Gulf Finance House (GFH), the Islamic investment bank based in Bahrain, is in talks with creditors over another US$100 million (Dh367.2m) of debt coming due in the next two years, after coming to a separate agreement over a $300m loan. The bank, which is heavily exposed to property in Qatar and Bahrain, said it had hired Liquidity Management Centre in Bahrain to help it "smooth out its liquidity profile" and is in discussions over the payment date of two $50m tranches of Islamic debt due this year and in 2011.
"Our priorities are now very simple; namely to grow revenue, substantially reduce our costs, continue improving our liquidity position, regain our ratings position and provide good exits for our investors from existing products," said Ted Pretty, the acting chief executive. GFH last week said it had repaid $200m and reached a resolution with 32 creditors to pay the remaining $100m over the next six months.
In response, the ratings agency Standard & Poor's (S&P) downgraded the bank's rating to one of its lowest grades because of a "selective default" on the debt. S&P said the move was a "distressed exchange" and "tantamount to a default because the new maturity represents a change to the facility's originally scheduled payment terms". The debt restructuring at GFH followed an announcement by Global Investment House, based in Kuwait, that it agreed with creditors to delay repayment of $1.7 billion of debt.
Financial institutions across the region are trying to reschedule debt payments. The largest test is at Dubai World, the ports and property conglomerate in Dubai that is in negotiations with 97 banks to restructure $22bn of debt. GFH is dealing with financial losses and a $125m lawsuit recently filed in Bahrain against Esam Janahi, the company chairman, over an energy project in Qatar. The bank reported losses of $124.4m for the first nine months of last year as deals dried up and economic conditions worsened in the region. Executives have announced cost-cutting measures and asset sales as a strategy for the bank to recover.
Mr Janahi said that GFH "has proven to be resilient in tough market conditions - our strengths are our innovative business model and the continued support we receive from our investors and partners". @Email:bhope@thenational.ae
