North Africa/Middle East

A softening in the United Arab Emirates' economy has led to a surge in small and medium-sized businesses defaulting on debt, dragging on banks' performance and highlighting the need for a new bankruptcy law, Reuters reported. In a country where a bounced cheque risks landing the issuer in jail, there have been hundreds of recent cases of expatriate business owners fleeing the country, or "skipping", with unpaid debts, banking sources say. Others who remain have defaulted on debt and in some cases been arrested.

The IMF has asked Saudi Arabia for more details of its plans to deal with its ballooning fiscal deficit, warning the world’s biggest oil producer could deplete its financial reserves within five years unless it builds on efforts to balance the budget, the Financial Times reported. Masood Ahmed, the IMF’s regional director, pressed Riyadh to outline details of its proposed spending cuts and clarify its position on additional revenue generation measures such as taxes, as it deals with a fiscal deficit hovering around 20 per cent this year and next.

An impediment to private enterprise and a major risk for banks has been the lack of a viable insolvency law. Ironically, UAE, which is an important international financial and business hub, has functioned without effective insolvency laws, which hurt its international reputation, Gulf News reported in an analysis. Prior to the global financial crisis of 2008, business failures were dealt with in an ad hoc manner and conflicts, when they rose, were often resolved through informal arrangements, facilitated by external negotiators.

Saudi Arabia has withdrawn tens of billions of dollars from global asset managers as the oil-rich kingdom seeks to cut its widening deficit and reduce exposure to volatile equities markets amid the sustained slump in oil prices, the Financial Times reported. The Saudi Arabian Monetary Agency’s foreign reserves have slumped by nearly $73bn since oil prices started to decline last year as the kingdom keeps spending to sustain the economy and fund its military campaign in Yemen.

Indebted Kuwaiti financial firm Investment Dar is seeking court approval to help close a 813 million dinar ($2.7 billion) debt restructuring, according to an official document seen by Reuters. The new plan, called Dasman, is designed to overcome minority creditor dissent to earlier proposals by asking Kuwait's Court of Appeal to impose the deal on all creditors. The plan involves transferring Investment Dar's assets, and the management of their disposal, directly to creditors.

Fahad Al Raqbani, director general of Abu Dhabi Council for Economic Development, said that the long-awaited insolvency law in the United Arab Emirates is expected to contain provisions for corporate bankruptcy modeled on U.S. chapter 11 proceedings, The National reported yesterday. “Many companies in the US undergo Chapter 11 bankruptcy and then gain in momentum,” Raqbani said. “A given project may be successful, but also need restructuring.” The insolvency law was passed by the Cabinet in July.

Malaysian state fund 1Malaysia Development Bhd said on Wednesday (Aug 26) that it strongly denies that Abu Dhabi's International Petroleum Investment Co (IPIC) is considering pulling out of a plan to help restructure 1MDB's debts. "We in fact confirm that 1MDB remains engaged in discussions with IPIC, to conclude the transaction per the terms as officially announced by IPIC to the London Stock Exchange on 10 June 2015," it said in a statement.

A Geneva prosecutor has closed a six-year investigation into a criminal complaint by Saudi Arabia's Ahmad Hamad Algosaibi and Brothers (AHAB) against Maan al-Sanea and two units of his Saad Group, the prosecutor's office told Reuters. Family conglomerate AHAB and separate Saudi business empire Saad Group collapsed in 2009 and have since been battling in multiple jurisdictions over who was to blame for the issues which affected their respective groups, including the default on bank debts worth billions of dollars.

Oil producer Afren Plc said its board had decided to put the company into administration as it failed to secure support for a vital refinancing and restructuring plan, Reuters reported. Afren said earlier this month talks with bondholders, banks and its partners were scuppered after the company cut its production forecast for the year earlier this month. Its shares were suspended on the same day.

It is one of the cheapest places on earth to drill for oil — but also among the most dangerous. And, right now, Kurdistan’s intrepid band of western operators are sweating. Tumbling oil prices and a dispute over crude sales between war-torn Iraq’s federal government and the Kurdish administration have left three foreign operators — Genel Energy, Gulf Keystone Petroleum and DNO — owed hundreds of millions of dollars.