Monday, August 16, 2010

Gulf Finance House Apparently "Hits the Wall": Delays Publication of 2Q10 Financials Until Study on Capital Reorganisation and Capital Increase Completed. Share Trading Suspended.

The Bahrain Stock Exchange announced this morning the temporary suspension of GFH from today until 23 August.

Yesterday instead of approving the Bank's 2Q10 report, GFH's Board met and took the decision that a  capital reorganisation and capital increase were necessary.  It  advised the BSE that it would therefore delay approval/issuance of its financials until it completed studies related to both and their effects on the financials.  It also requested the one week temporary suspension of trading.

From this rather dramatic last minute announcement it certainly appears that GFH has finally "hit the wall".   It had earlier received approval for a delay in issuing its financials with the deadline today.  Since it has not issued them, the news therein must be fairly grim.

There's a trading suspension announcement on the KSE (copy below, Arabic only).   Sadly, as you might have guessed,  it misses the important "bit" why the financials are delayed.  It just suspends trading because the financials were not provided.  Confirmation, if one were needed. that the news is not material to investors?  Or perhaps more accurately to Kuwaiti investors?

[10:25:14]  ِ.وقف التداول باسهم (تمويل خليج) لحين ورود بيانات 30-06-2010 ‏
يعلن سوق الكويت للاوراق المالية بانه تم وقف التداول باسهم بيت التمويل ‏
الخليجي(تمويل خليج) لحين ورود بيانات 30-06-2010 .‏

There is also an announcement at the DFM - where the exchange simply posted a copy of GFH's letter.

As of the writing of this post, there is nothing posted on GFH's website on this topic.

Footnote:  A "capital reorganisation" need not mean a rescheduling/restructuring of debts.   As of 1Q10 GFH had accumulated losses of US$440 million versus its legal (paid in) capital of US$621 million.  Under Bahrain Commercial Companies Law (as with some other GCC jurisdictions) when a firm has losses 75% or greater of legal capital, it's obliged to take action.  Either dissolve the firm, raise new capital, or use existing capital and reserves to offset the losses.  The latter can involve reducing legal capital.   So the capital reorganisation may be this process.  It may also include a debt rescheduling though with the recent West LB deal and earlier rescheduling of its LMC facility, the Bank shouldn't have an immediate debt repayment problem.  Unless of course things have really deteriorated.  On the debt front, don't forget that GFH's sukuk indenture requires them to maintain US$400 million or more of shareholders' equity.  So it's not too hard to imagine the Bank being close or below this trip wire as of 30 June 2010.

1 comment:

laocowboy2 said...

Unsurprising. And the next one is.....?