Royal insight

HH Sheikh Maktoum Hasher Maktoum Al Maktoum earned a strong reputation last year for his restructuring strategy that resulted in strengthening the balance sheet of his company, Al Fajer Properties. So last Monday, CW sat down with him to chat about Dubai World’s restructuring and other pressing issues

HH Sheikh Maktoum Hasher Maktoum Al Maktoum comes across as a very unassuming man. Especially, considering he is the nephew of UAE vice president, and prime minister and ruler of Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum. He is also the CEO of Al Fajer Properties, which is based in Dubai.

Even his closing comments at the Arabian Business conference last week prompted a resounding ovation from delegates. “The reality is we’re in this together, if we all benefit from it, we all benefit; if we all lose, we all lose; we come from the desert and we’ll go back to the desert,” he said, reflecting the thoughts of a man who has not forgotten his roots, despite having been educated in the US and is able to speak seven languages.

Since his appointment in early 2008 as CEO of Al Fajer Properties, Sheikh Maktoum charted out an aggressive managerial and financial restructuring strategy, which resulted in strengthening the balance sheet of the company by US $871 million (AED3.2 billion).

The restructuring made it possible for Al Fajer Properties to operate as a solvent successful company, weathering one of the worst financial crises in the last 100 years.

After restructuring, the company was able to focus on delivering its existing projects and operations successfully.

Sheikh Maktoum is also among those who feel that the world has overreacted to the Dubai World request for delayed payments. But the announcement has certainly dented confidence levels in Dubai of local and world markets.

“[The impact on construction] depends on whether those companies had to get paid by Dubai World or not,” he explains. “The results speak for themselves, from construction companies listed and the market impact on them.

“As far as the restructuring is concerned, it could have affected the market temporarily. No one knows what the outcome of the restructuring will be or what the plan is. I’m sure people are looking over the balance sheets of Dubai World now and are deciding how to restructure the best way possible and all stakeholders are being talked to, but you can’t predict a situation until it unfolds. You can speculate, but it’s purely speculation. In situations where there is a dislocation in the market, that’s where people make and lose a lot of money. You could be right, you could be wrong.”

And Sheikh Maktoum couldn’t be more correct. Speculation was, for most part, the basis on which the world markets reacted. But should governments try and keep speculation to the minimum? And if so, isn’t transparency the best tool to achieve that?

“Information is not always available,” says Sheikh Maktoum. “In the US, you just had someone arrested for insider trading. So speculation always happens – people always try to get as much information as possible to reduce speculation and that’s when the market adjusts. You had Dow Jones drop recently. That’s also based on speculation. It’s also the free hand of the market. That’s how the world goes round. Investment speculation is normal.

“Also, I think people keep forgetting that we’ve [UAE] only been in existence for 38 years. We’ve achieved a lot in this time and I’m sure we’ll achieve more. Things will improve going forward.”

When Dubai World publicly requested a delay in payments last month, many analysts and media suggested that the move could bring about another global financial catastrophe, comparing it to the likes of the first signs of the financial crisis in the US last year. Some thought this was a little ridiculous, given how old Dubai is. But Sheikh Maktoum sees it as a positive sign.

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“It’s good we’re being compared to New York and to the highest levels out there. As a nation we are trying to reach that level and if we’re being compared to such, it means people club us in the same category. I think it’s great. Who would you like to be compared to – that’s the question. We are being compared with the highest levels of transparency,” he says.

A strong, and even harsh comparison maybe, but Sheikh Maktoum says it drives the country to be even better. It’s harsh sometimes but he says he appreciates “constructive criticism” as it “always leads to an improvement.”

Speaking in constructive terms, when Dubai World made its announcement ahead of the Eid Al Adha holidays, it was considered a folly and an irresponsible move. Sheikh Maktoum agrees.

“That bit is correct, but if you have to restructure, you have to restructure. You can never judge a man until you walk a mile in his shoes. You don’t know how the situation unfolded, who knew what when; you can only look at it in twenty-twenty hindsight. There’s the possibility that people didn’t think it would have such a big impact, then there’s the possibility that they knew it, but got their dates wrong; most of the media reports were all speculation that didn’t serve a purpose. If you’re going to speculate on something, speculate on the future.

“For example, if they restructured the debt in a certain way, what would happen, if they did it another way, what then would happen? As I said, the announcement was not handled in the best way; every one agrees on it and acknowledges it, but the truth is that even if they announced it after Eid, they’d still get the same reaction. And also historically, Dubai has never made very complex statements, but you learn and you improve.”

According to Sheikh Maktoum, transparency will come into the market as time unfolds. He sees many of the recent occurrences in the country as firsts for Dubai, so some credit must be given to companies like Dubai World.

“To restructure a company, a regular company, it takes about 18 months. So before someone restructures something, you have to have the full knowledge of everything that has happened. I’m not saying, it will take 18 months from now as Dubai World has been restructuring for a while, but implementing a restructure on that magnitude takes time and the restructuring doesn’t stop until you actually stop.”

So, looking forward, is a merger between Nakheel and Limitless a possibility? He says he doesn’t know, but offers a good insight into what could happen.

“In reality, how things consolidate and how things unfold, really depends on the balance sheets of the different entities. You look at the balance sheets individually and judge if it is a good idea to merge, or not, or if there’s the possibility of a consolidation in some way. To make a call like that is extremely hard. It might even be a good idea to just let one company go. Put all the bad assets in it and let it go. The US did with Lehman.”

There has also been talk within some circles about Dubai raising capital through an initial public offering. But Sheikh Maktoum didn’t appear too convinced.

“The IPO market is still very challenging and when you go on a road show to do an IPO, you open your books. You have a plan, you have a strategy. Entities now are looking at the plan and how to handle it, because the panic subsided and people said ‘lets open the books and see what’s happening.’”

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