UAE banks report exposure to commodities broker in liquidation

Emirates NBD and Mashreq both report Dh130m exposure to the business that began as a rice trader

Farmers carry sacks of harvested rice through a paddy field in San Leonardo, Nueva Ecija, the Philippines, on Thursday, May 7, 2020. The Philippines expects sufficient rice supply for the entire year, Agriculture Secretary William Dar said on April 16, citing imports and local production. Photographer: Veejay Villafranca/Bloomberg
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UAE banks have started reporting their exposure to the Dubai subsidiary of Phoenix Commodities, which recently filed for liquidation.

Emirates NBD and Mashreq both declared exposure to the company on Tuesday in regulatory filings to the Dubai Financial Market. Emirates NBD said it is owed $23.66 million (Dh86.8m) by Phoenix Global DMCC (PGD), a Dubai-based, wholly-owned subsidiary of British Virgin Islands-registered Phoenix Commodities. Mashreq Bank reported exposure of Dh43.06m to the Dubai entity.

Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank and National Bank of Fujairah, said they had no exposure to the company.

The National was unable to reach anyone at Phoenix Global or its chairman and chief executive, Gaurav Dhawan.

Phoenix began in 2001 as a rice trading business and had grown into an operation that generated $3bn in revenue last year trading grains, coal, metals and other commodities.

The documents the company filed seeking liquidation said the business was brought down by losses incurred on currency hedges as markets became volatile during February and March at the time the Covid-19 pandemic spread, according to Reuters.

Restructuring firms Quantuma and KRyS Global were appointed joint liquidators to the company on April 24.

"Following an accelerated review of the company's available financial and company records Quantuma established that the company was facing potential crystallised liabilities of over $400m as a result of accrued losses incurred by its financial derivative trading desk in PGD," the document sent to creditors said, according to Reuters.

The group had about 100 entities trading across the world and employed more than 2,500 people. It claimed to be one of the largest rice distribution companies in the world, delivering close to two million metric tons of rice to its customers each year, its website said.

Operations included a pulses, spices and sugar packing facility in the UAE, milling operations in India, Vietnam and Kazakhstan and factories for processing pulses and nuts in the Ukraine, according to a company brochure.

Last week, the Financial Times reported that the company, which was owned by Dhawan, owes millions to UK-based lenders Standard Chartered and HSBC Holdings.