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Tue 26 Jan 2010 11:20 PM

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Dubai Holding eyes Bank Muscat stake sale to meet debt

Holding company has a 15% stake worth $350m in Oman's largest bank by market value.

Dubai Holding, the conglomerate owned by the ruler of the Gulf Arab emirate, is looking to sell its stake in Bank Muscat as it offloads low profile assets to meet its debt burden, bankers and analysts said on Tuesday.

Dubai Holding, which has $1.25 billion in debts maturing in the first half of 2010, is in focus after state owned Dubai World shook global markets and investor confidence in November by saying it would delay repaying $26 billion in debt.

Bankers and analysts say Dubai Holding, whose listed assets include a stake in Oman's Bank Muscat and HSBC, could quietly seek to sell off low profile, foreign listed assets.

Riyad Mohammed, head of brokerage, Almadina Financial and Investment Services Co, Muscat, said: "We are aware that there are some price negotiations happening regarding Dubai Holding's stake in Bank Muscat."

Another banking source told Reuters that Dubai Holding had expressed interest in selling the stake - most likely to a single buyer and not on the open market - but was "not happy to sell at the prevailing prices".

Dubai Holding has a 15 percent stake in Bank Muscat, Oman's largest bank by market value.

Its stake in Bank Muscat is worth more than $350 million based on current market prices.

Dubai Holding, which has a vast property portfolio, declined to comment on any asset sales, but a person familiar with the firm, who declined to be identified, said it had "access to adequate resources to meet its financial obligations".

A Dubai Holding unit said on Sunday it had made about $100 million worth of scheduled distribution payments on three bonds due over the next five years.

Khuram Maqsood, managing director, Emirates Capital, said: "For these companies, (Dubai Holding and affiliates) trying to sell domestic real estate assets is going to be a challenge."

He added: "These organisations are having a liquidity crisis and they have debt obligations coming due in the recent future. The only way to bridge the gap for them is from asset sales."

Dubai Holding, along with Dubai World and Investment Corporation of Dubai, is one of three major state linked conglomerates that led Dubai's growth from a backwater into the business hub of the world's largest oil producing region.

But whereas neighbours funded growth with proceeds from soaring oil prices, Dubai borrowed to invest through these sprawling firms that offered limited transparency.

A lack of communication from government linked firms since Dubai World's debt crisis has raised investor concerns that they could also face problems at Dubai Holding.

Standard & Poor's pulled its rating on a unit of Dubai Holding on Monday, while a lack of transparency on exactly how much debt it holds has amplified concerns.

Dubai Holding does not publish its financial data.

Analysts say selling its stakes in listed firms is a logical option for Dubai Holding, offering a simple and liquid financing method while the deals may command a premium to existing prices.

Joice Mathew, head of research, United Securities LLC, said: "If Dubai Holding is trying a sale of its overseas assets, Bank Muscat is one which they can sell at a premium to current market prices."

He added: "The stock is trading at a discount to valuations of its domestic peers."

Last week, sources told Reuters that Dubai Group, the financial services firm of Dubai Holding, was in talks to sell its 41 percent stake in Oman National Investment Corp, a sale that could garner about $90 million.

In December, a unit of Dubai Holding sold a 7 percent stake in Egyptian investment bank EFG Hermes for $120 million. But the conglomerate has said that it will not sell or list its luxury hotelier Jumeriah Group to pay off debt maturing next year.

Dubai Holding has $1.14 billion loan maturing in August 2011, but more pressing is Dubai International Capital's $1.25 billion loan which matures in June 2010. (Reuters)

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