Sovereign Wealth Fund Institute

Mumtalakat Holdings, Bahrain’s sovereign wealth fund will continue to support Gulf Air financially. Gulf Air is the national air carrier in the Kingdom of Bahrain. Unfortunately, Gulf Air will be a strain on the fund’s 2011 earnings. Gulf Air was negatively affected by the political unrest that swarmed the country. Management at Mumtalakat Holdings sees Gulf Air as a challenging asset; however, airlines are a strategic industry for the Kingdom of Bahrain.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

According to Reuters, “Three Gulf Arab sovereign wealth funds and UAE-based property developer Al Maabar have raised 15 billion dirhams for a tourism fund that aims to put Morrocco among the world’s top 20 destinations.  Omar Bennani, who heads state-controlled Moroccan Touristic Engineering Company (SMIT), said the four investors were Bahrain’s Mumtalakat, the Kuwaiti Investment Authority (KIA), Qatar Investment Authority (QIA) and Al Maabar of the United Arab Emirates.

“The contribution of the four partners is of at least 15 billion dirhams … They are committed to support us throughout the next 10 years,” Bennani told Reuters in an interview on Wednesday.

He said the investors did not want their individual contributions to the Moroccan government-backed fund be made public. The fund aims to attract 100 billion dirhams in investment.

The fund will finance resort developments in Morocco that aim to more than double tourism receipts to 150 billion dirhams by 2020.”

Read more: Reuters

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We have all witnessed the trend of some sovereign wealth funds raising private capital or creating sovereign wealth enterprises to act as an investment manager for private funds.  This article is to bring some clarity on why a number of funds are doing this.  With Mubadala raising $1.85 billion in medium term notes, Temasek Holdings multiple debt raises in denominated in multiple currencies, and Mumtalakat Holdings bond offering, it shows that SWFs are using their assets, not just their cash as an investment.

First off, most SWFs that are raising capital are the types of sovereign wealth funds that take large stakes in companies.  In addition, SWFs that hold large portions of their domestic industry would be the type of funds to engage in this behavior.  We most likely would not see the Abu Dhabi Investment Authority or the Norwegian GPFG raise capital or take on bank loans.  In some instances, SWFs experience shrinkage of money flows from their respective government; money in the private markets backed by SWF assets can increase their stability and investment performance.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

According to the Wall Street Journal, “Offers for Bahrain Mumtalakat Holding Co.’s first-ever bond issue are in the range of $1 billion to $1.25 billion, according to a source familiar with the sale.

That means the sovereign wealth entity’s debut could be larger than the minimum $500 million benchmark size when it completes on Wednesday. Deutsche Bank, HSBC, JPMorgan and Standard Chartered are leading the sale.

The five-year senior unsecured bonds, rated A by Standard & Poor’s and A from Fitch Ratings, are expected to yield 300 basis points over mid-swaps. Proceeds will be used for general corporate purposes, including to refinance existing debt.

The Kingdom of Bahrain, which owns Mumtalakat outright, issued $1.25 billion in 5.5% bonds on March 24 via JPMorgan, Deutsche Bank and BNP Paribas, according to Dealogic.  In a note on June 21, Standard & Poor’s said there is an “almost certain likelihood that the government of Bahrain would provide timely and sufficient extraordinary support to Mumtalakat in the event of financial distress,” although it does not formally guarantee its liabilities.

Mumtalakat does not make material investment decisions without government consent, S&P added. Most of the company’s assets are in domestic real-estate, telecommunications, aviation, banking and manufacturing. Bahrain owns a separate holding company for oil and gas assets, the National Oil and Gas Authority.  The issuer’s decision to tap the capital markets for the first time was predicated on the Mumtalakat’s need to become more independent from Bahrain, said the source.

“In the wake of the Dubai World issues, Bahrain is trying to push these sovereign entities away from its balance sheet and would like them to fund themselves on their own,” the person said.”

Source: Wall Street Journal

Nasdaq reports that, “Bahrain sovereign wealth fund Mumtalakat Holding Co. is talking to banks about a new $400 million-$500 million loan facility, people familiar with the situation said Tuesday. This is not a refinancing but new money for Mumtalakat, one of the people said. The deal is out in the loan market alongside a refinancing facility for Abu Dhabi-owned Mubadala Development Co., which is looking to refinance an existing $2 billion loan that matures in early April, as previously reported by Dow Jones. Both deals represent the first loan financings for Gulf-based entities since Dubai requested a standstill on $26 billion worth of Dubai World debt.”

read more: Nasdaq

Reuters reports, ” Bahrain’s sovereign wealth fund, which invests mostly at home, plans to diversify away from private equity projects and into stocks and bonds, its CEO said on Thursday. Talal Al Zain also told Reuters that Mumtalakat expects to receive a credit rating this year, which would allow it to tap capital markets for funding, including Islamic bonds. Mumtalakat, which has assets of around $10 billion, has investments in 35 companies. It holds stakes above 50 percent in more than 15 of those firms.

“We want to diversify. We will be looking at investments across markets. Our immediate focus will be to diversify investments, channel funds more towards liquidity, that is fixed income, equity markets,” Zain said in an interview.

A $1 billion motor sports-themed commercial real estate project in Bahrain was likely to be financed by a combination of investment from strategic investors, private sector funding and some of its own equity, he said. But Mumtalakat would wait to receive its credit rating later this year before issuing bonds.”

read more: Reuters

Gulf Times reports that, “Bahrain’s sovereign wealth fund is eyeing stakes in US, European and Asian firms in sectors including commodities and financial services, and will add new asset classes to its portfolio, its chief executive said.

The value of investments held by the sovereign wealth fund had fallen by about 10% to 15% from around $10bn as a result of the global economic downturn, Mumtalakat CEO Talal al-Zain told Reuters yesterday.

In an interview in Bahrain’s capital Manama, Zain said Mumtalakat’s strategy to balance local and international investments does not necessarily mean the fund would sell down local stakes and shift proceeds to its international portfolio.”

read more: Gulf Times

Reuters reports that, “Bahrain’s sovereign wealth fund said on Friday it would focus for now on its domestic investments, including Gulf Air, but would be on the lookout for global investments in sectors like tourism.

‘Right now, my focus really is on the existing portfolio companies which is mostly in the Bahrain market,’ Mumtalakat Chief Executive Talal al-Zain said in an interview at on the sidelines of the World Economic Forum in Dead Sea, Jordan.

‘I’m just taking advantage of what’s happening and just investing within my portfolio company,’ Zain told Reuters.

Sovereign wealth funds in the oil-exporting Gulf Arab region have scaled down investments in Western companies since oil prices tumbled from peaks of almost $150 a barrel last summer.”

read more: Reuters

Trade Arabia reports that, “Bahrain is pushing ahead with massive developments as much of the world cowers in the face of recession, said the head of the government’s investments arm. Bahrain Mumtalakat Holding Company chief executive officer Talal Alzain, was speaking as he detailed the $1 billion (BD378 million) @bahrain development, a business, technology, retail and leisure ‘city’ to be built alongside the Bahrain International Circuit (BIC) in Sakhir. Alzain was speaking yesterday on the second day of this year’s Gulf Air Bahrain Grand Prix, which @bahrain and Mumtalakat are using as the platform to launch the project.”

read more: Trade Arabia

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