Dubai-based investment bank Shuaa Capital said yesterday regulators should refrain from intervening in a $409 million (Dh1.5 billion) bond conversion dispute it has with Dubai Banking Group, driving shares lower.
In a letter to the UAE's bourse watchdog Securities and Commodities Authority (SCA), posted on the Dubai bourse website, Shuaa pointed to several questions that "required very careful consideration" and had to be addressed as "matters of law and public policy".
"We hope that the concerned authorities will treat the matter accordingly and it will not take decisions that effectively pre-judge the issues," Shuaa said.
Shuaa's stock fell 9.8 per cent yesterday as the high-profile wrangle continued.
"There was panic selling by retail investors and overall condition of the market didn't help the stock either," said Chamel Sahmy, regional senior sales trader at Beltone Financial. Shuaa's shares have fallen 21 per cent since hitting a six-month closing high on June 14.
Dubai Banking Group rejected on June 16 a Shuaa Capital decision on conversion of the bond, demanding the return of its investment along with interest.
Stock market operator Dubai Financial Market said it would not register the newly issued shares in the name of Dubai Banking Group until it received a joint letter from the two parties or an order from authorities to register the shares. Dubai Banking Group had purchased the bonds for Dh1.5bn in 2007 near the peak of the economic boom that saw Gulf financial firms witness explosive growth.
The bonds were due to convert into 250 million shares at Dh6 each on October 31, 2008, but the two groups agreed to extend their maturity and negotiate following Shuaa's rapid share price fall.
Shuaa shares are down 80 per cent from their 12-month high of Dh8.51 in June, 2008, and closed almost 10 per cent lower yesterday.
Shuaa said it welcomed the Securities and Commodities Authority's desire to reach an agreement, but the two parties had been "unable to bridge the differing expectations."
"External circumstances made the contract unprofitable for one of the parties, which then tried to avoid the financial consequences by rejecting the terms of the contract," said Shuaa.
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