x Abu Dhabi, UAEFriday 21 July 2017

Global Investment House seeks solution to stalled debt talks

The Kuwaiti investment bank fails to break a four-year long string of quarterly losses as it tries to force an accord for its second restructuring since the financial crisis began.

Global Investment House is attempting to break a gridlock over a proposed restructuring deal that would involve creditors taking ownership of the stricken investment bank, which has reported four straight years of quarterly losses.

The Kuwaiti investment bank generated net losses of 14.8 million Kuwaiti dinars (Dh192.6m) in the third quarter of this year, narrowing losses from 15.5m dinars during the same period a year earlier.

Global was once one of the biggest banks in the Arabian Gulf but has been hobbled by two debt restructurings since the financial crisis began.

Sixteen quarters have passed since the bank last reported a profit.

Revenues increased during the quarter to 1.5m dinars, up from a decrease of 4.3m during the same period a year earlier. The bank's expenses rose by 52.4 per cent to 16.7m dinars, which Global said was "mainly due to costs associated with a project to seek a long-term solution to the company's capital structure".

Global "continues its drive to rationalise its cost base", having cut staff costs by 20 per cent in the first nine months of this year compared with the same period a year earlier, said the company.

But the bank also said it was moving to force a conclusion in talks to restructure $1.7bn in debts that ran aground recently. In August, the bank said it would ask shareholders for approval for a US$433 million (Dh1.59bn) debt-for-equity swap that would give creditors a 70 per cent stake in the bank.

Shareholders approved the deal in September.

"Today, 95 per cent of creditors have approved the restructuring, with only three exceptions," said a spokesman for Global.

The bank was taking action under United Kingdom law to fast-track a deal.

Having signed up almost all creditors, a shift to UK law would help to force a deal, said Ahmad Alanani, a senior executive at Exotix, a specialist investor in illiquid debt.

"Global doesn't want to risk a deal that's been agreed by 95 per cent of creditors. They're going through the UK to cram the holdouts," he said. "That's a very interesting precedent."

Kuwait's financial stability law allows for companies to force dissenters into a restructuring if the vast majority of creditors agree.

However, it has been used only once before by The Investment Dar, which owns the car maker Aston Martin.

After missing a payment in 2009, The Investment Dar is still in restructuring talks.