x Abu Dhabi, UAESaturday 22 July 2017

Debt deal nears for Investment Dar

The Investment Dar, a troubled Kuwaiti investment company, is just weeks away from beginning to repay $3.6 billion of debt after it defaulted two years ago.

The Investment Dar, which owns half of Aston Martin, was the first in the Gulf to default on an Islamic bond. Courtesy Aston Martin
The Investment Dar, which owns half of Aston Martin, was the first in the Gulf to default on an Islamic bond. Courtesy Aston Martin

The Investment Dar, the Kuwaiti company that owns half of Aston Martin, is just weeks away from pulling off a US$3.6 billion (Dh13.22bn) debt restructuring.

The news brings a measure of finality to a two-year saga that rocked the region in the early stages of the financial crisis.

The Investment Dar (TID) was the first in the Gulf to default on an Islamic bond when it missed payments on $100 million of debt in May 2009.

The restructuring that ensued became one of the region's most complex and drawn-out, making its resolution this summer a long-awaited step toward righting the region's listing financial ship.

"It's very important because they're showing goodwill on their part, and it changes the environment immensely if the debtor shows goodwill and willingness to discuss the obligations they have outstanding" instead of leaving banks with losses, said John Sfakianakis, the chief economist at Banque Saudi Fransi.

After a meeting yesterday with banks and investors in Dubai, TID said its restructuring would go into force at the end of this month. About 82 million Kuwaiti dinars (Dh1.09bn) will be paid out during the first year to small investors and non-financial institutions, it said.

Fixed payments will then be made to remaining banks and investors over five years, with final repayment of the debt due by the end of June 2017.

The company has pledged to repay all its debt, mirroring a spate of restructurings in the Gulf where companies have not asked banks to reduce the amount of money they owe.

"The company, its advisers and both co-ordinating committees worked tirelessly over the last two years to find a solution to what has been a complex process in which we have had to overcome a great many obstacles," said Adnan al Musallam, the chairman of TID.

"We are now in a position to begin the implementation of a restructuring plan under which all TID's banks and investors will receive full repayment and which provides the best possible outcome for all of TID's stakeholders."

A committee representing TID's creditors agreed to the restructuring early this year, and the company's board subsequently approved it. The deal sped ahead after TID won protection under Kuwait's Financial Stability Law this month.

The law, enacted in 2009, includes a central bank guarantee for up to half of payments envisaged in investment companies' restructurings.

As with many investment companies in Kuwait, TID ran into trouble when it could not refinance or repay its debt at the outset of the financial crisis.

Other Kuwaiti companies shaken by the crisis include Global Investment House, which finalised a $1.7bn debt restructuring in late 2009, International Investment Group, which is in the throes of a restructuring, and the A'ayan Leasing and Investment Company, which recently signed a debt deal with its creditors.

The progress in Kuwait comes as several companies in the UAE make their own bids to settle outsized debts amassed during a global boom in credit markets.

In the biggest such deal to date, the government-owned conglomerate Dubai World this year secured final approval on a $24.9bn debt restructuring. Nakheel, a developer owned by Dubai World, said last week it had secured approval on its restructuring from banks holding more than 98 per cent of its debt.

"The company expects to secure confirmation from the remaining banks over the next few days, following which Nakheel will proceed to the completion phase of the restructuring," a Nakheel spokeswoman said.

As it pays back banks and investors, TID said it would be "subject to a variety of commercial restrictions" that included a pledge to make payments on schedule, a freeze on dividends to shareholders, a stop to all new investments and a prohibition on taking on any new debt.

A central bank monitor is to oversee the company during the restructuring, and the company is looking at giving creditors the option to buy and sell their debt, TID said.