All major deals and infrastructure project from and within the Gulf are fully financed by debt.
In 2007 the Dubai’s ruler was involved in the complicated NASDAQ-OMX-LSE deal. Borse Dubai BD is a vehicle of Investment Corporation of Dubai ICD, one of the emirate’s main state-owned holding companies. BD arranged two loans worth a total of $5.8bn to fund the takeover of the Nordic stock exchange OMX and a 28% stake in the London Stock Exchange LSE (stake today 20%, at market value of £500m). ICD arranged in 2008 a $6bn loan to replace old debt, likely also used for the LSE deal. Last year ICD borrowed $2.8bn from banks to repay part of a $6bn loan, while $1.2m was reported to be paid back in cash (unconfirmed); the remaining amount of $2bn due next year should also be paid back in cash. In 2010 Borse Dubai sold more than the half of its stake in NASDAQ OMX, earning $672m, and arranged a new loan for the total amount of $1.1bn used to partially repay the $5.8bn loan facility related to the transaction in 2007. Do you follow me?

In March 2009 the Abu Dhabi government owned IPIC International Petroleum Investment Company, through the controlled Aabar Petroleum Investments, acquired a stake of 9.1% in Daimler for $2.7bn (€1.95bn at that time, €3.5bn market value of the stake today). Pre-conditions of the deal was to establish a training center in Abu Dhabi to educate talent for positions in the automotive industry, to develop innovative compound materials to be used in car making and for electric vehicles, likely building in the future a production site for components of Daimler in Abu Dhabi. Because of the acquisition IPIC issued a $5bn bond in acquiring the control of Aabar, and raised a new loan of $5bn with European lenders to finance transactions of the controlled Aabar, as the deal with Daimler.

Following to this transaction Aabar also bought <40% of Daimler’s 10% stake in the electric car producer Tesla Motor, acquired by Daimler just two months before for $50m. The stake of 3.1% bought by Aabar in Tesla for $15m has today a market value of $100m. According to unconfirmed market rumors, because of the priority in financing other ongoing projects (lack of liquidity? Extinction of debt?), both stakes should be sold, which should be in contrast with statements released at that time, as both investments were declared pillars of the diversification strategy ongoing in Abu Dhabi with long term purposes, and not for only 3 years. Do you follow me?

In 2009 IPIC increased the participation in the Spanish oil company CEPSA from 9.5% to 47% buying shares from Santander for €3.3bn, following to another loans of $3.5bn from a group of international banks. Part of the same loan was also used to finalize the takeover of Nova Chemicals in Canada for $500m (but $2.3bn incl. Nova’s debt), plus $250m cash to the company to improve liquidity. In 2011 IPIC took fully ownership of CEPSA after purchasing 49% stake from Total and the free float of 4% for €7.5bn, this also supported by new bond issues of $4.4bn and new loans of $3.75bn.

Also in the same year IPIC also agreed to buy 17.6% of the Australian Oil Search Ltd for $1.1bn mostly due to a $850m loan managed by Deutsche Bank (expired and prolonged this year), in order to join as second biggest shareholder a liquefied natural gas project of $15bn in Papua New Guinea (therefore to be financed also by IPIC) . Do you follow me?

In October 2008 IPIC acquired 16% of Barclays Bank for £3.5bn, at that time in great bankruptcy turmoil. The transaction was surprisingly and officially closed through IPIC, a company focused on energy, where Sheikh Mansour is chairman. Despite the earlier statement of IPIC in giving to the Barclays-stake a strategic role in the portfolio of assets held abroad, only seven months after the purchase IPIC sold 13.5% Barclays’ stake at a substantial discount for £3.5bn through PCP Gulf Invest, making a profit of £1.46bn, even causing the share price to plummet 20% after the announcement, giving as its reason the well known strategy of IPIC to focus on investment opportunities within the energy sector. Directly or indirectly Sheikh Mansour still hold 6.20% of the bank (stake valued at £1.3bn), as well as reserve capital instruments worth £1.3bn and warrant for £1.5bn (part of it placed later in the market for a profit of £750m). The surprisingly short-term trading of the stake of Barclays, prospected to be held for long-term purposes, is in contrast to the investment policy of IPIC and makes it unclear whether this asset is really institutional for IPIC or more privately owned by Sheikh Mansour. In reality IPIC propagates a clear & strict interest in exclusively long-term investments only in energy, oil and industry-related sectors, definitely not in banks. The transaction was arranged by PCP Gulf Invest of Amanda Staveley, also involved in the purchase of Manchester Football Club by Sheikh Mansour, rumored to be the owner of PCP. Sheikh Mansour also supported the intention to buy 10% in Black Rock. For $2.3bn though the PCP vehicle of Mrs. Staveley. Further to that, he wanted offer $2bn to support Black Rock’s plan to acquire Barclays Global Investors for $13.5bn. The BGI deal failed, making it also unclear in this case whether Sheikh Mansour was interested in investing privately or institutionally through IPIC. Do you follow me?

Moody’s Investor Services estimated in October 2011 a total volume of bonds issued by IPIC maturing within 2013 at $9.9bn. Bloomberg reports for IPIC total liabilities of $51bn (+300% versus 2008). In 2011 IPIC reported total debt of $36bn and a collapsed net profit to $45m from $1.3bn in 2010.

In 2004 Mubadala acquired 25% of Lease Plan (50% VW, 25% Saudis Olayan), evaluated at €2bn, reporting strategic interest in the transaction. Surprisingly, Mubadala executed a put option this year, selling the stakes, with Olayan, to the German Metzler Bank for €1.3bn (supposed to hold the stake on behalf of VW).

Abu Dhabi aims to become an aerospace hub and the first galactic aerodrome in the world. The efforts of Abu Dhabi to become the aviation capital of the Gulf are laudable; further to different agreements with EADS, Finmeccanica or Rolls Royce, the government of Abu Dhabi takes a lot of care in the development of aerospace activity in its own emirate, among other things investing $500m through Mubadala in its aerospace composite plant, $8bn for the JV with GE and $20bn for the order by Etihad Airways of 10 new aircraft (apparently with the scope to be built in Abu Dhabi). Abu Dhabi is really doing a lot to become a significant force in aerospace manufacturing worldwide and to build a global aerospace hub. In this regard the government’s vehicle Aabar Petroleum Investments acquired 32% of Virgin Group’s space travel unit Virgin Galactic for $280 in 2008 giving a valuation of $900m for an inexistent activity; in 2001 Aabar increased the stake to 37.8% paying additional $110m, following to a bond sale to finance the deal. Apparently about 300 people have paid $40m in deposits to guarantee an early seat, other media report about 500 passengers have signed up for space flights, giving potential revenues of $100m to the company, which should begin commercial operations end of 2013. Additionally Aabar committed $100m plus transaction costs to fund satellite launch capability within a larger project (and investment) to build spaceport facilities in Abu Dhabi. Because of the characteristic of the previous transactions of Aabar, this investment will also be financed by debt, even if behind the project the real owner of Aabar is the oil-richest emirate of Abu Dhabi.