Government steps in to bolster Islamic lender Amlak's flagging fortunes

The Government has cut Islamic lender Amlak's debt burden by $1.1 billion, the Minister of Economy said today, in the latest effort to revive the Dubai mortgage provider whose stock has been halted since 2008.

Amlak, which is 45 per cent owned by Dubai's largest real estate firm Emaar Properties, fell into difficulties after the global financial crisis in 2008.

Sultan Al Mansouri said a committee had "succeeded in reducing by some Dh4 billion ($1.1 billion) of total debt owed by the firm and this in coordination with the Government and the local parties concerned," according to a statement on the ministry's website.

Amlak's total liabilities stood at Dh11.01bn as of September 30, 2011, according to its earnings report on the Dubai Financial Market.

In November 2008, the Government unveiled plans to merge Amlak with rival Dubai mortgage lender Tamweel after the two firms were hit by the global economic woes. That plan was effectively ruled out after lender Dubai Islamic Bank raised its stake in Tamweel to 57.33 per cent in September 2010. This gave Tamweel the funding it needed to resume trading but effectively put an end to the plan to merge it with Amlak.

Mr Al Mansouri said resuming trade in Amlak stock will take more time.

"The commission is keen to protect the rights of shareholders and the continuity of the company, while not exposing them to bankruptcy," he said.

"The Government will not allow bankruptcies of companies, as happened in many European countries and the United States, and the country is keen to give priority to the protection of the shareholders' rights and their interests and not expose to any risk."

* With Reuters