Abu Dhabi investment firm loses $3.42bn on stakes, all but wiping out its profit
Abu Dhabi's state-owned International Petroleum Investment Co posted a $3.42bn loss on stakes in automaker Daimler and Italian bank UniCredit in 2011, all but wiping out its profit.
IPIC, which reported a 97 percent drop in 2011 net profit on Wednesday due to "both market and economic volatility", released full financial results detailing the loss on the two European groups held by its unit Aabar Investments.
The fair value loss on its 9.1 percent stake in Daimler stood at $2.25bn in 2011 versus a $1.3bn gain in 2010, IPIC report said.
Its UniCredit fair value loss was $1.17bn versus a $239.3m loss in the previous year. It holds a 4.99 percent stake in the Italian bank.
Shares in UniCredit have fallen 43.6 percent so far this year, while shares in Daimler have gained 3.2 percent.
State-owned fund Aabar became Daimler's largest investor after buying a 9.1 percent holding for 1.95 billion euros ($2.66bn), or 20.27 euros per share, in 2009 through a capital increase that excluded existing shareholders.
IPIC also said Aabar restructured a derivative collar transaction it entered into with regard to the Daimler stake, extending the collar maturity to 2015.
A collar trade is an options trading strategy used to limit potential losses on acquisitions and lets buyers assume more debt to finance a deal. The trade also limits the upside and can lead to the other side demanding the collateral.
The strategy is created by purchasing an out of the money put option while simultaneously writing an out of the money call option.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.