GulfNews Business

GulfNews Business

Bernard Madoff, mastermind of giant ponzi scheme dies

Markets|: New York: Bernard Madoff, the Manhattan investment adviser who promised stellar returns to his A-list clients and instead defrauded them of more than $19 billion in history's largest Ponzi scheme, has died. He was 82. His death was confirmed by the New York law firm of Brandon Sample, Madoff's attorney. Madoff's home since July 2009 was the Butner Federal Correctional Complex in Butner, North Carolina, where he was serving a 150-year term. He requested compassionate early release, citing end-stage kidney disease, in February 2020. Like Charles Ponzi, whose 1920 con earned him a place in the annals of crime, Madoff seemed to deliver stunning returns to his clients, when in fact he was paying existing investors with money from new ones. Unlike Ponzi, who soared and fell in the course of one year, Madoff achieved a level of respect and acclaim among finance professionals - he was chairman of the Nasdaq Stock Market in 1990, 1991 and 1993 - and kept his ruse going for at least 15 years, even under the gaze of regulators who visited his office to inspect his records. His thousands of clients entrusted him with more than $19 billion in principal and were led to believe, through fake statements and trade confirmations, that they had almost $65 billion among them in their accounts. Irving Picard, the trustee appointed to unwind the accounts, had recovered more than $14.4 billion to partially reimburse clients who lost money. Client List Madoff's big-name investors included Fred Wilpon, then-majority owner of the New York Mets; husband-and-wife actors Kevin Bacon and Kyra Sedgwick; Henry Kaufman, former chief economist at Salomon Brothers; the late Boston philanthropist Carl Shapiro; two of Europe's wealthiest women, Alicia Koplowitz of Spain and Lilliane Bettencourt of France; charitable foundations of director Steven Spielberg and Holocaust survivor Elie Wiesel; and New York and Yeshiva universities. Contributing to Madoff's facade was the existence of legitimate businesses alongside the fraudulent one at his firm, Bernard L. Madoff Investment Securities LLC. The company's market-making and proprietary-trading units, run by his sons and brother, occupied the 18th and 19th floors of the red, cylindrical Lipstick Building in Midtown Manhattan. Madoff's 17th-floor office, where the fraud was run, was off-limits to most employees. With his promise to deliver steady returns through markets bullish and bearish, Madoff built such a sterling reputation that he had to turn some prospective investors away. He owned homes in Manhattan and Montauk in New York state, Palm Beach in Florida, and Cap d'Antibes on the French Riviera. He sailed on a yacht called "Bull" and lavished jewelry on his wife, Ruth. The end The fraud collapsed in December 2008, when plunging equity markets prompted clients to seek more withdrawals than he could accommodate. His sons Andrew and Mark notified the Federal Bureau of Investigation that their father had confessed to them. "The money is gone," Andrew Madoff quoted his father as telling the family. "It's all been one big lie." Andrew Madoff recalled the quote for Laurie Sandell's "Truth and Consequences: Life Inside the Madoff Family" (2011), an authorized biography. Madoff pleaded guilty in March 2009 to fraud, money laundering, perjury and theft. In court, and in later interviews from prison, he insisted that he had run a genuine investment business for many years before finding himself unable to maintain the generous returns his clients had come to expect. He said that - "to the best of my recollection" - the fraud began in the early 1990s, during a recessionary period for the U.S. economy, and that he "believed it would end shortly and I would be able to extricate myself and my clients." "As the years went by, I realized that my arrest and this day would inevitably come," he said. Prosecutors said the fraud began in the 1980s, if not earlier. Family Fallout As for Madoff himself, he lost not just his wealth and freedom but the once-strong bonds of family. The oldest of his two sons, Mark Madoff, who had been head of sales at the firm, killed himself on Dec. 11, 2010, the second anniversary of his father's arrest. He was found hanging from a dog leash attached to a pipe in the living room of his Manhattan apartment. His suicide was the final straw for his mother, Ruth Madoff, who said it prompted her to break off all communications with her imprisoned husband. "I was responsible for my son Mark's death, and that's very, very difficult," Bernard Madoff said in a May 2013 telephone interview from prison, according to CNN Money. "I live with that. I live with the remorse, the pain I caused everybody, certainly my family, and the victims." In September 2014, his son, Andrew, died of cancer. SEC case His father worked for Manhattan-based Everlast Sporting Goods Manufacturing Co., the maker of boxing equipment, before opening his own sporting-goods manufacturer, Dodger Sporting Goods Corp., which sold the Joe Palooka punching bag. The company filed for bankruptcy in 1951 after struggling with rising raw-material prices due to the Korean War, Diana B. Henriques wrote in "The Wizard of Lies: Bernie Madoff and the Death of Trust" (2011). His father then set up a brokerage firm, Gibraltar Securities, in his wife's name and at the family home's address. The SEC, in 1963, accused the company of failing to file required financial reports, and the Madoffs withdrew their registration. Innovator image That push led to the creation of the Nasdaq exchange. It also allowed Madoff "to add a few brushstrokes each year to his portrait as a committed market innovator, an ally in the crusade to drag the nation's tradition-bound markets into the modern age," according to Henriques. "I was very driven," Madoff said in a 2011 interview with the Financial Times. "But I was always outside the club, the club being the New York Stock Exchange and white-shoe firms. They fought me every step of the way." When, exactly, Madoff began cooking the books was the subject of dispute. During his guilty plea in court, Madoff said, "To the best of my recollection, my fraud began in the early 1990s," when a bear market was making it impossible for him to "satisfy my clients' expectations." His response, he said, was to claim he was employing a strategy, which he called "split strike conversion," using well-timed investments in and out of Standard & Poor's 100 Index companies, hedged by options contracts in those same stocks.

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Bentley celebrates 200,000 production milestone

auto|Business|Luxury|: Bentley is commemorating the creation of its 200,000th vehicle since the company’s founding in 1919. The car in question – a Bentayga Hybrid destined for a customer in China – met the oldest surviving Bentley, the EXP 2, alongside some of the firm’s longest-serving members of staff. It’s the latest in 155,582 cars built at the firm’s Crewe headquarters since 2003 too, the year that the original Continental GT was launched, marking the start of a new era of more modern sports cars for the company. Today, Bentley builds 85 cars a day – the same amount that would’ve taken it a month to produce two decades ago. Bentley’s chairman and chief executive, Adrian Hallmark, said: “This production of the 200,000th car is just the latest landmark on the extraordinary journey that Bentley has been travelling since its foundation in 1919. “In 2003, the introduction of the Continental GT represented a transformative moment for the brand, and this Bentley alone, has represented 80,000 sales of our total 200,000, and created both a new segment, and a contemporary image foundation for the Bentley business. “The pace of progress has accelerated significantly since 2003 and we are now entering the next period of transformation as we pursue our Beyond100 strategy, with the aim of positioning Bentley as the global leader in sustainable luxury mobility.” Bentley recently announced that it would move to full electrification – either via plug-in hybrid or standard hybrid- by 2026, before switching the entire model range to electric-only 2030.

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Bitcoin approaches $65,000 with Coinbase listing fueling demand

Banking|: New York: Bitcoin breached the $64,000 level for the first time as investor demand for all things crypto surged amid Coinbase Global Inc.'s public debut. The direct listing of the biggest U.S. crypto exchange is seen pushing tokens even more into the mainstream of investing, exposing legions of potential buyers to the digital asset class that have grown into a $2 trillion industry in little more than a decade. Bitcoin, the original and biggest crypto coin, is valued at more than $1 trillion alone after a more than 800 per cent surge in the past year. Other digital assets also advanced on Wednesday. Ether, the second-largest cryptocurrency, climbed to a record, while Bitcoin Cash jumped more than 10 per cent at one point. The cryptocurrency Dogecoin surged following an endorsement from TV personality Guy Fieri. And exchange tokens, such as Binance Coin, also saw their value rise, with BNB, as it's known, gaining 3%, according to CoinMarketCap.com. If Coinbase is valued at $100 billion as expected, it would be worth more than the New York Stock Exchange and Nasdaq Stock Market combined. Given its size and visibility, Coinbase is likely to be popular with actively managed equity funds, particularly growth managers, essentially making a large swath of stock holders passive investors in crypto. "It's a huge step forward for the industry and the legitimacy it brings in the eyes of investors and regulators," Mati Greenspan, founder of Quantum Economics, said on Bloomberg TV. Growing mainstream acceptance of cryptocurrencies has spurred Bitcoin to a 120% rally since December, as well as lifting other tokens to record highs. That's despite lingering concerns over their volatility and usefulness as a method of payment. Attention from regulators is poised to intensify as Coinbase becomes a public company. "As the direct listing on the Nasdaq will reach a wider investment base other than the usual crypto evangelists, investors must expect much greater government scrutiny," said Nigel Green, CEO and founder of deVere Group. The token was volatile during the morning, climbing as much as 2.7 per cent to $64,869. It has risen for seven straight sessions, its longest winning streak since the start of the year.

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US-based investment firm picks up stake in Abu Dhabi tech firm Group42

Business|: Dubai: Investment firm, Silver Lake, has made a “substantial” investment in Group42, the Abu Dhabi-based company that specializes in AI and cloud computing. Proceeds from the investment will be used to help G42 scale in the UAE and international markets. The terms of the investment transaction were not publicly disclosed. In connection with the deal, Egon Durban, Managing Partner of Silver Lake, will join the G42 board of directors. “G42 has not only experienced tremendous growth in recent years, but has done so by partnering with large-scale clients to address the most complex technology challenges. We are excited to have this opportunity to work with them,” said Durban in a statement. “Silver Lake’s mission is to build and grow great companies in partnership with founders and management teams,” he added. Over the past year, G42 partnered with the Abu Dhabi Department of Health on COVID-19 pandemic management to provide scalable diagnostics and a successful nationwide vaccine rollout. The company also expanded its capabilities through the acquisitions of Injazat, a regional market leader for digital transformation IT services, and Khazna Data Centers, a commercial wholesale data center provider. In 2020, G42 became the first UAE-based company to establish an office in Israel, following the signing of the Abraham Accords. “We aim to work with the best technologies and the best partners to deliver value to every market in the world - our business verticals range from energy, to healthcare, to finance. Now is the right time to partner with Silver Lake to further expand our possibilities,” said Peng Xiao, Group Chief Executive Officer of G42.

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Dubai Islamic Bank closes lowest-ever pricing on an AT1 issuance from the GCC

Banking|: Dubai: Dubai Islamic Bank PJSC (DIB) has priced a $500 million Perpetual Non-Call 5.5-year Additional Tier 1 Sukuk with a profit rate of 3.375 per cent per annum. This transaction represents the lowest ever pricing achieved by a GCC bank (both conventional and Islamic) on an Additional Tier 1 instrument and the lowest ever on a US dollar AT1 Sukuk globally. Despite the volatility witnessed in credit markets during the past month on account of US Treasury rates, achieving this landmark success in the current scenario is testament to the bank’s strong credit profile and standing with international and regional investors. The deal was priced intraday after completing investor calls, which were attended by several local, regional and international investors. Despite the record low yield, the Sukuk was 5.6x oversubscribed with an orderbook that peaked at $2.8 billion which is a further testament to investors reaffirming their commitment to UAE and DIB in particular. “We are very pleased with the outcome of our issuance today. Given that markets had been fairly volatile during the last several weeks on account of underlying US Treasury rates rising rapidly, successfully executing this issuance at the lowest-ever pricing on a USD AT1 instrument is an achievement we are all proud of," said Dr. Adnan Chilwan, Group Chief Executive Officer, DIB. The Sukuk is issued under DIB Tier 1 Sukuk (5) Ltd. and is listed on Euronext Dublin and NASDAQ Dubai. Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC and Standard Chartered Bank acted as Joint Lead Managers and Bookrunners on this transaction.

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UAE and Dubai government entities come together to host global celebration at Expo 2020 Dubai

Business|: Dubai: Key UAE and Dubai government bodies have committed to the structure of delivery of critical services and provision of facilities that will maximise Dubai and the UAE's preparedness to welcome the world for Expo 2020 Dubai, to ensure the first World Expo in the Middle East, Africa and Asia is a resounding success. Formalising the support of their respective entities, Saeed Mohammed Al Tayer, Managing Director and CEO, Dubai Electricity & Water Authority (DEWA); Helal Saeed Al Marri, Director General of Dubai's Department of Tourism and Commerce Marketing (DTCM) and Director General of Dubai World Trade Centre Authority; Major General Mohammed Ahmed Al Marri, Director General, General Directorate of Residency and Foreigners Affairs  Dubai; Paul Griffiths, Chief Executive Officer, Dubai Airports; Dawood Abdul Rahman Al Hajri, Director General, Dubai Municipality; and Awadh Seghayer Al Ketbi, Director General, Dubai Health Authority, signed an operational responsibility matrix that will drive alignment and readiness for Expo 2020 Dubai. By mapping out the vital roles and responsibilities for the mega-event, Expo 2020 and government entities will ensure a seamless Expo visit on par with the positive experiences visitors have become accustomed to in Dubai  one of the world's most visited cities and the UAE. Mohammed Ibrahim Al Shaibani, Director General of His Highness The Ruler's Court of Dubai and Chairman of City Readiness Committee to host Expo 2020 Dubai, said, "Dubai and the UAE are renowned the world over for offering an exceptional experience for residents and tourists alike a result of a deep-rooted spirit of hospitality, world-class infrastructure, cutting-edge technology and globally competitive economic models." "Today, government entities, who have been active contributors to the nation's success story, have committed to their crucial roles in making the largest event to take place in the Arab region an overwhelmingly positive experience for visitors, reinforcing the readiness of Expo, Dubai and the UAE to welcome the world for a six-month celebration of creativity, innovation, human progress and culture."  Consistently ranked among the safest cities and countries in the world, Dubai and the UAE continue to attract tourists and new residents, and are home to the busiest airport in the world for international travel, Dubai International Airport.  Running from October 1, 2021 until 31st March 2022, Expo 2020 will coincide with the 50-year anniversary of the founding of the UAE, and highlight the country's role as a global connecting hub for people, ideas and innovation. Expo 2020 Dubai's site has been built to high environmental and sustainability standards, as well as the highest technological infrastructure, making it a true reflection of what responsible future cities could look like.

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Geely's iconic Lotus Cars mulls raising $1 billion

Zhejiang Geely Holding Group Co. is considering raising about $1 billion to help expand its iconic British sports and racing automotive business Lotus Cars into the electric vehicles market in China, according to people familiar with the matter. Geely is working with advisers to sound out potential investor interest in a funding round that could value Lotus's EV operations at about $5 billion, the people said, asking not to be identified because the matter is private. Separately from the fundraising, the Chinese company is also weighing an initial public offering of Lotus Cars, or just the British carmaker's EV business, as soon as next year, the people said. A listing could value the entire business, including its combustion-driven sports and racing cars, at more than $15 billion, the people said. Geely Automobile Holdings Ltd. shares rose as much as 6.6% in their biggest advance in a month, outperforming a 1% gain in the benchmark Hang Seng Index. The all-electric Evija hypercar photographed in Dubai. Image Credit: Supplied Chinese billionaire Li Shufu's Geely, which also controls Sweden-based Volvo Car AB, purchased a stake in Group Lotus in 2017. It owns 51% of the company, including both Lotus Cars and consultancy Lotus Engineering, while Malaysia's Etika Automotive Bhd. owns the remainder, according to a press release. Under Geely, Lotus in 2019 launched its all-electric Evija hypercar, a 1,972-horsepower coupe that costs about $2 million. Considerations are ongoing and details including size and timing could change, the people said. A Geely representative declined to comment. Representatives for Lotus didn't immediately comment when contacted by Bloomberg News. Geely is seeking to expand into electric vehicles amid a booming market in countries including China. Polestar, the electric carmaker controlled by Volvo Car and its owner Geely, is exploring options for going public as soon as this year, Bloomberg News has reported. Investor mania over EV-related stocks has pushed the share prices of players including Nio Inc. and Xpeng Inc. to stratospheric levels. That intense interest has also spawned a wave of EV upstarts raising billions and racing to list via special-purpose acquisition companies. More than $180 billion has been raised globally through SPAC IPOs in the past 12 months, Bloomberg-compiled data show.

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Banks lead UAE stocks' coming back

Markets|: Dubai: Abu Dhabi and Dubai stocks bounced back from the last session's drop, following the lead set by global markets that looked upward after a drop in US bond yield guided investors towards more risky but higher-gain equity assets. The UAE rally was led by the banking stocks in contrast to their performance on Tuesday when they played the biggest drag on the indexes. Abu Dhabi Securities Exchange traded 0.4 higher at 6,045 points with First Abu Dhabi Bank providing the single-biggest impetus and Abu Dhabi Commercial Bank joining the list of gainers. The banks and other stocks in GCC markets and globally have seen volatility in recent trading sessions as investors lacked guidance towards a particular direction ahead of first-quarter earnings. Soaring to maximum RAK for White Cement and Construction Materials soared 15 per cent, hitting the maximum ceiling a stock is allowed to reach in a single session. The stock leap comes after its board of directors proposed to hand out 5 per cent of its capital in full-year dividends despite reporting a decline in the last year's profits. Wednesday's gains have wiped out most of the losses so far this year as they narrowed down to 2.5 per cent after overshooting 17 per cent on the backdrop of disappointing full-year results. Dubai Financial Market advanced 0.4 per cent to trade at 6,045 points, recouping some of the losses in the previous two sessions. Financial pack led the advances with Emirates NBD and Dubai Islamic Bank acting as the biggest boost. Property shares also provided their own contribution as Damac Properties, Emaar Properties and Emaar Development all heading higher. Dubai property stocks have recently displayed a better performance than their peers in other sectors, getting clues from Emaar's sales numbers that more than doubled for the first three months of the year. The emirate's real estate market has the worst days behind it as some segments are winning back the buyers and overall property prices have stabilized and are set to rise next year. Results call the shots Qatar Exchange traded unchanged as gains in energy and materials stocks were countered by underperforming industrial shares. Oman's 30-company index edged up marginally with Al Jazeira Services picking up 1.9 per cent after reporting a four-fold spike in the first-quarter profits. The index gains were capped by Renaissance Services that dropped 2.1 per cent after its profits plunged 34 per cent for the same period.

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US to go ahead with $23 billion defence sales to UAE

Business|: Washington: US President Joe Biden’s administration has told Congress it is proceeding with more than $23 billion in defence equipment sales to the United Arab Emirates, including advanced F-35 aircraft, drones and other equipment, congressional aides said on Tuesday. A State Department spokesperson said the administration would move forward with the proposed sales to the UAE, “even as we continue reviewing details and consulting with Emirati officials” related to the use of the weapons. The Trump administration told Congress in November it had approved the US sale to the UAE as a side deal to the Abraham Accords, an agreement in September in which the UAE agreed to normalise relations with Israel. In the last months of the Trump administration, Israel reached deals with the UAE, Bahrain, Sudan and Morocco as part of the accords. The $23.37 billion package contained products from General Atomics, Lockheed Martin Corp and Raytheon Technologies Corp, including 50 F-35 Lighting II aircraft, up to 18 MQ-9B Unmanned Aerial Systems and a package of air-to-air and air-to-ground munitions. Delivery from 2025 The State Department spokesperson said on Tuesday the estimated delivery dates on the UAE sales, if implemented, were for after 2025 or later. The government anticipated “a robust and sustained dialogue with the UAE” to ensure a stronger security partnership, the spokesperson said in an emailed statement. “We will also continue to reinforce with the UAE and all recipients of US defense articles and services that US-origin defense equipment must be adequately secured and used in a manner that respects human rights and fully complies with the laws of armed conflict,” the statement said.

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Egypt seizes Suez ship 'Ever Given' pending $900 million compensation

Business|: Cairo: Egypt seized a giant container vessel that closed off the Suez Canal last month as it sought compensation of over $900 million for the blockage. A court in the city of Ismailia granted the request regarding the Ever Given vessel at the behest of the Suez Canal Authority, state-run Ahram Gate reported on its website. It did not say who the SCA wants compensation from. The ship's insurer for third-party losses, the UK P&I Club, said in a statement that it received a claim for $916 million, the size of which is "largely unsupported." It said it was disappointed that the vessel was arrested on Tuesday. Egypt's move underscores the legal complications following the container vessel's grounding on March 23, which closed the canal for almost a week and roiled shipping markets. Logjams are expected to continue in the coming weeks at major ports such as Singapore and Rotterdam because of disruptions to schedules, according to supply-chain data provider project44. The SCA has said compensation is needed to cover losses of transit fees, damage to the waterway during the dredging and salvage efforts, and the cost of equipment and labor. It has calculated that it missed out on about $15 million of transit fees each day. The U.K. P&I Club said the claim included a $300 million salvage bonus and another $300 million for loss of reputation, but not the professional salvor's claim for its services. It said a generous offer was made to settle the claim and that negotiations will continue. Calls to the SCA weren't answered. A spokesman for the Ever Given's owner, Japan-based Shoei Kisen Kaisha Ltd., declined to comment on compensation while discussions with the SCA are underway. The company said the crew is still on board the ship, which is now in the Great Bitter Lake, about halfway along the canal. The charterer, Taiwan's Evergreen Marine Corp., said in an email it hadn't received any information from the ship's owner about a court order.

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Global air travel is stuck way behind 2019 levels

Aviation|: New York: Airlines just can't get the world flying again. Despite a US boom in vaccinations, many countries are battling a resurgent coronavirus. That means carriers are now expected to end 2021 offering about two-thirds the number of seats they did in 2019. Passenger demand could be even lower. Globally, scheduled capacity is stuck at about 58% of pre-pandemic levels, says John Grant, chief analyst at aviation data specialist OAG. For every market that grows, another seems to fall back, he said. Using weekly OAG updates, Bloomberg has built a global flight tracker to monitor the pulse of the air travel comeback. It's not one Grant expects to be quick. Measuring seats on offer shows that carriers currently have some 62 million seats per week, well short of the 2019 benchmark of 106 million. While not as precise a measurement as actual passenger traffic, tracking seats offered can help identify trends, ideally giving readers an early look at what's happening on a global, regional or national level. Lost European summer With lockdowns meaning hopes of a buoyant European summer season hang in the balance, Grant says the reality is that airline capacity will hit an average of about 65 to 68 million seats by the end of the year "- with passenger demand lagging some 15-20 percentage points behind capacity levels "for a long period of time." "There maybe light at the end of the tunnel, but it's a very, very long tunnel we've still got to go through." OAG's data snapshot for the week of April 12 shows that the U.S. is gaining momentum, with a handful of accessible destinations in the Caribbean benefiting from a recent upturn. Besides Cancun in Mexico, airlines have been ferrying Americans to the U.S. Virgin Islands, where capacity is up 36% versus 2019, Puerto Rico, up 0.5%, and St. Vincent and the Grenadines, where last week's volcanic eruption is likely to erase a 13% gain. Discount carriers in the US have been adding capacity as rising vaccination rates encourage leisure travel. Frontier Group Holdings Inc. and Spirit Airlines Inc. have been the most aggressive, piling on flights just before spring break "- though their push has trailed off in the past week. Despite US growth, Asia leads the global pack. China is offering 5.1% more seats than during the same week in 2019. Vietnam is still closed to foreigners but domestic tourism means flight capacity is almost back up to where it was two years ago. A similar dynamic is at play in India, where seats offered are down just 16%. In Europe, the regional hops that embody summer travel are nearly dormant, with countries like Italy, France and Germany stuck at 25% or less of pre-pandemic levels. One surprising development is the handful of bright spots in Africa. The Democratic Republic of Congo leads the way at 41% above pre-pandemic activity. International borders have been open since August in the expansive central African country which is layered in rainforest. War-torn Yemen in the Middle East is another outlier, with capacity offered at 19% above 2019 levels. While Yemenis are unable to fly to many countries, airlines have reintroduced routes to Sudan and Ethiopia, where getting visas is easier. No region is back at 2019 levels China was quick to bring Covid-19 under control, and has kept infections low. Yet while it continues to help Asian air travel outperform the rest of the world, even that is not enough to see the region restore capacity mothballed since 2019. Asia's comeback was briefly interrupted by the Lunar New Year break in February, when the Chinese government encouraged people not to travel, OAG's data show. The recovery has resumed since then. though the pace has flattened in recent weeks. North America got a bump at the start of March, driven by spring break getaways and a powerful U.S. vaccine rollout. That looks set to continue after the Centers for Disease Control and Prevention this month cleared a return to recreational travel for vaccinated individuals. Muddying the outlook is a rise in infections in the Midwest, which has sent U.S. virus cases to a two-week high. Europe trails every other region by far. A host of factors are at play, ranging from the high reliance on international flights "- which complicates border crossings "- to the emergence of new virus strains and setbacks in the European Union's vaccination drive. The U.K., which has had the most success in cutting infections, has waffled on a May 17 target date for a reopening of international air travel, but says it's still a goal. Domestic travel can offset gloom United Airlines Holdings Inc., whose normal route network is weighted toward international travel, remains stuck at almost 50% below normal. The Chicago-based carrier has emphasized matching capacity to demand, so planes will fly fuller. Delta Air Lines Inc., another big global carrier, will have more room for passengers on May 1, when it becomes the last U.S. airline to lift its block on selling middle seats. While international travel remains suppressed, some large nations are being buoyed by domestic carriers, which have been able to keep flying where train or automobile travel is less practical. Airlines in China and India have kept accepting single-aisle jet deliveries from Airbus SE. Vietnam, about 1,000 miles from north to south, has also recovered well, with scheduled capacity down just 5.2% from 2019. Yet Singapore and Hong Kong, both reliant on international travel, are barely flying at all. Progress toward establishing flight corridors has been waylaid by virus flareups, despite low case numbers in comparison to Western countries. In Malaysia, where capacity is 85% below 2019 levels, AirAsia Group Bhd. posted a record loss in the final quarter of 2020 after local lockdowns delayed its plan to resume limited operations. What comes next? While U.S. airlines are bringing back pilots from leave, the coming weeks will show whether March's rebound can endure. Rising Covid-19 cases there mean the outlook for carriers is becoming less clear, according to analyst Helane Becker of Cowen & Co. Vaccination rates will be key to lifting travel restrictions over the coming months. Just this week Johnson & Johnson's coronavirus vaccine rollout became the latest to hit obstacles, with the U.S. pausing use of the shot and its European rollout delayed after reports of rare instances of blood clotting. Questions have also been raised about the effectiveness of some of China's vaccines. "It's very difficult on a global basis to see that there are going to be enough vaccinations by the end of 2021 or indeed 2022," said OAG's Grant. "It almost makes air travel a luxury product once again, particularly if you need to get tested both before and after arriving back home."

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Pipeline deal shows oil still king for investors in Saudi Arabia

Energy|: Dubai: Saudi Arabia is celebrating one of the biggest foreign-investment windfalls in its history after netting more than $12 billion by selling off a stake in the oil pipelines that traverse the desert kingdom. But the country may also be facing an uncomfortable reality as a result. As carefully cultivated relationships with firms such as BlackRock Inc. and SoftBank Group Corp. have yet to draw in the desired investment, it's turning to the jewels of its energy industry to attract new money. The sale of the stake to EIG Global Energy Partners LLC shows how reliant Saudi Arabia is on its traditional mainstay and the challenges Crown Prince Mohammed bin Salman faces in diversifying the country away from oil and gas to achieve his Vision 2030 goal. The likes of BlackRock and SoftBank haven't invested back into the country as much as the government might have hoped, while foreigners favor revenue-rich energy assets over tourism and entertainment. "Entertainment and tourism might have had a better year of foreign direct investment in 2020 if Covid had not happened," Karen Young, resident scholar at the American Enterprise Institute in Washington, said via e-mail. "But all the same, the core investors who see value in Saudi will be interested in the largest and most profitable sector, and that is still very much oil and energy." Though EIG, the Washington-based private equity firm led by Chief Executive Blair Thomas, is a prominent investor in North America and Europe, it barely resonates in Saudi circles. It hasn't made a single equity purchase in the Middle East until now, let alone the kingdom itself, and its management team has never showed at Saudi Arabia's marquee "Davos in the Desert" conference, an event attended routinely by investment leaders from The Blackstone Group Inc.'s Stephen Schwarzman to Ray Dalio of BridgeWater Associates LP and the Carlyle Group's David Rubenstein. Big boost to FDI Saudi Arabia attracted $5.5 billion in net FDI flows in 2020, equivalent to about 1% of its economic output, according to data compiled by Bloomberg, which means the EIG deal brings more than twice last year's total. The government's goal is 5.7 per cent by 2030, hence the temptation to offer up prized energy assets such as parts of Saudi Aramco, the state-owned energy giant. "This is the latest milestone in an ongoing shift," said Jim Krane, a fellow at Rice University's Baker Institute for Public Policy in Houston. "Mohammed bin Salman and his advisers keep finding novel ways to coax cash out of Aramco without disrupting its operational capability. Right now it's cash that the kingdom needs and Aramco controls the spigot." EIG beat out rivals including Apollo Global Management Inc. and Brookfield Asset Management Inc. to buy the stake. It's now putting together a consortium of other investors to join the deal. Source of capital While several global investors have forged closer ties with Saudi Arabia in recent years, most of them see it more as a source of capital than an investment destination. The kingdom's flagship Public Investment Fund, or PIF, is the largest investor in Softbank's $100 billion technology vehicle, with an allocation of $45 billion. The PIF has also pledged as much as $20 billion to help Blackstone Group LP build the world's largest infrastructure fund. The reasons are manifold, ranging from the inconsistency of the Saudi legal system to an economic slump as the country adjusts to lower oil prices. The 2017 arrest and incarceration of scores of Saudi businessmen at Riyadh's Ritz Carlton hotel and the murder of dissident writer Jamal Khashoggi the following year have hardly helped. FDI into Saudi Arabia peaked between 2008 and 2012, averaging more than $26 billion. During those years, it was mostly driven by large refinery and petrochemical projects developed with foreign partners at a time when oil averaged over $90 a barrel. The subsequent slide in oil has seen average FDI into Saudi drop to about $6 billion a year. "Despite the measures to liberalize and open the economy for investment into new industries, FDI has not come in the way originally planned," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. FDI may be set to pick up further this year. The kingdom signed agreements with developers including Electricite de France SA and Marubeni Corpo. to build solar power plants last week, and later this year it is likely to complete the sale of the world's largest desalination plant. Asset sales In selling assets of its main state-owned energy explorer, Saudi Arabia is following a model successfully implemented by neighboring Abu Dhabi. Instead of pursuing an initial public offering of its state-owned energy firm Adnoc, the emirate has raised more than $20 billion in recent years by bringing international investors into some of its key assets. EIG studied some of the Adnoc assets that were on offer but couldn't reach an agreement. Hence, it didn't want to lose out on the Aramco transaction, a person familiar with the matter said. Saudi Aramco is encouraged by the valuation and the interest generated for the deal, meaning the oil giant may pursue more disposals in the coming years, people familiar with the matter said. It has already entrusted boutique investment bank Moelis & Co with formulating a strategy for selling stakes in some subsidiaries, people familiar with the matter said in December. "It's a great deal for Aramco, but also a new kind of investment strategy, in that it is "giving up" much more in terms of investor access to information, control over operations than an IPO does," said Young of the American Enterprise Institute. "It is a real partnership, a long-term effort with outsiders, which is an entirely new level of trust outside of the firm and the government." Founded in 1982, EIG has committed more than $34 billion to the energy sector, according to its website. Its portfolio includes holdings in Spanish solar developer Abengoa SA, Houston-based Cheniere Energy Inc., natural-gas producer Chesapeake Energy Corp. and storage and pipeline operator Kinder Morgan Inc.

GulfNews Business

There’s nothing negative in Gulf’s growth forecasts

Analysis|: The possibility of GCC economies returning to faster growth is showing up in more ways – despite the repeated claims to the contrary put out by some external media outlets. Early this month, the International Monetary Fund (IMF) issued its latest set of updates on the global economy and revised forecasts for the year. And what the IMF provided matched the optimistic views concerning the Gulf economies. The institution raised its expectation of 2021 growth rates for the UAE and the GCC countries compared to forecasts it put out last October. As for the UAE, the GDP is expected to grow by 3.1 per cent this year, up from the earlier forecast for 2.6 per cent. The Saudi GDP will possibly increase by 2.9 per cent, Bahrain’s by 3.3 per cent, Qatar by 2.4 per cent, Oman by 1.8 per cent and Kuwaiti by 0.7 per cent, each higher than the October projections, which made as COVID-19 related repercussions were still being felt intensely. Vaccination push pays off The Fund said the GCC countries have been successful in taking measures to contain the spread and lessen its economic repercussions. The Gulf countries are now at the forefront in adopting rapid, transparent and practical preventive measures, and lead the world in terms of COVID-19 vaccinations rates. This may speed up growth rates referred to by the IMF, especially since most of the forecasts project an improvement in oil prices. A large part of the GCC economies’ decline last year resulted from the deterioration in oil revenues. Some critics may say that the 2021 expected growth rates in developed countries, according to the IMF, is 5.1 per cent, with the EU’s at 4.4 per cent. But it must be pointed out that this issue is part of the action-and-reaction dynamic. Over the past year, the economic decline in developed countries was double the Gulf’s recession. In Spain, growth rate dropped by 12.4 per cent and in the UK by 10.3 per cent, compared to 5.9 per cent and 4.1 per cent the UAE and Saudi Arabia. This means that it is natural for growth rates to rise in developed countries, given that they are measured by previous rates of decline. On solid grounds The same applies to the Gulf countries - but measuring the ratios shows the advantage enjoyed by the Gulf economies. As for the forecasts for emerging economies, they are expected to achieve higher growth rates and which would, in due course, lead to a recovery in commodity prices, especially oil. The Fund expects the global economy to achieve 6 per cent growth, and overcoming much of the impact brought on by the pandemic. Vital sectors will return to some level of normalcy, including travel and tourism. But some growth hurdles are expected to continue into next year. But their effect will be less severe and gradually disappear thanks to vaccinations and precautionary measures. It is in this context that we should dismiss the often fabricated and instigated reports, some of which, unfortunately, come from reputed media outlets and led some investors to take wrong decisions. When evaluating economic conditions, it is best to be all objective. The economic prospects in the Gulf appear sound, as evidenced by the large projects that will come online, especially in the field of renewable energy and infrastructure. - Mohammed Al Asoomi is a specialist in energy and Gulf economic affairs.

GulfNews Business

Toshiba CEO resigns as buyout offer stirs turmoil

Business|: Tokyo: Toshiba's president Nobuaki Kurumatani has resigned, the firm announced Wednesday, as a buyout offer from a private equity fund reportedly stirs turmoil inside the Japanese company. The resignation came as reports said two other funds were considering their own offers for the Japanese household name, potentially setting up a bidding war. In a statement, Toshiba said the board had accepted Kurumatani's resignation, without giving details on why he had asked to step down. He will be replaced by chairman Satoshi Tsunakawa, the firm said. The move comes as board members raise questions about the buyout offer from CVC Capital Partners, where Kurumatani formerly headed Japanese operations. The private equity firm is reportedly offering a deal in excess of $20 billion, though there are reports that some in Toshiba see that sum as too small. The Financial Times said Wednesday that another private equity fund, KKR, is planning to offer its own larger buyout proposal. And Bloomberg News reported that a third, Canadian Brookfield Asset Management, was also exploring a possible offer. Toshiba last week confirmed it had received an offer from CVC Capital Partners which would take Toshiba private. Delisting the firm could produce faster decision-making by Toshiba's management, which has clashed with shareholders recently. It could also allow Toshiba to concentrate resources on renewable energies and other core businesses. 'Sticky situation' CVC and Toshiba have close ties. Kurumatani worked for the fund between 2017 and 2018, and a senior executive at CVC Japan currently serves as an outside director on Toshiba's board. That closeness has reportedly sparked concern, and Justin Tang, head of Asian research at United First Partners, said Kurumatani's departure would "remove uncertainty over potential conflicts of interest". It will also "force the board to seek other offers that are in the best interests of shareholders", he told AFP. "It is a very sticky situation at present." The turmoil inside Toshiba is a fresh blow for the firm, which has been trying to improve its governance after an accounting scandal in 2015 and the 2017 bankruptcy of its US nuclear subsidiary. After sweeping restructuring, its earnings rebounded and it returned to the prestigious first section of the Tokyo Stock Exchange in January. Any buyout offer is likely to face significant challenges, including securing financing and regulatory approval. Last week Toshiba warned the financing assistance CVC is expected to seek was likely to involve "a substantial amount of time and considerable complexity". Toshiba shares jumped 4.46 per cent to 4,800 yen shortly after markets opened in Tokyo. The CVC offer is reportedly around 5,000 yen a share, but Tang said he believes "a price north of 6,000 yen is necessary to get shareholders over the line".

GulfNews Business

TikTok founder's $60 billion fortune places him among the world's richest people

Business|: Beijing: Just last year, the world's most valuable startup, ByteDance Ltd., was being squeezed from all sides. The Trump administration wanted the Chinese firm, which owns the ubiquitous TikTok video-sharing platform, to get rid of assets. Beijing was cracking down on tech businesses, and India had blacklisted some of its social-media apps. For all the obstacles, ByteDance kept growing. Now its founder, 38-year-old Zhang Yiming, is among the world's richest people - a distinction that lately has carried increased risks in China. Shares of the company trade in the private market at a valuation of more than $250 billion, people familiar with the dealings have said. At that level, Zhang, who owns about a quarter of ByteDance, could be worth more than $60 billion, placing him alongside Tencent Holdings Ltd.'s Pony Ma, bottled-water king Zhong Shanshan and members of the Walton and Koch families in the U.S., according to the Bloomberg Billionaires Index. ByteDance, famous for its short-video apps and news aggregator Toutiao, more than doubled revenue last year after expanding beyond its core advertising business into areas such as e-commerce and online gaming. It's now weighing options for the initial public offering of some businesses. "Zhang is someone who's known for thinking long-term and not easily dissuaded by short-term setbacks," said Ma Rui, partner at venture-capital firm Synaptic Ventures. "He is set on building an enduring, global business." Surging valuation During its last fundraising round, ByteDance reached a $180 billion valuation, according to a person with knowledge of the matter. That's up from $20 billion about three years ago, according to CB Insights. But in the private market, some investors recently were asking for the equivalent of a $350 billion valuation to part with their shares, the people have said. Its value for private equity investors is approaching $400 billion, according to a report in the South China Morning Post. That would mean an even bigger fortune for Zhang. ByteDance representatives didn't respond to requests for comment. It's a tough time to be wealthy in China as the government seeks to rein in the country's most powerful corporations and their billionaire founders. Just ask Jack Ma. After opening an antitrust probe, regulators fined Alibaba a record $2.8 billion and the central bank ordered an overhaul of his Ant Group Co. fintech empire so it'd be supervised more like a bank. While ByteDance hasn't been singled out as a target, its dominance in social media and war chest for deal-making are sensitive areas the government is looking into. "There are no more silly games in the U.S. with Trump and potential bans or forced asset sales," said Kirk Boodry, founder of investment research firm Redex Holdings. "But the pressure on tech-share prices and China in particular might make $250 billion a tough sell," he added, referring to ByteDance's value in private transactions. Born in the southern Chinese city of Longyan, Zhang, the only son of civil servants, studied programming at Tianjin's Nankai University, where he built a following on the school's online forum by fixing classmates' computers. He joined Microsoft Corp. for a brief stint after graduating, later calling the job so boring he often "worked half of the day and read books in the other half," according to an interview with Chinese media. He went on to develop several ventures, including a real estate search portal. His breakthrough came in 2012, when working in a four-bedroom apartment in Beijing he created ByteDance's first hit - a joke-sharing app that was later shut down by Beijing's censors. It then turned to news aggregation before winning over more than 1 billion global users with its short-video platforms TikTok and Chinese twin app, Douyin. In the process, it attracted big-name investors such as SoftBank Group Corp., Sequoia Capital and proprietary-trading firm Susquehanna International Group, making it a rarity among Chinese internet startups that usually get absorbed into the wider ecosystems of Tencent and Alibaba Group Holding Ltd. Novel concept One of Zhang's earliest supporters, Susquehanna has become ByteDance's largest outside backer with a 15% stake, according to a Wall Street Journal story in October. The initial bet was made at the start of 2012, when ByteDance's news app Toutiao was just a concept that Zhang had drawn up on napkins, according to a 2016 blog post by Joan Wang, who led that investment for Susquehanna's Chinese venture-capital unit. With TikTok facing scrutiny in the U.S. and India, Zhang has put more effort into ByteDance's nascent and fast-growing Chinese businesses, which range from gaming to education to e-commerce. That helped it increase sales to about $35 billion last year and operating profit to $7 billion, a person familiar with the results said. Investors are eyeing the IPO of some of ByteDance's businesses after Chinese competitor Kuaishou Technology raised $5.4 billion in February in the biggest internet listing since Uber Technologies Inc. The firm's market value is now nearing $140 billion. Last month, ByteDance hired former Xiaomi Corp. executive Chew Shou Zi as its chief financial officer, filling a long vacant position that will be crucial for its eventual market offering. For Zhang, it's not all about immediate payoffs. The affable founder is known for his business philosophy of "delaying satisfactions" as he puts the focus on long-term growth - a message he stressed again during his spiel to employees at the company's ninth anniversary celebration last month. "Keep an ordinary mind, that's something that sounds easy but important to do," he said. "Put in the plainest words, when hungry, eat, when tired, sleep."