Gulf Finance House - Update on Rescheduling US$300 Million West LB Facility

AlAnba'a Newspaper (Kuwait) reported the following on 8 February:

1. The West LB-led syndicate had agreed to GFH's request to reschedule US$100 million of the $300 million due 10 February for six months.
2. GFH and West LB were in discussion about a US$50 million Sukuk with a two year tenor (maturity  June 2012).
3. Last week GFH was in discussions with various private sector parties in Kuwait and the Gulf seeking a US$100 million loan to be secured by real estate and shares.  (Note most of GFH's facilities are so secured). These were undertaken as a back-up to the West LB discussions. Status of these negotiations is unclear - whether they achieved anything and whether or not they are continuing.
4. Whether repayment of the US$100 million will come from GFH's capital increase last year or from expected profits from GFH's investments (which AlAnba'a says were US$500 million last year).

Today GFH issued an announcement in reply to a request from the BSE about the 8 February article denying that it was in discussion with West LB over a new US$50 million Sukuk.

Some thoughts:

1. First it's a pretty good assumption that GFH is on the "watch list" by the authorities.  A press report is published in Kuwait on 8 February.  The same day the BSE writes to GFH asking for a clarification.  This enhanced supervision is a major takeaway.  The regulators are concerned about GFH's situtation.
2. Second, it's probably not unreasonable to assume that if GFH were sitting on a pile of cash, the West LB lenders would insist on full payment of the amount due them tomorrow.  So where did that US$450 million go?  Well US$200 million is going on Thursday. No responsible institution is going to pay away all of its cash.   There are bills to pay.  GFH has been running about US$35-$40 million in operating expenses per quarter, though this will now come down as the US$200 million payment will reduce interest expense.  Balance that against cash inflows and you'll see the need to conserve cash:  revenues have pretty much dried up.  In 3Q09,  operating revenues were a paltry US$5.9 million.  And you'll recall I had raised earlier the perplexing fact that Deutsche Bank was converting its facility into stock in GFH.  Could that have been related to a cash outflow? When Fiscal 2009 financials and 1Q10 financials are released, we'll be able to understand better GFH's cash position and what the cash was used for.