The Investment Dar (TID), a Kuwaiti company that owns half of the luxury car maker Aston Martin, has agreed with its core group of creditors to a new plan to restructure about US$3.6 billion (Dh13.22bn) of debt.
The company was one of the first in the region to default on debt in the aftermath of the global financial crisis, missing a payment on a $100 million Islamic bond in May 2009. Its restructuring, however, has been held up by protracted negotiations and legal obstacles. An initial creditors' co-ordinating committee representing banks to which TID owes money resigned last November.
With the deal agreed yesterday, the company and its new creditors' committee are hoping to put the legal turmoil and drawn-out talks of the past two years behind them. The new deal "contains revised facilities under which full repayment with profit will take place over a six to eight-year period," TID said.
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The terms call for TID to repay 405m Kuwaiti dinars (Dh5.31bn) of debt in three to four years at an 11 per cent profit rate, the Sharia-compliant equivalent of interest, it said. TID is to repay an additional 600m dinars of debt in four to eight years.
Some of the debt is to be settled with a debt-for-equity swap, meaning the company is asking banks to convert a portion of borrowings into ownership stakes in TID.
If it is able to pay off its debts as envisaged in the restructuring, however, shareholders could reclaim ownership stakes taken by banks, according to the company. Shareholders are also planning to inject "up to 20m dinars" in fresh equity in the 12 months after the plan's adoption, it said.
TID is listed on the Kuwait Stock Exchange, but its shares have not traded since restructuring talks began in 2009.
The debt talks at TID come as restructurings reshape the financial landscape of the Gulf. Many companies in the region borrowed heavily during the global credit bubble, only to find banks unwilling to extend or refinance loans in the wake of the financial crisis. Dubai World, a Dubai Government-owned conglomerate, clinched a $24.9bn restructuring deal last year. Global Investment House, another Kuwaiti company, agreed to restructure $1.7bn of debt also last year. They are only two among a number of companies, including those in Bahrain and Abu Dhabi, that have recently sought new terms on debt.
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TID's plan still needs the approval of its board of directors before it is presented to the company's wider group of creditors for final sign-off. The central bank of Kuwait must also confirm the deal, a source close to the company said.
The revised restructuring terms follow weeks of meetings and negotiations between creditors and TID's advisers, which include the global accountancy Deloitte and the law firm Allen & Overy. TID held large meetings last month in Dubai and Kuwait to present the plans and hear concerns from banks.
Further meetings are expected once the plan is approved by TID's board and the Kuwaiti regulators. In the meantime, TID has applied to Kuwaiti courts for protection under a financial stability law passed in 2009 as part of the country's response to the financial crisis. TID last year became the first company to invoke the law, and may use it to enforce the terms of a restructuring if creditors do not unanimously consent to it. A hearing on the application is scheduled for tomorrow. The fate of TID's Aston Martin stake - one of its most prized possessions - is unclear but a banking source who attended meetings last month in Dubai said the company was considering a sale of the British sports car company. Deloitte has given the 50 per cent stake a valuation of $300m, said the source, who wished to remain anonymous.
