupons ranging from 9.75% to 14%.

Assuming Barclays doesn’t fail, it appears to be quite a deal for Middle East players — in fact, a win-win really, since Barclays gets the capital it so badly needs to boost its Tier One, and avoids heavy FSA hands sans a government injection.

clipped from www.marketwatch.com LONDON (MarketWatch) — Barclays on Friday struck a deal to raise up to 7.3 billion pounds ($11.9 billion) in fresh capital as the U.K. lender signaled its preference for cash from Middle Eastern royal families to the British government. Barclays said it’s issuing 3 billion pounds of notes that carry a 14% coupon to Qatar Holding, a state-backed investment vehicle, and Sheikh Mansour Bin Zayed Al Nahyan, a member of the Abu Dhabi royal family. The notes will carry options for the issue of up to 3 billion pounds at a price of 197.775 pence a share. Barclays also said it’s issuing 2.8 billion pounds of mandatorily convertible notes to Qatar, Qatar Holding’s Chairman Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, and Al Nahyan, as well as up to 1.5 billion pounds to existing institutional shareholders. The convertibles will have a coupon of 9.75% and will convert into equity at a price of 153.276 pence.

As reported in a TradeFlow21 posting on September 29th, it was suggested that sovereign wealth funds  may soon join a list of suitors seeking bargains among Wall Street’s ruins.  In an interview with the Financial Times published today, Deputy US Treasury Secretary, Robert Kimmitt,  indicated that SWFs were “actively looking at US opportunities.”  While Gulf nations struggle to address liquidity issues in banks and stock exchanges at home, many of their sovereign funds may also be waiting for the US market to hit a ‘true bottom’ before increasing such activity.  Patience is the rule of thumb here–buy low, sell high.

Liquid Abu Dhabi investors to chip-maker AMD’s rescue. The cost: $700M and $1.2B in assumed debt for Advanced Technology Investment Co. (ATIC) to acquire a sizable chunk in the JV (Foundry Co). ATIC is also said to have a deep pocketbook of between $3.6B-$6B for capacity expansion. Meanwhile, Mubadala boosts its equity stake in AMD to 19.3% from 8.1%. See clips of coverage by MarketWatch below.

clipped from www.marketwatch.com NEW YORK (MarketWatch) — Advanced Micro Devices Inc. said Tuesday it plans to spin off its manufacturing operations in the form of a multibillion-dollar joint venture with an Abu Dhabi investment firm. AMD(AMD) said it will own 44.4% of Foundry Co., as the venture will be called. The remaining 55.6% would be own by Advanced Technology Investment Co., an investment company formed by the government of Abu Dhabi. Under the deal, ATIC will pay $700 million to AMD for its ownership stake in Foundry Co., with the joint venture also assuming $1.2 billion of AMD’s debt. At the same time, Mubadala Development Co. will pay $314 million to AMD for 58 million newly issued shares and warrants to buy an additional 30 million

Though Gulf nations have certainly felt the aftershocks of Wall Street’s crash, including the UAE, which had to pump billions into their public market to sustain liquidity levels, the region may soon join a growing list of institutional and sovereign suitors seeking bargains among the ruins.  As the U.S. Congress fiddles with the terms (and moral hazards) of a $700 billion bailout, Wall Street continues to burn.  Even with the passage of the bailout, the wholesale collapse of over-leveraged companies and industries burdened by subprime toxic waste is likely to proceed, largely unabated and at an accelerated pace.