Archive for November, 2009

AB InBev calls off sale of Beck’s beer brand: report (Reuters)

Saturday, November 28th, 2009 | Finance News

FRANKFURT (Reuters) –
Anheuser-Busch InBev (ABI.BR) has walked away from a planned sale of its German beer brand Beck's to U.S. buyout firm Bain Capital, a German magazine reported.

Contracts had been ready to sign and Bain had secured financing for the projected 1.7 billion Euro ($2.54 billion) deal, weekly Wirtschaftswoche said on Saturday in an excerpt of an article to be published on Monday, citing financial sources.

Nobody at Anheuser-Busch InBev was immediately available for comment.

The sale of 13 eastern European breweries for 2.2 billion euros in October eased Anheuser-Busch InBev's debt burden enough for the brewing giant to call off the Beck's deal, Wirtschaftswoche reported. (Reporting by Ludwig Burger in Frankfurt and Jan Strupczewski in Brussels, editing by Mike Peacock)

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Abu Dhabi to aid Dubai on “case by case” basis (Reuters)

Saturday, November 28th, 2009 | Finance News

ABU DHABI (Reuters) –
Abu Dhabi, wealthy capital of the United Arab Emirates, will "pick and choose" how to assist debt-laden neighbor Dubai, a senior official said on Saturday, after fears of a Dubai default sent global markets reeling.

"We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts," the official in the government of the emirate of Abu Dhabi told Reuters by phone.

Dubai's crisis exploded on Wednesday when the emirate, known for flashy lifestyles and the world's tallest building, said it would delay payment on debt issued by one of its flagship firms, angering investors and sending global markets sharply lower.

Selective assistance for companies in "Dubai Inc.," a network of quasi-sovereign industries, instead of blanket assistance, would serve a rude awakening to investors who for years assumed that the conservative Abu Dhabi provided a safety net for its racier neighbor.

"Some of Dubai's entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist," said the official, who declined to be identified because he is not authorized to speak to the media.

At stake is the $59 billion in debt held by government controlled holding company Dubai World and its property arm Nakheel, builder of palm-shaped islands for wealthy celebrities.

Dubai delayed payment on Nakheel debt by six months in a shock announcement, which came on the eve of a long holiday.

World leaders including Britain's Gordon Brown and French premier Francois Fillon said the global economy -- recovering from two years of financial crisis -- was now strong enough to deal with a shock of this magnitude.

And markets began to recover on Friday after banks outside the Gulf said they were not heavily exposed to Dubai debts.

India, which receives 10-12 percent of its worker remittances from the UAE, said on Saturday it would keep a close watch on the situation in Dubai but did not expect much impact on it.

In the Gulf itself, details of local banks' exposure to Dubai have begun to emerge.

Years of chasing business in Dubai's property boom means Abu Dhabi banks have built up an exposure to Dubai-based companies worth at least 30 percent of their loan books, senior bankers in Abu Dhabi said on Friday.

In most investors' minds, the question is not whether Abu Dhabi will support Dubai but when and how.

Abu Dhabi, which pumps 90 percent of the oil that make the United Arab Emirates the world's third-largest oil exporter, has already provided $15 billion in indirect support for Dubai through the UAE central bank and two private Abu Dhabi banks.

How much more support the emirate provides for its cash-strapped neighbor, however, will depend on how Dubai clarifies its stand on unresolved issues.

"Until things become clearer, it is very difficult to make any further investment decision on the bonds. Many things have to be clarified by Dubai," the official said.

MONITORING

The UAE central bank said it was closely watching events to ensure no harm results for the national economy, a spokesman for the central bank said on Saturday.

"The central bank is monitoring developments very carefully to ensure that there is no negative impact on the UAE economy," the spokesman told Reuters by phone.

Constitutionally, each emirate in the UAE is a separate legal entity within the loose federation, and each controls its own natural and financial resources. The federal government has no guaranteed access to those resources nor is it obliged to underwrite the liabilities of any emirate.

As part of Dubai's restructuring program, investors have been advised of a "standstill" in repayment of flagship real estate developer Nakheel's $3.5 billion Islamic bond, or sukuk, due for maturity on December 14.

Dubai World's $59 billion of liabilities as of August make up the majority of Dubai's total debt of $80 billion.

International banks' exposure related to Dubai World could reach $12 billion in syndicated and bilateral loans, banking sources told Thomson Reuters LPC.

A statement from the Dubai government is expected on Monday, when the markets reopen following an extended break for Eid, a Muslim religious holiday.

(Reporting by Stanley Carvalho via the Dubai newsroom; writing by Thomas Atkins; Editing by Mike Peacock)

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Audit would hurt economic prospects: Bernanke (Reuters)

Friday, November 27th, 2009 | Finance News

WASHINGTON (Reuters) –
Federal Reserve Chairman Ben Bernanke said on Friday congressional proposals to audit the Fed and strip it of regulatory powers as part of post-crisis reforms could damage prospects for economic and financial health in the future.

"These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," Bernanke wrote in a column posted on the Washington Post's website.

The rare newspaper column by a Fed chairman comes shortly before Bernanke testifies before a Senate panel on his renomination to serve a second four-year term at the helm of the central bank and answers a series of steps on Capitol Hill that could diminish the central bank's role.

Lawmakers are angry with the Fed over its emergency bailouts of major financial firms and its failure to prevent the contagion of mortgage delinquencies that crashed the financial system. A proposal to audit the Fed's monetary policy deliberations won a committee vote recently over the objections of House Financial Services Committee Chairman Barney Frank.

Frank's Senate counterpart, Banking Committee Chairman Christopher Dodd, is himself the author of a proposal to consign the Fed solely to making decisions about setting benchmark interest rates.

Bernanke, in his column, conceded the Fed had missed some of the riskiest behavior in the lead up to the crisis. But he said the Fed had helped avoid an even more damaging economic meltdown and has stepped up its policing of the financial system.

"The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation," he said.

Bernanke acknowledged that lawmakers are responding to public anger over the government's response to the turmoil.

"The Federal Reserve, like other regulators around the world, did not do all that it could have to constrain excessive risk-taking in the financial sector in the period leading up to the crisis," he said.

However, the central bank has moved "aggressively" to fix the problems, Bernanke said. The Fed's knowledge of complex financial institutions is invaluable in supervising them, he said.

The Fed's ability to slash interest rates to combat a recession without fueling inflation depends on its political independence he said. Allowing audits of its monetary policy -- as proposed legislation would do -- would increase the perceived influence of Congress on interest rate decisions, he said.

That, in turn "would undermine the confidence the public and the markets have in the Fed to act in the long-term economic interest of the nation," Bernanke wrote.

Frank has said the audit provision is likely to be revisited as legislation winds through both houses of Congress.

Dodd has said his proposal is a starting point for debate.

(Reporting by Mark Felsenthal; Editing Bernard Orr)

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