(Reuters) – Dubai International Capital (DIC) said its board was dissolved six months ago, allowing its parent conglomerate Dubai Holding to take control of its dwindling investment portfolio and manage its $2.6 billion debt pile.
A company statement on Sunday said the private equity firm’s board was dissolved in January, after a report in the UK’s Sunday Times paper mentioned Sameer al Ansari, former chief executive of DIC, as having left his non-executive role on the board.
“DIC is currently under the direct supervision of Dubai Holding,” the statement said, adding that the board was dissolved to implement a new governance structure.
However, the statement did not specify Ansari’s departure from his non-executive role. He is currently the chief executive of Dubai-based investment bank, Shuaa Capital SHUA.DU.
In May, DIC sought a three month debt repayment delay on certain maturities, underscoring the debt problems plaguing the emirate’s government-owned entities, collectively known as Dubai Inc. It has a $1.25 billion loan maturing this month.
The announcement further compounds looming problems at DIC’s parent Dubai Holding, which spans financial investments, hospitality and real estate and is owned by the emirate’s ruler Sheikh Mohammed bin Rashid Al Maktoum.
Concerns about the overall debt burden of Dubai’s state-linked companies mounted after Dubai announced a standstill on repaying $26 billion in debt as it restructured conglomerate Dubai World DBWLD.UL. It unveiled a $9.5 billion rescue plan for the firm in March.
A source later told Reuters that DIC had sold off its last listed, liquid assets.
“To me, we are in the second stage of this down cycle. It’s not over yet. If things had stabilized we would have had a strategy as to where we are headed and more transparency,” said Saud Masud, head of research at UBS.
“They (DIC) have to make sure they are able to restructure their obligations first. How they manage the portfolio beyond restructuring is a concern too. The main question is of transferring them to another entity’s umbrella.”
Ansari founded DIC in 2004 and took on the role of executive chairman and chief executive, and spearheaded its international expansion. Under Ansari’s leadership, DIC spread globally by acquiring stakes in German aluminum firm Almatis and Merlin Entertainments Group in the UK.
However, the global financial and economic slowdown, hampered the firm’s investments and brought to light heavy investment losses in Dubai’s banking and property sectors.
The emirate’s growth model, based on excessive borrowing to fund ambitious development projects at home and prestigious investments internationally, has resulted in a need to restructure debts and potentially sell high-profile assets.
As a result of the growing debt troubles in the emirate, several high ranking officials have already left their posts, but more high profile exits are expected as part of a management shake-up at Dubai Inc companies.
David Jackson, former chief executive of Dubai World’s DBWLD.UL investment arm Istithmar World, which owns stakes in luxury retailer Barneys New York, was replaced in January. [nLDE60J0WK]
(Reporting by Dinesh Nair and Rachna Uppal; Editing by Louise Heavens)