Wednesday 28 April 2010

Gulf Investment International (Gulfinvest) - Central Bank Gives 3 Months to Raise New Capital

Gulfinvest  (KSE # 226) reported its 2009 earnings on the KSE this Tuesday.  It reported losses of KD42.8 million for 2009.  For 2008 it had reported losses of KD51.8 million.

As a result, its shareholders' equity is negative KD24.8 million.

As required by the Kuwait Commercial Law #15 of 1960 Article 171 when a company has accumulated losses 75% or more of its paid in capital (note this is not total shareholders' equity), the company's Board is required to call an extraordinary general meeting of shareholders so that they can decide which actions to take.  There are two options.  Commence a wind-up or rectify the solution.  The latter can be achieved in one of two ways.  One is to offset the losses against paid in capital and any reserves (share premium, mandatory and voluntary reserves but not fair value reserves).  The other is to raise new capital.  Sometimes a combination of the two is used.

Clearly, GI has more than breached this threshold as it has negative shareholders' equity.

The Central Bank of Kuwait has given GI three months to rectify its situation.  That involves not only extinquishing the accumulated losses but also restoring shareholders' equity to at least KD15 million.   Thus, GI has to raise some KD40 million in capital.

The company has advised that it has hired a financial advisor to help it work out a plan to rectify its problems. 

Solutions being explored are:
  1. Getting creditors (roughly KD50 million at 30 September 2009) to convert some of their debt to equity. 
  2. Settling debts by transferring assets to creditors.
  3. Agreeing a rescheduling with deferred principal repayments and a freezing of interest for some undisclosed period.
  4. Raising new capital via an offering.  By law existing shareholders would have first priority rights.
Looks like a tough slog.  A very tough slog.
  1. The company only has assets of KD21.9 million.    Of which only KD6.2 million are current. 
  2. Current (and total) liabilities are KD46.6 million.  What value there are in KD15.7 million of non current assets is debatable.
  3. There doesn't seem much of a franchise here to get existing shareholders to put new money at risk.  As per the info at the KSE, there do not appear to be any institutional shareholders with significant existing shareholding in GI.  The company has a major investment (for it) in Ahlia Holding Company (KSE#206) roughly 30% of AHC.  And it appears GI wrote off a substantial amount of goodwill on AHC for its FYE2009 financials.
  4. I'm doubtful that lenders can be persuaded to convert debt into equity.  From GI's 30 September 2009 financial statements, it appears that substantially all assets are already pledged as collateral to lenders.  So if they want the assets, they can foreclose on the collateral.   Taking equity seems a very hard sell.  Why take equity and the expense burden of the company when you can just strip out the (hopefully) cash generating assets and sell them immediately?  Or, if you believe in a value rebound, foreclose and then hang on to the assets for a later sale? 

Here's the KSE announcement (Arabic only).


[4/27/2010-12:29:49]  مجلس ادارة (غلف انفست) يوصي بعدم توزيع ارباح عن عام 2009‏
يعلن سوق الكويت للأوراق المالية بان مجلس ادارة الشركة الخليجية الدولية
للاستثمار (غلف انفست) قد اعتمد البيانات المالية السنوية للشركة للسنة
المالية المنتهية في 31-12-2009، وفقا لما يلي:‏
ِ1) نتائج أعمال الشركة:‏
البند             السنة المنتهية في 31-12-09   السنة المنتهية في 31-12-08‏
الربح(الخسارة) (د.ك)          (42.803.655)          (51.803.468)‏
ربحية (خسارة)السهم(فلس كويتي)  (226.80)               (271.51) ‏
اجمالي الموجودات المتداولة     6.175.257             11.075.184‏
اجمالي الموجودات              21.864.251           68.418.091‏
اجمالي المطلوبات المتداولة     46.630.201          36.217173‏
اجمالي المطلوبات               46.630.201          51.586.977‏
اجمالي حقوق المساهمين      (24.765.950)          16.831.114‏
بلغ اجمالي الايرادات من التعاملات مع الاطراف ذات الصلة مبلغ 27.449 د.ك
بلغ اجمالي المصروفات من التعاملات مع الاطراف ذات الصلة مبلغ 174.348 د.ك
علما بأن بنك الكويت المركزي قد وافق على هذه البيانات المالية بتاريخ
ِ25-04-2010.‏
كما افاد بنك الكويت المركزي انه قد تقرر منح الشركة مهلة 3شهور من تاريخة  ‏
لاتخاذ الاجراءات الازمة لتصويب اوضاعها المالية بإطفاء الخسائر المتراكمة ‏
بالكامل بالاضافة الى توفير رأس مال جديد لا يقل عن 15 مليون د.ك،
وذلك بالدعوة بصفة فورية الى عقد جمعية عامة غير عادية لاتخاذ ‏
القرارات اللازمة في هذا الخصوص اخذا في الاعتبار الوضع المالي للشركة ‏
كما في تاريخ انعقاد الجمعية العامة .‏
ِ2) التوزيعات المقترحة:‏
قرر مجلس ادارة الشركة عدم توزيع ارباح عن السنه الماليه المنتهيه
في 31-12-2009، علما بان هذه التوصية تخضع لموافقة الجمعية ‏
العموميه و الجهات المختصه .‏
علما بان تقرير مراقبي الحسابات يحتوي على الفقرة التوضيحية التالية .‏
ايضاح رقم 2.26:‏
الاستمرارية ‏
تم اعداد البيانات المالية المجمعة في بافتراض استمرار المجموعة ككيان ‏
مستمر وهذا يتطلب دعم مالي من المساهمين على الرغم من ذلك ، ‏
اذا لم تتمكن المجموعة من الاستمرار في حالتها التشغيلية في المستقبل ‏
القريب ، فقد لا تتمكن من سداد التزاماتها ضمن المسار الاعتيادي للاعمال
وبالتالي عدم امكانية استمراريتها .‏
حققت المجموعة صافي خسارة بمبلغ 42.803.655 د.ك للسنة المنتهية ‏
في 31-12-2009 وبذلك التاريخ بلغ رصيد حقوق المساهمين السالب ‏
ِ24.765.950 د.ك ، كما في 31-12-2009 بلغت الخسائر المتراكمة ‏
للمجموعة 43.840.358 د.ك والتي تمثل 226% من رأس المال.‏
نتيجة لخسارة الشركة الام لاكثر من 75% من رأس مالها ووفقا للمادة ‏
ِ171 من قانون الشركات التجارية رقم 15 لعام 1960 ، ينبغي ‏
على مجلس الادارة طلب اجتماع للجمعية العامة غير العادية لتحديد ‏
الاجراء الواجب اتخاذة بموجب القانون . بالاضافة الى ذلك فإن ‏
المجموعة قد بلغت من قبل بنك الكويت المركزي لتصحيح وضع ‏
الانخفاض في حقوق الملكية والتي هي اقل من الحد الادنى 15 مليون د.ك ‏
من اجل مواصلة نشاطها كشركة استثمارية .‏
قامت الشركة الام بتعيين مستشارا ماليا لدراسة الخيارات المتاحة للشركة الام
لاعادة هيكلة حقوق الملكية .‏
بناء على توصيات المستشار المالي ، شرعة الشركة الام في اتخاذ الترتيبات ‏
التالية لتسوية الوضع : ‏
ِ- مناقشة المقرضين الحاليين لتحويل اجزاء من القروض الى اسهم ملكية في ‏
الشركة بالاضافة الى اعادة جدولة المبالغ المتبقية من القروض لفترات مقبلة ‏
مع تجميد مدفوعات الفائدة لفترات اخرى .‏
ِ- استكشاف الخيارات لتسوية اجزاء من القروض المستحقة للبنوك عن طريق
تحويل الاصول المتوفرة لدى الشركة .‏
ِ- مناقشة المساهمين الحاليين لضخ رأس مال اضافي لاعادة تمويل حصة المجموعة ‏
في ضوء الوضع المالي الحالي .‏

4 comments:

Laocowboy2 said...

This entity has always been controlled (and used/abused) by AHC. Unless AHC steps in (and they have their own troubles) this one looks like toast. While there may have at one time been some value in an Investment Comapny license, that is no longer the case, especially with so many other sin dire straits as well. The disappearance of more than a few investment companies would be no loss to the economy.

Abu 'Arqala said...

Laocowboy2

You're right of course.

But then who will prop up those obscure and often undeserving shares on the KSE? Who will fund "wise" investments?
Where will local banks get "good" lending opportunities?

One down, 50 or 60 to go?

laocowboy2 said...

Step 1: Too many investment companies. Cull (20 or so) needed.
Step 2. If that means a lack of lending opportunities for banks, perhaps there are too many banks? Or at least too many with a Kuwait market-only business model.
Step 3. (And I am dreaming here)Controls on the level of investment portfolios as a percentage of total assets in non-investment companies - there are too many investment companies with an industrial sideline masquerading as either industrials or service sector companies.

Abu 'Arqala said...

You've almost got my (symbolic) vote for the Majlis AlUmma just a couple of points to clear up.

(1) Speculation - like over leveraging - is a national tradition. I believe that is in the Second Amendment to the Kuwaiti Constitution - though I might be misinformed. "An irrational unregulated stock market being necessary for the ability to make profits, the right of the people to speculate and leverage shall not be infringed." Do you want to deny Second Amendment rights? And please sit squarely in front of the monitor, I don't believe I can see your flag lapel pin. You wearing one, aren't you?

(2) Where do you stand on the manifest dangers of music, women's soccer, and immodestly dressed women legislators?