Dubai Holding unit to take 32% stake in troubled Shuaa

FINANCIAL REPUTATION: Shuaa Capital was founded in the UAE in 1979 long before Dubai became a regional financial centre. (Getty Images)

The Dubai Banking Group (DBS) said on Sunday it will take a 32 percent equity stake in Shuaa Capital on Oct. 31 by converting 1.5 billion dirham's ($408 million) worth of bonds issued by Shuaa last year into shares, UAE daily The National reported.

The move comes just days after Dubai Financial Services Authority (DFSA) fined the investment bank nearly 3.5 million dirhams for share manipulation.

DBG signed an agreement to subscribe to the convertible bonds with maturity date on Oct. 31 2008, in November, 2007.

In May, it was reported DBS intended to exercise conversion rights and that the respective stakes of the then largest shareholders were expected to fall to 7.43% for the Al-Ghurair family, 5.02% for NBK Trust, and 4.07% for the Al-Sager family.

DBG is a 70 percent owned by Dubai Group which in turn is a unit of Dubai Holding, the sovereign wealth fund owned by the government of Duba, and 30 percent owned by Emaar Properties.

"The action taken by Dubai Banking Group was not decided recently and negotiations must have been ongoing for some time," the paper quoted Deepak Tolani of regional brokerage Al Mal Capital, as saying.

"Dubai Banking Group knew the investigation was going on and decided to proceed with the purchase; as a big banking group showing faith in Shuaa, this is a positive sign for investors."

Talks over the conversion of bonds - at an agreed price of 6 dirhams per share equivalent to 250 million Shuaa shares - have been going on since June, according to the Zawya Dow Jones news service.

Representatives at Dubai Banking Group, part of the government-owned Dubai Holding and Shuaa Capital declined to comment on the acquisition, and there was no official comment from the DFSA, the paper added.

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