The Government committee overseeing the revamp of Amlak Finance, the failed Islamic loan company, agrees to reduce its debts by Dh4 billion.
Amlak debt slashed by Dh4 billion
The government committee overseeing the overhaul of Amlak Finance has cut the company's debt by Dh4 billion (US$1.08bn) as attempts to clean up the after-effects of Dubai's debt crisis proceed.
The committee had succeeded in lowering the Islamic mortgage company's total debt "in coordination with the federal Government and the local parties concerned", said Sultan Al Mansouri, the Minister of Economy.
Amlak, alongside its rival Tamweel, funded much of Dubai's housing boom. However, their reliance on wholesale funding became apparent when credit markets froze in the autumn of 2008. Trading in the companies' shares stopped in November that year, after an aborted merger that had been floated by the Government.
The resumption of trading on Amlak's shares "will take time", Mr Al Mansouri said.
"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."
Tamweel was absorbed by Dubai Islamic Bank in 2010, ahead of its return to market trading in May last year, scuttling the proposed merger. A question mark has remained over Amlak ever since.
The company reported a net loss of Dh146 million for the first nine months of last year and total liabilities of Dh11bn.
Auditors from Ernst & Young wrote at the time that Dh3.2bn of investment properties and Dh672m of advances for such properties could not be properly valued and were being carried at their pre-crisis acquisition cost.
Amlak is 45 per cent-owned by Emaar Properties.
In October, the Ministry of Finance established the Emirates Development Bank, a property lending bank that had been dormant for two years after its approval by the Cabinet.
Previously, the bank had been mooted as a potential merger partner for Amlak and Tamweel, although the ministry gave no indication of whether this was still the case.
In the meantime, speculation has mounted that Amlak will be merged with a stronger entity, with analysts from HC Securities anticipating that Emirates NBD could be forced to acquire it.
"The government committee for Amlak's affairs continues to espouse balance-sheet restructuring or a merger," HC said in a report in December.
"We therefore expect a government solution for Amlak, which, due to its very sizeable property investment portfolio, is in an even worse position than Dubai Bank was."
Emirates NBD was ordered to acquire Dubai Bank in October for Dh10.