Shuaa Capital (SHUAA) have issued 250 million shares to Dubai Banking Group, effective today I think. Shuaa share price is 15% limit up as I post this. I'm not sure when the announcement appeared on the DFM site, it might have been during trading because I think Shuaa shares are suspended (it wouldn't be the first time) - my Mubasher screen is showing a line through Shuaa which usually indicates trading has been suspended. Note that despite press reports saying otherwise often enough, if a share is limit up or limit down, it does not mean trading is suspended by the stock market, it just means no one can buy at a higher price, or sell at a lower price. And trading usually dries up because there are few willing sellers at the limit up price, or willing buyers at the limit down price.
Oddly there is a note on the DFM website saying trading has resumed, but not one saying trading has been suspended.
DFM 16 June 2009:
DFM: Resume trading on SHUAA shares after disclosing the incoming news from the company
I'm trying to figure out why the increased number of shares results in an increased share price though. I would have thought the additional shares mean profits are diluted therefore share price should drop. After all, Shuaa have already received the Dubai Banking Group (DBG) funds back in 2007 no? And blown it apparently.
(SHUAA) Shuaa Capital: Announces the details of outstanding mandatory convertible notes on preannounced date to disclose.
Shuaa disclosure 16 June 2009:
SHUAA Capital issues 250 million shares to Dubai Banking Group
Dubai, 16 June 2009: SHUAA Capital psc today issued 250 million shares to Dubai Banking Group pjsc, exercising its rights under the outstanding convertible notes following the expiration of a Memorandum of Understanding between the two companies. SHUAA has requested the Dubai Financial Market to register the shares for trading.
SHUAA had eariier given notice to DBG, prior to the maturity date of the notes in October 2008, of its intention to convert the notes and issue shares at maturity, as it had the right to do under the terms of the notes. DBG objected and proposed alternative terms for extension and/or conversion of the notes.
In an attempt to preserve good relations with a prospective major shareholder and contain negative repercussions to SHUAA's business, both parties agreed to enter into an MOU on 2 November 2008, under which the parties suspended their positions in order to permit SHUAA to seek shareholder approval for proposed compromise measures.
The MOU was extended several times in order to accommodate-discussion of various other alternatives for resolution of DBG's concerns. In the end, however, it proved impossible for the Company to achieve a resolution that bridged the differing expectations of the two sides. SHUAA's board unanimously conciuded that no agreement couid be reached on terms that they could recommend to shareholders.
Issuance of the new shares increases the company's outstanding shares to 800 million shares and DBG becomes a 32% shareholder in SHUAA Capital. Postissuance book value per share would adjust to AED 2.5 per share. The proceeds from the issuance of the shares have been reffected as part of the equity of SHUAA Capital since December 2007, the first reported quarterly financials after the transaction was closed, and EPS have been reported on a diluted basis of 800 million shares since then.
Re: Notice of Election to Redeem AED 1,500.000.000 convertible note issued by Shuaa Capital PJSC
We refer to the AED 1,500,000,000 convertible note issued by Shuaa Capital PJSC (Shuaa Capital) on 31 October 2007 to Dubai Banking Group, maturing on 31 October 2008 (the Note).
Following numerous attempts at achieving a reasonable sertlement with regard to the Note with Shuaa Capital, Dubai Banking Group, on 15 June 2009, elected not to convert the Note but rather to redeem the Note at its principal amount in accordance with the Note and applicable laws.
As a consequence of this election, we are writing to give you notice that we will not accept delivery of the conversion shares issued by Shuaa Capital in contravention of our election and respectfully request you not to effect registration of any shares in Shuaa Capital in the name of Dubai Banking Group without our express consent.
In addition, we have issued Shuaa Capital with a notice of redemption of the Note for its principal amount and have demanded payment of the principal amount and other amounts payable under the Note and related documents, together with accrued interest in respect of each up to the final payment date.
We thank you for your commitment and excellence in respect of the Dubai capital markets and trust that with your support we can reach a long term and sustainable solution that will be to the mutual benefit of Dubai Banking Group and Shuaa Capital.
Sincerely,
Ahmad Bin Byat
Chief Executive Officer
Dubai Holding LLC
Soud Ba'alawy
Authorized Signatory
Dubai Banking Group LLC
Now have I understood this correctly ?
1. In 2007, DBG gives Shuaa AED 1.5 billion in return for 250 million shares effectively worth AED 6 each from a capital increase, to be effected at a later date.
2. In 2008, Shuaa shares plummet in value and DBG doesn't want their shares anymore, saying the conversion was optional. Shuaa says the conversion was compulsory.
3. Today, Shuaa says they've issued 250 million shares to DBG, increasing total shares outstanding by that amount (from 550m to 800m I think).
4. Also today, DBG says no, they don't want the shares, issue a request to Shuaa to pay back the money + interest, and request the DFM not to issue/register the new shares.
5. Shuaa shares are suspended by the DFM.
If Shuaa have to pay back AED 1.5 billion in cash, that could be a problem, to put it mildly. Last time I looked, they only had a couple hundred million dirhams in the bank. _________________ UAE IPO list | posting guidelines
Shuaa Capital (SHUAA) shares have started trading again in the past few minutes. Share price plummeted from 15% limit up to 10% limit down and wobbled back to about AED 1.70 - roughly similar to what it was at close yesterday.
DFM is saying they won't issue shares until Shuaa and DBG agree that shares should be issued, or they're instructed to by the relevant authority (would that be ESCA then?).
DFM 16 June 2009:
DFM: Resume trading on SHUAA shares as DFM issues a statement in response to Shuaa Capital and Dubai Banking Group letters
DFM 16 June 2009:
Dubai Financial market statement in response to SHUAA Capital and DUBAI Banking GROUP letters
DFM statement 16 June 2009:
Dubai Financial market statement in response to SHUAA Capital and DUBAI BANKING GROUP letters
“The Dubai Financial Market (“DFM”) has received a request from Shuaa Capital notifying the market of increase of its capital and the issuance of an additional 250 million shares (the “Shares”) for the benefit of Dubai Banking Group as per the attached letter. At the same time, DFM has received a letter from Dubai Banking Group declining the acceptance of the Shares and disputing the ownership of the Shares as per the attached letter. DFM has resolved as follows:
1. In relation to the notification of the capital increase of Shuaa Capital this will be notified once the approval of the concerned government authority is obtained and the capital increase and the amendment to the Articles of Association of Shuaa Capital has been published in the UAE Official Gazette and a copy of this is provided to us by Shuaa Capital.
2. As for the legal ownership of the Shares, we will not register the Shares in the name of Dubai Banking Group until we have received a letter from Shuaa Capital and Dubai Banking Group jointly or an order from the concerned authorities requesting us to have the Shares registered in the name of Dubai Banking Group.”
Well, that's funny. ESCA (and DFM/ADX) asks companies to file disclosures in both Arabic and English, but don't bother themselves .
Sorry, I'm afraid my Arabic is very limited - numbers and enough words to tell a taxi driver to stop and go . _________________ UAE IPO list | posting guidelines
I would if I could . But I rarely get clarifications from companies and the markets to my requests. In fact, my requests to Shuaa in particular seemed to result in getting me knocked off their press release list, despite Shuaa investor relations saying how important it is to give investors "a clear picture of what is going on in the company".
It's not the first time Shuaa doesn't bother sending disclosures in English, which is one of the reasons I've sold all my Shuaa shares despite taking a heavy loss . I'll put the money towards shares in a more investor-friendly company. _________________ UAE IPO list | posting guidelines
Other wise MSCI Barra will not upgrade them from frontier to emerging market.
There was a decision within the past couple of weeks not to include the UAE in the MCSI emerging markets index. Maybe this is one of the reasons why. I'm only guessing, I haven't looked at the criteria for inclusion. _________________ UAE IPO list | posting guidelines
It's on the DFM website in English. Not sure what you guys are complaining about.
Cash King wrote:
In the morning it was only Arabic .
I've seen it happen in the past that a disclosure is first posted in Arabic and then later on in English (not just for Shuaa). A couple of times when I've phoned DFM to ask if there was a translation they've said they would ask the company for one. Maybe that's what happened. _________________ UAE IPO list | posting guidelines
Statement from Dubai Banking Group Regarding Litigation Concerning SHUAA Capital’s Convertible Bond
Dubai: 23 June, 2009 – Dubai Banking Group (DBG) is in the process of initiating litigation against SHUAA Capital (SHUAA) to recover amounts due to Dubai Banking Group by SHUAA Capital under the AED 1.5bn Convertible Bond agreement, dated 31 October 2007
Fadel Al Ali, Chairman of Dubai Banking Group said: “Dubai Banking Group has made several attempts to amicably resolve the matter of SHUAA Capital’s bond issue. We believe that our proposals were in the best interest of both parties.
“We are disappointed by SHUAA Capital’s attempts to force conversion of the bond, without prior warning, consultation or agreement. This is in violation of the terms and conditions of the Subscription Agreement, the Note Certificate and applicable law.
“Since it has become clear that a resolution is not possible at this time, we have no choice but to pursue litigation in order to redeem our original investment in the company and other amounts outstanding including interest, in accordance with the terms of the Note, ancillary documents and the UAE Companies Law No8 for 1984.”
I've been trying to find what the actual terms of the original bond issue are but nowhere can I find the word "mandatory" in the conversion of the bond, but equally, I can't find anywhere where it is explicitly stated that conversion is at the discretion of the bondholder. So it's understandable that Shuaa and DBG are in disagreement.
What I did find though was a press release from last year about the Shuaa DBG bond terms being changed. The Shuaa DBG EGM voted to extend the maturity term to 31 October 2009. So the question is why did Shuaa then decide to issue shares sooner than the maturity date? I expect I've missed something important .
Press Release 03 November 2008:
SHUAA Capital (SHUAA) announces today that the Dubai Banking Group (DBG), a Dubai Group Company, and SHUAA Capital have agreed that instead of redeeming the convertible notes due to convert on 31 October 2008, SHUAA will call for a general meeting of its shareholders at which it will present for approval a proposal to extend the tenor of the convertible note for one additional year (with the option to extend for a further year) so that the note will mature on 31 October 2009 (unless extended for a further year), at which time they may be converted into shares on the same terms and conditions as previously agreed.
I think what you may have missed was the statement from SHUAA in early June that said they were cutting the extension period short because negotiations were progressing -
Bloomberg 27 May 2009:
Shuaa Surges 31% in Two Days as It Considers DBG Bond Buyback
By Haris Anwar
May 27 (Bloomberg) -- Shuaa Capital PSC soared to the highest in more than four months after the United Arab Emirates’ biggest investment bank said yesterday it was considering buying back convertible bonds it issued to Dubai Banking Group.
Shuaa shares jumped 14 percent to 1.44 dirhams at 12:27 p.m. in Dubai, bringing the two-day surge to 31 percent. The stocks are headed for the highest close since January 8.
The investment bank said it may either buy back all or some of the convertible bonds it issued to Dubai Banking. The one- year bonds were initially scheduled to be converted into 250 million shares at 6 dirhams each on Oct. 31, 2008, giving Dubai Banking a 32 percent stake in Shuaa. Both parties agreed in November to extend the maturity of the bonds by a year.
The deadline for reaching a deal with Dubai Banking has been extended to June 4, Shuaa said in a statement to the Dubai bourse yesterday. Dubai Banking withdrew its demand for a majority of seats on Shuaa’s board and both sides no longer consider the extension of the convertible bonds by a year desirable, according to the statement.
Press release today from Shuaa on DFM website. Shuaa rejects the DBG claim, unsurprisingly. Shuaa says "it had the right to do under the terms of the notes" in reference to the conversion of the DBG bond to shares. I looked back through the 2007 disclosures from Shuaa on the DFM website. The one which appears to be the terms and conditions is in Arabic, and I can't find an English version. The other documents referring to the terms and conditions don't appear to say whether the bond is mandatorily or optionally convertible, by either Shuaa or DBG. Only that it was a convertible bond and the date of maturity was October 2008.
Shuaa shares tanked in early trading today (I think 10% limit down) but recovered nicely in the last half hour to end up closing unchanged from yesterday, at AED 1.28. Is a resolution on the cards?
Press Release 24 June 2009:
SHUAA Capital rejects claim by DBG
SHUAA Capital (SHUAA), the GCC's leading financial services institution, today notes the statement from Dubai Banking Group (DBG) announcing that it is taking steps towards legal action to recover the principal amount of the disputed AED 1.5bn convertible bonds.
SHUAA Capital rejects the claim that any amounts are due to DBG because SHUAA has already exercised its contractual option to redeem the bonds by issuing 250 million new shares.
SHUAA had earlier given notice to DBG, prior to the maturity date of the notes in October 2008, of its intention to convert the notes and issue shares at maturity, as it had the right to do under the terms of the notes. DBG has refused to accept the new shares and the market authorities have so far declined to register the new shares, pending further consideration.
Mr. Majid Al Ghurair, Chairman of SHUAA Capital commented: "This is not an unexpected development as DBG had earlier indicated its willingness to file such a claim. This is their right as in the case of any commercial dispute. We believe in the rule of law. However, it is worth noting that the parties have exercised considerable efforts since October 2008 to reach a reasonable and amicable solution and the matter is currently under active review by the concerned authorities.”
Thanks Genesis. I presume they're different from the disclosures I found on the DFM website? Anyway, Shuaa and DBG have come to an agreement with Shuaa issuing twice as many shares to DBG. I sold mine too soon obviously . Shuaa opened 15% limit up this morning, and there are no sellers in the queue. There's a press release on the DFM website also.
* Deal represents premium of 127 pct to Wednesday close
* DBG sees Shuaa stake as long-term, strategic investment (Adds background, details of agreement)
DUBAI - Dubai Banking Group (DBG) and Shuaa Capital (SHUAA) settled a long-running bond dispute with DBG taking a 48.4 percent stake in the investment bank, Shuaa said on Thursday, in a move likely to ease investor concerns.
The deal, which follows months of negotiations and a threat by DBG to take Shuaa to court, will give DBG 515 million shares in Shuaa, more than twice the number of shares agreed to in the original convertible bond deal from 2007, Shuaa said.
The dispute had threatened to tarnish Dubai's image as a financial centre, pressured Shuaa shares down by over a third from a recent peak and triggered a cut in its credit ratings as the spectre of a drawn-out court battle with uncertain consequences for the bank weighed.
The settlement is likely to see Shuaa shares strongly supported as investor concern over the bank's ability to pay DBG in cash should lift.
The deal represents a conversion price of 2.91 dirhams ($0.793) per share or a premium of 127 percent to the closing share price of 1.28 dirhams on Wednesday, Shuaa said.
DBG, owned by the ruler of Dubai, said it saw its new Shuaa stake as a long-term, strategic investment.
"We would like to take this opportunity to start a new page and welcome Dubai Banking Group as SHUAA's largest shareholder," said Shuaa chairman Majid Al Ghurair.
The dispute revolved around Shuaa's decision to convert a 1.5 billion dirham ($408.5 million) bond it had issued to DBG in 2007 into shares. DBG had disputed the move, saying it wants its principal investment back instead.
SHUAA Capital and Dubai Banking Group agree new bond conversion terms
SHUAA Capital (SHUAA), the GCC's leading financial services institution and Dubai Banking Group (DBG), a Dubai Group company, today announce that they have agreed new terms for the convertible bond, originally entered into in October 2007.
Building on the invitation extended by the Securities and Commodities Authority, SHUAA Capital psc and Dubai Banking Group have reached agreement regarding the convertible bonds issued by SHUAA to Dubai Banking Group, whereby Dubai Banking Group will convert the AED 1,500 million convertible bonds into 515 million shares, representing a 48.4 per cent stake of SHUAA Capital’s share capital post-conversion. Conversion will be effected in accordance with UAE legal procedures and subject to final approval by the concerned authorities.
As a result, SHUAA’s issued and paid up capital will be increased by AED 515 million to AED 1,065 million, while the balance of AED 985 million will be credited to the premium account within equity. Total shareholder equity will remain unchanged at AED 2 billion.
The new agreement represents a conversion price of AED 2.91 per share equal to a premium of 127% to the closing share price of SHUAA of AED 1.28 yesterday. The foregoing terms are within the authority that the company’s Board received from SHUAA’s shareholders in their extraordinary general meeting held in Dubai on 15 April 2009.
Mr. Majid Al Ghurair, Chairman of SHUAA Capital commented: “We believe that this agreement was the best course of action under the circumstances and we worked swiftly to remove the uncertainty that followed the marked escalation over the past week. This was especially important in view of the nature of our business. Despite our differences, we both recognized the need to resolve them amicably for the sake of all our shareholders and our standing as a leading UAE company. We would like to take this opportunity to start a new page and welcome Dubai Banking Group as SHUAA's largest shareholder”.
He added: “Both parties also wish to thank the Emirates Securities and Commodities Authority and its senior management for facilitating the dialogue that lead to the agreement today”.
Mr. Fadel Al Ali, Chairman of Dubai Banking Group said: “We see our investment in SHUAA as a long term and strategic one. SHUAA has a unique market position and an enviable track record coupled with credible management and strong brand recognition. We believe that today’s resolution of our differences is a significant milestone toward cementing its position as one of the leaders in financial services in the UAE”.
It's a bit moot now since Shuaa and Dubai Banking Group have come to an agreement but I had a look at those documents out of curiosity. Bleah, they look confusing enough (but then I guess legal documents always are ). Clause 1.2 of the Memorandum of Intent appears to say that either Shuaa or DBG could request share conversion before the maturity date, so I can understand why Shuaa was miffed that DBG wanted their money back rather than the converted shares. Here's some of the relevant clauses as far as I can tell. I'm not sure where the actual "Conditions" are, there was a reference in the Note Certificate to attached "Notes" but there wasn't an attached document, unless the "Notes" refer to the Memorandum of Intent.
Anyway, a good day for those who have Shuaa (SHUAA) shares. Price is still at 15% limit up with no sellers in the queue, and last trade looked like it was at around 12:30. Lots of keen buyers though, looks like Shuaa will be in the green again tomorrow.
Note Certificate 31 October 2007:
Note Certificate
...
2. References to Conditions: Any reference herein to the "Conditions" is to the terms and conditions of the Notes attached hereto and any reference to a numbered "Condition" is to the correspondingly number provision thereof.
3. Terms and Expressions: All terms and expressions in the Note Certificate shall, unless the context otherwise requires, have the same meaning as in the Conditions.
...
5. Promise to pay: Subject to the exercise of the conversion right, the Issuer, for value received, hereby promises to pay the principal sum referred to above to the Holder on the Maturity Date or on such earlier date or dates as the same may become payable in accordance with the Conditions. The Issuer hereby promises to pay interest on such principal sum in arrear on the dates and at the rate specified in the Conditions, all subject to and in accordance with the Conditions.
6. Conversion: On the Maturity Date, the Notes shall be converted into shares in the Issuer at the Conversion Rate either at the option of the Issuer or the Holder in accordance with the Conditions.
...
Memorandum of Intent 24 June 2007:
Memorandum of Intent
...
1.2. Conversion. On the maturity date, the Bonds shall be converted to shares of SHUAA if either (1) a request for conversion has been made by Holdco as subscriber or (2) a request for conversion has been made by SHUAA as the issuer. Conversion shall be at the Conversion Rate. In the event of conversion, Holdco may require that the resulting shares of SHUAA shall be issued in full or in part to a designee of Holdco, provided that such designee shall be a company controlled by Holdco.
1.3. Repayment of principal. If no request for conversion of the Bonds has been made as provided in Clause 1.2 above, the principal amount thereof shall be repaid to the subscriber on the maturity date or the first business day thereafter.
After the settlement of Shuaa Capital & DBG. I sense some major changes ahead . In fact I see a more bright future under DBG then the current Shuaa Management.
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. But I rarely get clarifications from companies and the markets to my requests. In fact, my requests to Shuaa in particular seemed to result in getting me knocked off their press release list, despite 
. I'll put the money towards shares in a more investor-friendly company.
.
). Clause 1.2 of the Memorandum of Intent appears to say that either Shuaa or DBG could request share conversion before the maturity date, so I can understand why Shuaa was miffed that DBG wanted their money back rather than the converted shares. Here's some of the relevant clauses as far as I can tell. I'm not sure where the actual "Conditions" are, there was a reference in the Note Certificate to attached "Notes" but there wasn't an attached document, unless the "Notes" refer to the Memorandum of Intent.
