Large markdowns on property investments and a debt restructuring led to fourth-quarter losses of US$607.2 million (Dh2.23 billion) at Gulf Finance House (GFH), sending its stock tumbling today. The Bahrain-based Islamic investment bank, which is heavily exposed to property projects in Dubai and Qatar, said late on Sunday that it lost $728m last year. News of the losses comes as Gulf financial companies are coping with tightening credit markets, scarcer mergers and acquisitions deals, and falling property values.
"While 2009 proved challenging, it is important to view our results in the context of what prudently managed banks must do in tough economic times," said Esam Janahi, the GFH chairman. "We have closely reviewed all of our assets, made provisions where appropriate and have also begun to dispose of those which are non-core. We have asked management to review our cost base and also to ensure that we have a strategy to grow revenues."
GFH said last week it had paid off two-thirds of a $300m Islamic loan and refinanced the remainder, agreeing to repay it within six months. It announced at the weekend that it would seek a similar deal on an additional $100m of debt in two $50m tranches that mature this year and next. GFH said it hired Liquidity Management Centre, a Bahraini consultancy, to help manage its cash position as it resolved debt issues.
The struggles at GFH, which wrote down $300m in December on an investment in the Legends resort project in Dubailand, have led to severe declines in its stock price and credit rating downgrades. The company's shares, which are listed in Bahrain, Dubai, Kuwait and London, have lost more than 90 per cent since last May and closed 8.6 per cent lower today in Dubai. Standard & Poor's put the company in "selective default" after GFH reached the $300m refinancing deal last week, saying the move was "tantamount to a default".