Abu Dhabi - Arabstoday
Abu Dhabi’s state-owned fund International Petroleum Investment Co posted a $3.42bn loss on stakes held by its unit in auto maker Daimler and Italian bank UniCredit in 2011, all but wiping out its profit.
IPIC, which reported a 97% drop in 2011 net profit on Wednesday due to “both market and economic volatility”, released full financial results yesterday detailing the loss on the two European groups held by its unit Aabar Investments.
The fair value loss on its 9.1% stake in Daimler stood at $2.25bn in 2011 versus a $1.3bn gain in 2010, IPIC report said. Its UniCredit fair value loss was $1.17bn versus a $239mn loss in the previous year. It holds a 4.99% stake in the Italian bank.
“As a diversified investment holding company, Aabar’s investments were subject to dramatic market volatility in 2011,” IPIC, which also owns stakes in Spain’s Cepsa and Austrian oil group OMV said in the statement.
Shares in UniCredit fell 58.5% in 2011, while Daimler shares dropped 33%, resulting in the valuation loss.
The losses were partially off-set by gains on derivative transactions entered by Aabar with relation to the stake buys in both the entities.
The fund had a $1.9bn derivative gain on Daimler shares and a $953mn gain on UniCredit stock, which helped ease the net loss from financial investments to $1.5bn, the statement showed.
State-owned fund Aabar became Daimler’s largest investor after buying a 9.1% holding for €1.95bn ($2.66bn), or 20.27 euros per share, in 2009 through a capital increase that excluded existing shareholders.
In April, sources said the fund was looking at a gradual sale of its 9% stake in the automotive group. A German magazine earlier reported plans of a stake sale.
Aabar enters into complex derivative strategies to limit its downside while acquiring large stakes.
The fund, which was a cornerstone investor in commodities giant Glencore last year, restructured a derivative collar transaction it entered into with regard to the Daimler stake, extending the collar maturity to 2015, IPIC said.
“Aabar restructured the maturity of collar for 63.6mn shares tied to Daimler shares,” the statement said.
The collar transaction was entered with Goldman Sachs, who also advised the fund in its Daimler stake buy in 2009, four sources familiar with the matter said.
The sources spoke on condition of anonymity as the matter is not public. Aabar declined to comment. Goldman Sachs was not immediately available for comment.
A collar trade is an options trading strategy used to limit potential losses on acquisitions and lets buyers assume more debt to finance a deal. The trade also limits the upside and can lead to the other side demanding the collateral.from gulf times.