December 2009
Ireland & deficit: The Irish Department of Finance has reported an Exchequer deficit of $35.3B for 2009, vs. $18.2B in 2008.
Ireland is a major base for international aircraft lessors and investors.
Iceland's president will not sign a controversial bill to $5.45B in compensation to the British and Dutch governments over the failure of Icelandic banks.
Iceland has received $10B in financial support from other countries including a $2.1B loan from the IMF received in November 2008.
Icelandic banks, airlines, and lessors are significant niche players in the global aircraft trading and financing business.
Japan: Finance minister resigned due to ill health as key decisions are being made about government support for Japan Airlines.
Japan’s economy: Public debt is almost 200% of GDP as Japan’s baby boomers are hitting retirement & savings are at their lowest ebb.
Sovereign risk: Austria nationalized Hypo Group Alpe Adria (Klagenfurt), a key regional bank, with assets of $63B.
Hypo is a subsidiary of Germany’s BayernLB, a bank in Germany's state-controlled Landesbank sector.
Systemic threat: Ownership by Germany’s BayernLB and relationships with other Austrian banks made the failure of Hypo a systemic threat.
UniCredit SpA, Raiffeisen Zentralbank and Erste Bank AG, will provide Hypo with $725M in contingency liquidity support.
BayernLB lost more than $5.4B on its Hypo investment. CEO resigns.
German banks may have to write off $130B in bad loans according to the Central Bank.
Germany's eight Landesbanken, many active in aviation, provide wholesale-banking services to Germany’s network of local savings banks.
Dubai, $80B to $100B in debt, receives $10B in financial support from Abu Dhabi to be used to refinance Dubai Word debt.
Dubai bailout: Abu Dhabi has provided Dubai with $25B in the last year, mostly by buying Dubai government bonds.
Abu Dhabi & Dubai are the two emirates that share control of the UAE, a federation of seven semiautonomous city-states.
Dubai World: $4.1B of the emergency funds will be used to pay off debt due by subsidiary Nakheel property.
Dubai World said it is pushing ahead with talks to convince lenders to agree to a standstill on repaying some of its debt.
Abu Dhabi rationale: The move by Abu Dhabi is aimed at quashing worries before they undercut confidence in the United Arab Emirates as a whole.
UAE's central bank said it remains committed to standing behind the country's banks, including those with exposure to Dubai World and Nakheel.
Bankruptcy code is to be introduced in Dubai to increase openness and protect creditors in a country where bankruptcy proceedings are untested.
Standard & Poor's warned that the Dubai government's ability to bail out other firms remains
uncertain.
Dubai financial crisis revelations: (1) The Dubai Government will not guarantee Dubai World debt, a misapprehension common among investors.
Dubai financial crisis revelations: (2) International investors high anxiety as the repayment of the $3.5B Sharia bond owed by Nakhee becomes due on Dec. 14.
Dubai financial crisis revelations: (3) Contracts will mostly have been done under a mixture of common and Sharia-compliant law bringing contract interpretation into unknown territory.
Dubai financial crisis revelations: (4) If the relevant contract documentation allows it a case may be held in the UK or USA but enforcement will have to take place in Dubai.
Dubai financial crisis revelations: (5) There is more uncertainty in Dubai as to outcome for claims because there has never been a major corporate insolvency.
Dubai financial crisis revelations: (6) There are bankruptcy provisions in the UAE’s commercial codes but no structured work-out system such as Ch11 in the US.
Dubai financial crisis revelations: (7) Dubai World holds many assets in the West that enforcement of the debt against such assets could take place abroad.
Sovereign risk: Ukraine economy contracted 15% in 2009; inflation hit 16% as the government fails to implement policies to receive $3.5B installment of $16.8B IMF loan.
Sovereign risk: Greece rules out going to the International Monetary Fund for aid in solving its $435B debt problem.
Sovereign risk: Greece will not default on its debts say the Greek prime minister as the government plans to reduce public deficit from 12.7% of GDP 8.7% in 2010.
Sovereign risk: EU provided bailout assistance to Hungary, Latvia, and Romania in 2008Emirates fleet financing: Dubai’s
Emirates Airline says it raised the $1.13B to finance 6 A340s. through Citibank & Doric Asset Finance.
Citibank & Doric helped to fund three of A340s each, the first to be delivered on an Emirates order for fifty-three.
Sovereign risk: Moody’s Investor Service has said that it fears Dubai businesses will face higher borrowing costs in the wake of the Dubai World crisis.
Sovereign risk: Moody’s is holding the credit rating for the UK and the USA at current levels. Moody’s reports on 17 countries.
Emirates Airlines (Dubai) has never had a financial problem with its plans to continue to grow its fleet.
Emirates say that banks in the region and banks around the world are confident in Emirate’s financial stability.Sovereign risk: Greece, Ireland, Spain put at higher sovereign debt risk fuelled by Dubai's financial problems.
Greece's Finance Minister George Papaconstantinou has acknowledged growing fears about its ability to pay its debts.
Greece’s credit rating: Citing a fiscal deterioration, Fitch Ratings cut Greek debt to BBB+ with a negative outlook.
Credit rating: This is the first time in 10 years a ratings agency has put Greece below the A investment grade. It is the only euro zone state below A grade.
China adjusts its economic growth model for 2010 (GDP 8.3%) as economic stimulus and easy credit policy stay in place
Bank failures in the USA reach 130 for 2009 to date.
Middle East default concern widens as two conglomerates favor local bank creditors over BNP, Citi, RBS, HSBC & Standard Chartered.
Saudi conglomerates Saad Group and Ahmad Hamad Algosaibi, family-owned businesses, defaulted on debt in September owing $20B.
Dubai stock prices are at the lowest point since the Dubai World crisis began two weeks ago.
Tuesday 8th December 2009
Dubai Debt: Cumulative liabilities are currently rising faster than investments are able to generate returns says Moody’s.
Dubai exposure: Moody has identified $47B+ in liabilities at government-related companies. Represents more than 100% of 2006 GDP.
Dubai leverage raised through state-owned corporations will continue to grow faster than GDP for the next 5 years.
Dubai World unveiled something of its plan for restructuring $26B of its borrowings reports the BBC. www.aviationregister.biz
Dubai rescue: UAE central bank offers an extra liquidity facility to UAE banks & foreign banks in the Emirates. www.aviationregister.biz
Dubai's government distanced itself from Dubai World's problems saying that it would not guarantee the company's debt says the BBC.
Dubai finance minister said creditors think Dubai World is part of the government, which is not correct. www.aviationregister.biz
Monday 30th November 2009
Emirates Airlines & Dubai crisis: Airbus says customer Emirates airlines is meeting its payment obligations for A380 delivers, a key part of expansion plans.
United Arab Emirates, of which Abu Dhabi is a dominant state, eases credit to local banks via its Central bank to help them through the Dubai crisis.
UAE agrees to backstop Dubai to avoid the tail risk of a major sovereign default in Dubai as likely debt exceeds $100B & not $80B as previously reported.
Abu Dhabi and Dubai stock exchanges fell 6% and 7% respectively, the max allowed, as the crisis continues.
Real Estate: 40% of office space in Dubai is empty
Systemic Risk: 19 of the 24 banks identified by the UK’s Financial Stability Board are participants in the aircraft financing market.
Sunday 29th November 2009
Dubai fallout: Indians form 42.3% of the population of Dubai and major layoffs would affect remittances and travel to India.
Dubai is serviced by an estimated 95 airlines including many major flag carrier and low cost carriers servicing the Middle East.
Carriers at risk from lost Dubai revenue: Air Arabia, Air India, IndiGo, Jazeera Airlines, Kingfisher, and RAK Airways.
Saturday 28th November 2009
Abu Dhabi will "pick and choose" how to assist its debt-laden neighbor Dubai.
Abu Dhabi, oil-rich & home to the U.A.E.'s rulers, provided $10B in aid to Dubai in February.
Dubai World fallout: Abu Dhabi has cash on hand of $850B vs. Dubai’s debt of $80B vs. Dubai's ruler, Sheik al Maktoum net worth of $16B.
Dubai World bonds price fall: $3.52B bonds (one of the Islamic bold ever issued), due in
December, traded at a 10% premium, now down 50%.
Dubai fallout: Confidence in the economic standing of Dubai has collapsed.
Risk assets globally are weaker because Dubai World is restructuring resulting in the largest relative jump since March 5. (CDR Credit Indices)
Banks: Aerospace banks with exposure to Dubai: HSBC, Standard Chartered, Barclays, RBS/ABN-Amro, Citibank, BNP, Lloyds.
Dubai fallout: As Bear Stearns was a harbinger of failures of overleveraged investment banks
Dubai raises concerns about heavily indebted countries. (NYT)
Dubai risks a sovereign default that could ripple through developing nations that are major aerospace markets.
Country risk is rising for Brazil, China, Greece, Indonesia and the UK.
Government & corporate bond impact: Cost of insuring bonds rising to levels last seen in July 2009. (CDR Credit Indices)
Friday 27th November 2009
Dubai, in default, has total government debt estimated at $80B & about 65% of that is held by local investors.
Dubai World had $59B of liabilities as of August, most of Dubai's total debt of $80B.
International banks' liabilities related to Dubai World could be as high as $12B in syndicated and bilateral loans. (Thomson Reuters)
Bank worldwide are writing down $2.8T between 2007 and 2010 based on estimates from the IMF because of the global credit crisis.
Airbus, Boeing, GE/Pratt, & Rolls-Royce have commitments from Dubai Aerospace and Emirates Airlines for orders valued in excess of $87B.
Airbus and Boeing production lines for the A320, A350, A380, B737NG, B777, and B747 have slots allocated to Dubai Aerospace and Emirates Airlines.
Dubai decision to restructure Dubai World debt affects aerospace banks: Barclays, HSBC, Standard Chartered, RSBC, Deutsche Bank, ING Group and Sumitomo Mitsui Financial Group.
Dubai Aerospace subsidiary DAE Capital has an aircraft portfolio comprising 37 single aisle and wide-body aircraft.
DAE Capital has 24 aircraft delivery commitments of which 15 are being purchased for lease back to existing operators.
DAE Capital has committed to invest $27B that will include 100 A320s and A350 XWBs, 100 B737NGs and wide-bodies for delivery from 2010.
Emirates Group is owned by the Government of Dubai via the Investment Corporation of Dubai.
Emirates Group is headquartered in Dubai and is a public international travel and tourism conglomerate holding company.
Emirates Group has 50 business units and employs about 48,000 people.
Emirates Group owns Emirates Airline, the national airline of Dubai and the largest airline in the Middle East.
Emirates, (Est. ’85 with two leased aircraft) has 137 aircraft, flies to 100 cities, carries 25M passengers, $12B revenues, & $265M profits.
Emirates has invested heavily since 2000 in a state-of-the-art fleet.
Emirates operates four wide-body types: A330, A340, A380, and the B777.
2008(July): Emirates received its first A380-800 and in August 2008, it became the second airline to fly the A380-800.
Emirates has firm orders for 163 aircraft, and options for 70 more, 134 aircraft from Airbus and 39 Boeing aircraft; value $60B.
2000 (April): Emirates was a launch customer for the A380, and ordered five A380-800s and two A380-800Fs.
2001: Announced the largest order in aviation history for 58 Airbus and Boeing aircraft valued at $15B including 15 more A380-800s.
2003: Ordered 21 A380-800s.
2005: Announced the largest-ever order for 42 B777 family of aircraft valued at $9.7B.
2006 (April): Ordered two more A380-800s & cancelled the A380 freighter orders.
2006: Signed a Heads of Agreement for 10 B747-8Fs fitted with GE’s GEnx engines, and valued at $3.3B.
2007: Announced a historic civil aviation aircraft order for 120 A350s, 11 A380s, and 12 B777-300ERs, valued at $34.9B.
2007, Emirates A380-800 order book now stood at 58.
2007 Order: Comprises firm orders for 50 A350-900s and 20 A350-1000s, plus 50 options for the A350-900s, delivered begin in 2014.
2007 Order: Emirates brought its total firm order for the A380s to 58.
2009: With the new order for 12 777-300ERs, valued at $3.2B, Emirates has 48 pending delivery and is set to become the world’s largest B777 operator.
Gulf International Bank (Saudi owned) postponed a bond auction scheduled for next week.
Dubai World is the main investment vehicle owned by the government of Dubai.
Dubai World is unable to redeem $3.5B of Islamic bonds (sukuk) in December and will not be able to pay it until at least May 2010.
Dubai World Islamic bond issue was one of the largest ever issued.
United Arab Emirates government failure to support Dubai undermined the assumption that the
Emirates would stand behind the debt of state owned companies.
Dubai rating: Standard & Poor’s has downgraded Dubai based banks with exposure to state owned companies.
Credit insurance: The cost of insuring Dubai’s debt has increased 400% since the Dubai World default was announced.
Thursday 26th November 2009
Dubai has total debts of $80B of which State-run Dubai World accounts for $59B of those liabilities.
Dubai World and subsidiary property developer Nakheel, Dubai government owned, deferred a $3.5B debt payment due in December 2009.
Dubai World has asked for a deferral of debt payments until May 2010.
Dubai said today that DP World, which is profitable, would not be involved in the restructuring.
Dubai will most likely have to abandon an economic model that focused on heavy property investment and inflows of foreign capital.
Insurance: The cost of insuring Dubai's debt against default is soaring as bond prices tumble.
Bank shares in Europe fell on fears of exposure to Dubai and concerns the holdings would be cut to meet obligations at home.
Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum, has reshuffled the boards of key companies with equity interests in Dubai Aerospace Enterprise.
Dubai Aerospace Enterprise (DAE) is supporting Dubai's goal of becoming a globally renowned aerospace centre and aviation hub.
DAE’s aerospace business is made up of aircraft leasing, maintenance, MRO and aviation IT solutions. It includes DAE Capital.
DAE Capital has an aircraft portfolio comprising 37 single aisle and wide-body aircraft.
DAE Capital has 24 aircraft delivery commitments of which 15 are being purchased for lease back to existing operators.
DAE Capital has committed to invest $27B that will include 100 A320s and A350 XWBs, 100 B737NGs and wide-bodies for delivery from 2010.
DAE’s shareholders include Investment Corporation of Dubai, Dubai International Capital, DIFC Investments LLC, EMAAR, Istithmar World, and Dubai Silicon Oasis Authority (DSOA).
Dubai has changed the board of the Investment Corporation of Dubai, which manages the Sheikh’s wealth and is a DAE shareholder.
The new board of the Investment Corporation of Dubai is considered as more conservative than the deal-doing directors replaced.
Dubai also changed the CEO of the Dubai International Financial Center.
Wednesday 25th November 2009
Dubai World, the Dubai government-owned investment company has asked creditors for a six-month delay on debt repayment.
Dubai government said the request to delay debt repayments also applied to property developer Nakheel, a Dubai World subsidiary.
Debt default: Standard & Poor’s said the Dubai World announcement could be considered as a debt default.
Standard & Poor's is downgrading its ratings on several Dubai government-related financial entities.
Dubai World has total debts of $59B and has appointed Deloitte to help with its financial restructuring.
Dubai is one of the seven self-governing emirate state that make up the United Arab Emirates (UAE).
Dubai is suffering economically since mid-2008 after six years of rapid growth.
Dubai will have to turn to the Abu Dhabi emirate to bail it out.
Dubai Aerospace Enterprise (DAE) was created in 2006 to target the $100B global airport, aircraft leasing and financing segments.
DAE signed letters of intent in November 2007 for aircraft order worth $27B.
DAE Capital: As of April 2009 DAE Capital had a fleet of 36 aircraft leased to airlines around the world.
The government of Dubai, Dubai International Capital, and Dubai Holding’s investment arm, Emaar, backs DAE.
DAE other investors: Property company, Istithmar, investment holding company and Dubai International Financial Centre (DIFC).
DAE equity players: Amlak Finance and the Dubai Airport Free Zone Authority (DAFZA).
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Global developments presenting risks and rewards for the aircraft trading and financing market
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Headline News was last updated: January 6, 2010
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A credit rating cut indicates to global investors that a country is a more risk-prone place in which to invest.
