Shuaa, DBG dispute draws to close with share issue

Shuaa Capital said on Saturday it would issue 515 million shares to Dubai Banking Group.

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DUBAI // Dubai-based Shuaa Capital said on Saturday it would issue 515 million shares to Dubai Banking Group (DBG), implementing an agreement to resolve a long-running bond dispute. Shuaa said in June it had settled the dispute after months of negotiations and the threat of a lawsuit by DBG, by allowing DBG to take a 48.4 per cent stake in the investment bank. On Saturday, Shuaa said it had asked the Dubai Financial Market to issue DBG with 515 million shares in Shuaa, more than twice the amount agreed back in 2007 and making DBG the biggest shareholder in Shuaa.

DBG will convert Dh1.5 billion (US$408.5 million) worth of convertible notes into the 515 million shares, a statement said, raising Shuaa's capital to Dh1.065bn. "Total shareholders' equity will remain unchanged at Dh2.16bn, as reported in the second quarter 2009 financial statements," Shuaa said, adding it had received official approval of the deal. "The new agreement represents a conversion price of 2.91 dirhams per share, equal to a premium of 93 per cent to the closing share price of Shuaa of 1.51 dirhams on 27 August 2009."

The dispute revolved around Shuaa's decision to convert a 1.5 billion dirham bond it had issued to DBG in 2007 into shares. DBG had disputed the move, saying it wanted its principal investment back instead. The dispute had threatened to tarnish Dubai's image as a financial centre, pressured Shuaa shares and triggered a cut in its credit ratings as the spectre of a drawn-out court battle with uncertain consequences weighed.