Dubai International Capital (DIC), the private equity firm associated with some of the emirate’s high-profile acquisitions, is ready to start investing in the region again.
The Dubai Holding unit said it would consider a fresh round of Middle East investments as the emirate’s economy rebounds.
It made global headlines during Dubai’s boom years with a series of highly leveraged trophy purchases, including the parent firm of London’s Madame Tussauds and the British hotel operator Travelodge. But as asset prices tumbled following the global financial crisis in 2008 and 2009, it was unable to meet its debt obligations.
“DIC had its own challenges when it came to liabilities and debt and we had to renegotiate with our creditors,” Maissan Al Maskati, the firm’s managing director, said in an interview yesterday.
Mr Al Maskati, a former investment banker at Bank of America, has been with the firm since 2004.
“By 2012 we had completed that and brought about a new strategy. We used to call ourselves an investment company but now we don’t do all the lines outside of private equity,” he said.
As well as figuring out a repayment schedule for US$2 billion in debt, DIC has slashed its workforce by more than 80 per cent, limited its business to Europe and the Middle East (where it has about $2bn of investments), and stopped investing in listed companies, he said.
DIC’s successful sale of all of its acquisitions in the Middle East had given the firm the kind of track record it needs to attract international institutional investors, Mr Al Maskati said.
These investors, such as pension funds, seek exposure to a region with promising growth potential, but they also have stringent guidelines on how they can invest their money, according to Mr Al Maskati.
“At the peak we had every three guys who could raise money setting up private equity firms,” he said. “A lot of these small firms have disappeared. The prominent names in the market are the ones that survived.”
DIC’s investments before the financial crisis include Doncasters, an engineering firm that provides components to companies such as Rolls-Royce, and the German industrial packaging firm Mauser. It paid £700 million (Dh4.19bn) for Doncasters and €850m (Dh4.29bn) for Mauser.
It is best remembered for its purchase of Travelodge, the British budget hotel chain. DIC borrowed £600m to buy it but was forced to restructure last year because it was unable to pay the debt. The New York-based hedge fund manager Goldentree Asset Management, Avenue Capital Group and Goldman Sachs ended up taking control of the company.
Observers say the region’s asset management industry is maturing following a period of wild spending when many investors overpaid for their acquisitions.
Dubai’s economic recovery following years of stagnation has helped many money managers get back on their feet, they say.
Angus Blair, the chairman and founder of the Signet Institute, a Cairo-based business and political research group, said: “Many in Dubai and elsewhere in the region bought at the top of the market and their returns have been less than forecast.
“The exuberance before the financial crisis was immature. Management has had to learn to go after long-term investments.
“There’s been a turnaround in staff, so some of the people who ran these companies are no longer there. Dubai is doing better, but it still has some issues in terms of debt payment. It’s not out of the woods yet.”
mkassem@thenational.ae
