Air Arabia buffeted by Abraaj exposure
Carrier’s stock plunges to 11-month low as it confirms it has investments with private equity firm
Air Arabia’s share prices plunged over 7 per cent yesterday, reaching their lowest level in 11 months as the carrier confirmed it has investments with Abraaj, the private equity group that filed for liquidation.
Air Arabia was the most actively traded stock on the Dubai Financial Market (DFM), with its shares accounting for 20 per cent of the market’s total traded values. It saw the steepest losses of the day even as other stocks sank.
The decline came amid concerns about Air Arabia’s exposure to Abraaj, which on Thursday filed for provisional liquidation in the Cayman Islands.
A spokesperson for Air Arabia confirmed that the carrier “has an investment in Abraaj funds” and that that was part of the Air Arabia Group investment portfolio.
The founder of Abraaj, Arif Naqvi, also serves as a board member at Air Arabia.
“Air Arabia has appointed a team of experts who are actively engaged with all stakeholders
Air Arabia was the most actively traded stock on the DFM, with its shares accounting for 20 per cent of the market’s total traded values.
and creditors involved with the matter to ensure Air Arabia’s investment and business interest is protected,” the spokesperson said.
The Sharjah-based carrier did not provide details on the size of its investment or how and whether it plans to pull out of it.
When it filed for liquidation, Abraaj asked the court to appoint PwC as provisional liquidators, saying that the move will “[allow] time for a proposal to be put to creditors for the orderly restructuring of the company.”
The filing follows legal action against Abraaj by the Kuwait Public Institution for Social Security and another creditor who are seeking the liquidation and winding up of Abraaj for non-payment of debt.
Abraaj, which once managed almost $14 billion (Dh51.4 billion) for institutions and other agencies, is now facing growing concerns about its viability.
The UAE’s equity indices dove yesterdayas investors looked to dump any exposure to private equity group Abraaj.
The main index on the Abu Dhabi Securities Exchange (ADX) plunged around 2.7 per cent amid weak liquidity and ended the day 2.68 per cent lower at 4,588.27, with most stocks ending in the red.
The Dubai Financial Market (DFM) fell 1.83 per cent to 2,982.58, closing below the 3,000 mark for the first time in two weeks.
In Dubai, Air Arabia saw the steepest losses, with its share prices dropping over 7 per cent to end at Dh1.05 amid concerns that the airline has some exposure to Abraaj, which had filed for provisional liquidation in the Cayman Islands.
Otherwise, it was still a sea of red on the Dubai stock exchange, with other stocks, including heavyweights such as Dubai Islamic Bank and Emaar dropping 1.18 per cent and 3.04 per cent respectively.
The losses in the UAE’s bourses came in the first trading session after Abraaj announced it was seeking court protection.
Marwan Shurrab, head of high net worth and retail equities at Al Ramz Capital, said the decline across stocks was exacerbated by weak trading values.
He added that most traders in the market yesterday were retail traders who were trying to benefit from the volatility as many of the regional institutional investors are still off for Eid Al Fitr holidays.
Just Dh105 million was traded in Abu Dhabi, while trade values on the Dubai bourse reached Dh202 million.
“[With Air Arabia], you saw there certain outflows, or people trying to reduce their exposures, but due to the fact that there is not enough demand on a day when the region is off, it impacted us negatively,” he said.
On the ADX, the most actively traded stocks were blue chips, which all saw their share prices dive. First Abu Dhabi Bank fell 3.56 per cent, Aldar Properties dropped 1.92 per cent, etisalat declined 3.88 per cent, and Abu Dhabi Commercial Bank ended 2.02 per cent lower.
Shurrab said that negative sentiment was also weighing on trade.