Wednesday, Feb 04, 2009

(Adds details, background)

DUBAI (Zawya Dow Jones)--The United Arab Emirates Cabinet said Wednesday it has formed a steering committee to review and recommend strategies for the country's troubled mortgage lenders, Amlak Finance and Tamweel.

The committee, headed by U.A.E. Minister of Economy Sultan bin Saeed Al Mansouri, will evaluate both companies' performances in the changed economic environment and recommend a plan for the development of a strong long-term business model.

The committee will draw up a comprehensive report and present its recommendations on the way forward to the government by the end of February, according to a statement issued by the U.A.E. government.

Tamweel and fellow Islamic mortgage lender Amlak Finance (AMLAK.AI) are in the process of merging with state-controlled Real Estate Bank and Emirates Industrial Bank under the recently-created Emirates Development Bank.

Lenders and developers in Dubai have been hit hard by the global financial crisis. Market financing has evaporated, sales have slumped, developers and brokers are cutting jobs, banks are tightening lending, while prices in some developments are reported to have fallen sharply.

The formation of the steering committee is described by the statement as "a step that will lend strong impetus to U.A.E.'s mortgage market and its sustainability."

"The ripple effects of the global financial meltdown have necessitated a renewed approach to the business models of Amlak and Tamweel," said Minister Al Mansouri.

"From a long term perspective, U.A.E.'s mortgage finance segment offers enormous potential. The Committee will structure solutions and evaluate ways in which Amlak & Tamweel can unlock these opportunities in the short to medium term," he said.

The proposal may also look at reconstructing the business and developing a sound, long-term business model. This is aimed at infusing greater stability into U.A.E.'s vibrant property sector, Al Mansouri said.

The three-way merger will create the largest real estate finance company in the United Arab Emirates and allow Amlak and Tamweel to take deposits and access emergency federal funds.

The merged entity would have approximately $8.33 billion of assets under management, according to Zawya Dow Jones' calculations.

Trading in Amlak, an affiliate of the Middle East's largest developer Emaar, and Tamweel is currently suspended until details about the merger are clarified.

Amlak and Tamweel have a combined market capitalization of about 2.5 billion U.A.E. dirhams ($680.6 million) and assets worth AED25 billion. Emirates Industrial Bank had assets worth AED1.79 billion at the end of 2006, while Real Estate Bank had AED3.79 billion in assets at the end of 2007, according to Zawya.com data.

Both companies are listed on the Dubai Financial Market but are also partly government owned. Emaar holds a 45% stake in Amlak. Dubai Islamic Bank holds a 19.98% stake in Tamweel.

-By Mirna Sleiman, Dow Jones Newswires, 0097143644966, mirna.sleiman@dowjones.com

Copyright (c) 2009 Dow Jones & Co.

(END) Dow Jones Newswires

04-02-09 0957GMT