Global Investment House's $1.7 billion debt restructuring will face a shareholder vote, as the bank seeks to delist to pave the way for a transfer of shares to creditors.
Kuwait's Global Investment House aims to delist as ‘law forces hand’
Global Investment House's US$1.7 billion (Dh6.2bn) debt restructuring will face a shareholder vote next month, as the bank seeks to delist from the Kuwait Stock Exchange to pave the way for a transfer of shares to creditors.
Once among the largest investment banks in the Arabian Gulf, Global has been humbled by two debt restructurings since the onset of the financial crisis.
The bank's latest plan hangs upon a debt-for-equity swap, one of the biggest ever attempted in the region, which would grant creditors a 70 per cent stake.
However, Kuwaiti market law requires any company seeking to purchase more than 30 per cent of a company to make a mandatory takeover offer for the whole firm.
In an effort to avoid this rule disrupting the restructuring plan, Global has asked for the bank to be delisted from the Kuwait Stock Exchange (KSE).
The bank has petitioned the Kuwaiti Capital Markets Authority for a waiver to this rule, but with no success so far.
"Global has saved no efforts to implement the proposed restructuring plan while retaining its listing on KSE," the bank said.
"However, since it is unable to obtain an exemption from the Capital Markets Authority to rules of the mandatory offer, it is inevitable for the company to take measures such as the delisting from KSE to preserve the public interest of the company and safeguard the rights of its existing shareholders."
Global's shareholders will meet on December 2 to decide whether the bank should delist.
Almost a year has passed since Global's shares were suspended from the KSE, after the bank's accumulated losses breached 75 per cent of its capital.
In the meantime, Global said on Wednesday that it had secured consent from 95 per cent of creditors for its restructuring plan, with three holdouts.
The bank is taking legal action under British law in an effort to complete the deal.
Though Kuwait's financial stability law can be invoked to force an agreement among creditors, it has only been utilised once so far - by Investment Dar, the owner of the car maker Aston Martin.
Global has also seen its finances sapped by a dispute with National Bank of Umm Al Qaiwain over a deal gone sour at the onset of the financial crisis.
Global backed out of a proposed investment in NBQ in late 2008, leading the tiny lender to claim $250 million in funds deposited by Global as its own.
The two banks have been locked in a legal battle ever since.