DIB may take over Tamweel: report

DUBAI Wed Jun 2, 2010 4:58am EDT

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DUBAI (Reuters) - Dubai Islamic Bank DISB.DU, which owns a stake in Tamweel TAML.DU, may take over the troubled United Arab Emirates (UAE) mortgage lender and is in talks with creditors to restructure its debt, a newspaper said.

Arabic language daily Alrroya Aleqtissadiya, citing sources familiar with the matter, said on Wednesday the long-planned merger between Tamweel and rival Islamic mortgage lender Amlak AMLK.DU had been scrapped.

"A proposal to merge the two companies has been dropped to be replaced with the option of Dubai Islamic Bank (DIB) stepping in to save Tamweel," the paper said, citing sources familiar with the matter.

"While other information suggested that a Dubai government-linked company could take a similar step toward Amlak," it added.

Dubai Islamic Bank owns a 19.8 percent stake in Tamweel.

Tamweel's chairman and a Dubai Islamic Bank spokesman both declined to comment. Amlak officials could not immediately be reached.

Tamweel and Amlak have been hit hard by the collapse of Dubai's once-booming property sector and shares in both were suspended in 2008 and have not traded on the Dubai Financial Market DFM.DU since.

Talks to boost DIB's stake in Tamweel have begun and are conditional on creditors agreeing to reschedule the mortgage lender's debt, according to a letter seen by the newspaper.

The report said DIB proposed Tamweel creditors agree to a minimum five-year moratorium on their debt, with a 4 percent annual return.

"Sources said that Dubai Islamic's next step is the full acquisition of the company," the newspaper said.

"If these transactions help facilitate financing then it will be a positive move," said Saud Masud, head of research and senior real estate analyst at UBS in Dubai.

"But I don't see how DIB adding more exposure to Tamweel would help putting financing back in the market. We still have concerns about Dubai and UAE banking in general," he said.

(Reporting by Jason Benham and Tamara Walid; Editing by Sharon Lindores)

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