BAHRAIN // Gulf Finance House (GFH), the struggling Bahraini Islamic investment bank, is close to a deal to roll a US$100 million (Dh367.3m) loan over two years, the company's acting chief executive says. Ted Pretty, who is overseeing an overhaul of GFH's business told The National that the loan would be partially repaid when it came due, with the rest paid down in regular instalments over two years. The deal is expected to be agreed to within days and follows a round of cost-cutting and the shedding of about 100 jobs.
The Islamic loan originally called for $50m to be repaid next month, with the other $50m due next year. "Like everybody, we had debts maturing at certain points in time and unfortunately a lot of it was due this year," Mr Pretty said. "With the benefit of hindsight, it wouldn't have been so congested. We need to smooth out our liquidity profile and debt maturity, and that's why we entered into discussions with syndicates."
GFH has already reached a deal on a $300m chunk of debt with a lending syndicate of 32 banks led by Germany's WestLB. Under that arrangement, the company repaid $200m while refinancing the rest for an additional six months. Mr Pretty has been working aggressively to pare down GFH's balance sheet, making it "smaller but healthier" and positioning the company for a recovery by giving it a better foundation.
Renegotiating debt is a large part of that strategy, although GFH's activities in recent months have given rise to worry among credit ratings agencies and investors. Standard & Poor's downgraded GFH to "selective default" after it reached an agreement on its $300m loan, saying that under its ratings criteria the deal was equal to a failure to repay. "It creates some pain because the rating agencies become a bit nervous, investors become a bit nervous and market sentiment can turn against you," Mr Pretty said.
"But I think from our point of view, taking that pain was important because you need to understand what your current position is, and you can rebuild from a concrete base. You can't rebuild from one that's still built on sand." GFH posted a loss of $607m in the final three months of last year, mostly due to a reassessment of the value of its assets. The company is heavily exposed to the property and financial sectors, with major investments in Bahrain, Qatar, India, Tunisia, Jordan and Morocco.
The company plans to raise about $250m of cash in the near term to help pay off debts as they mature, including the $100m that remains of the $300m loan. The company may sell equity stakes in property projects and other investments to raise as much as $420m as it reformulates its business plans in the longer term. In addition to property holdings in Bahrain and other Middle East countries, GFH owns stakes in Khaleeji Commercial Bank, First Energy Bank, Gulf Energy Holding and Gulf Holding, a property developer.
afitch@thenational.ae
