(Corrects July 13 entry to say "some of whose partners'
accounts were frozen" instead of "whose accounts were frozen")
Nov 5 A sukuk default by Kuwait's Investment Dar
and debt restructuring at Saudi conglomerates have shaken
confidence in the $1 trillion Islamic finance industry, fanning
debate about investors' protection and investors' rights.
Billed as safer than traditional banking due to
requirements for assets to underpin deals, Islamic bond holders
worry they may not have any more legal safeguards than
conventional counterparts in case of default, or perhaps even
less, partly due to the untested nature of the process.
Debt restructurings at Saudi conglomerates Saad Group
[SAADG.UL] and Algosaibi have put about $9.6 billion of
investments at risk at 30 Gulf banks alone, and the fate of
Dubai government-owned property firm Nakheel's $3.5 billion
Islamic bonds, which mature in December, is being closely
Here is a timeline of developments since late last year.
Oct 16: Texas-based energy company East Cameron Gas, which
had issued $166 million in sukuk in 2006, files for bankrupcty.
A year later, the case to decide bondholders' rights was still
before a U.S. court.
Dec 14: Kuwait's Investment Dar TIDK.KW Islamic investment
firm shocks markets, saying it is considering selling up to 20
percent of luxury British carmaker Aston Martin, and may borrow
up to $1 billion to refinance debt. [ID:nLE424729]
Dec 21: Kuwait's biggest investment bank, Global Investment
House GLOB.KW, downgraded by two ratings agencies a week
earlier for allegedly failing to meet debt obligations, appoints
HSBC as an adviser with foreign lenders. [ID:nLL438445]
Jan 8: Global Investment House defaults on most of its debt.
At end-September, it had short-term borrowings of 389.8 million
dinars ($1.38 billion), its website said. Total liabilities
stood at 806.7 million dinars. [ID:nL8123879]
May 12: Investment Dar, Global Investment House's main
Islamic rival, defaults on a $100 million sukuk registered in
Bahrain and in the United States. The group is the first Islamic
Gulf company, and the second leading investment firm in oil-rich
Kuwait, to announce a default on debt repayment. [ID:nLC281536]
June 2: Privately-held $30 billion Saudi company Saad Group
[SAADG.UL] says it plans to restructure the debt of its units
hurt by a liquidity squeeze brought on by the financial crisis.
Ratings agency Moody's cuts its ratings on the group to junk
June 3: Credit agencies slash ratings for Saudi conglomerate
Saad Group to default status or withdraw coverage altogether,
saying Saad has ceased to pay creditors. [ID:nL3334708]
June 16: Saudi-based Ahmad Hamad Algosaibi & Bros Co (AHAB)
says it is about to start talks with creditors, after reports it
and Saad Group are seeking to restructure $10 billion in debt.
July 8: Malaysia central bank governor says no systemic
risks have arisen in the global Islamic finance industry from
problems related to Saudi Saad group's debt restructuring.
July 13: Saudi Arabia creates special panel in connection
with the restructuring of heavily indebted AHAB, some of whose
partners' accounts were frozen by the central bank in June, days
after it froze personal accounts of Saad head Maan Al-Sanea.
July 14: Saad's sukuk investors mull setting up committee to
represent them at creditor meetings. It's common practice for
bondholders wanting to defend their positions ahead of a debt
July 17: Saudi Arabia's indebted family conglomerate
Algosaibi files a lawsuit in New York alleging $10 billion in
loan irregularities involving billionaire Maan al-Sanea, the
head of the Saad Group, the Financial Times reports.
July 23: UAE central bank directs banks to take provisions
of 50 to 75 percent of their exposure to Saad and Algosaibi over
two years, to reflect probable defaults or losses.
[ID:nLN214179] -- Abu Dhabi Islamic Bank ADIB.AD declines
to comment on Saad, the day after a newpaper reports it has $67
million Saad exposure due to a 2007 loan. [ID:nLN186787]
Aug 1: Cayman Islands court freezes $9.2 billion of Saad
assets, including equity stakes outside the Gulf. [ID:nLV613802]
Aug 11: Moody's says its ratings on Islamic banks are stable
due to ample liquidity, high profit margins and conservative
lending; but that sector growth is hampered by a lack of
products to absorb abundant liquidity. [ID:nLB643725]
Sept 6: Abu Dhabi Commercial Bank ADCB.AD, the United
Arab Emirates' third largest lender by assets, files a $30
million debt claim against a Saad Group unit [SAADG.UL].
Sept 7: Malaysian rating agency MARC downgrades 100 million
ringgit worth of Boon Koon Group Bhd's Islamic paper and notes,
removes ratings from MARCWatch. The reconditioning company's
weakened position stems from challenging industry conditions.
Sept 23: Abu Dhabi Commercial Bank (ADCB) has more than $600
million in exposure to the two Saudi, debt-laden conglomerates,
for which it will have to book additional provisions, the lender
Sept 28: Saudi Arabia's central bank governor says Saad
Group has struck an agreement with Saudi creditors to repay
syndicated and bilateral loans. [ID:nLS268341]
Sept 30: MARC downgrades investment holdings company Oilcorp
Berhad's (Oilcorp) 70 million ringgit Murabahah and other notes
in expectation of an imminent default by Oilcorp.
Source: Reuters ((Click on [ID:nISLAMIC] for more Islamic
finance stories and ISLAMIC for a speed guide))
(Compiled by Gillian Murdoch; Editing by Kim Coghill)