A note-worthy farce

16 June 2009 By Una Galani Follow @ugalani

The row between investment bank Shuaa Capital and statebacked Dubai Banking Group over whether the former’s $400m fundraising was a mandatory convertible seems farcical. A fair and speedy resolution to the spat could give Dubai s standing as a financial centre a needed boost.

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Statecontrolled Dubai Banking Group refused on June 16 to accept 250m shares issued by Shuaa Capital, the Dubaibased investment bank, to convert an AED1.5bn (E294m) bond into equity.

The two sides disagree on whether the bond is a mandatory convertible and have been in talks since the note was due to mature in October.

The Dubai Financial Market, the local exchange where Shuaa is listed, said it would not register the shares until both parties reached an agreement or it was ordered to do so by another authority. The dispute will now be taken up by the regulator of the exchange, the Emirates Securities and Commodities Authority.

In October 2007, Shuaa Capital issued the note due to mature the following October at AED6 per share. Under the terms of the agreement, posted by Shuaa on its website, the bond "shall convert into shares in the issuer at the conversion rate either at the option of the issuer or the holder in accordance with the conditions".

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