Tuesday, August 31, 2010

Gulf Investment House - Debt Problems Largely Solved: Only US$7 Million of Foreign Debt Left KD45 Million Rescheduled by KFH


In an exclusive interview, AlWatan quotes GIH's CEO, Badr Abdullah Al-Ali, saying that: 
  1. GIH has repaid all by US$7 million of its foreign debt.  The remaining amount is due in November and GIH may prepay given its strong financial condition.
  2. The Company has been successful in rescheduling KD45 million with KFH (who own about 30.72% of GIH's shares) over five years.  No doubt KFH's shareholding interest was a major  positive factor in achieving the rescheduling agreement.  This amount is substantially all of the non foreign debt of the Company - whose total bank debt as of 30 June 2010 was KD56.8 million.  It's unclear at that point just how much foreign debt remained. In May if I remember they were reported to have KD13 million of foreign debt.
With respect to 2010 financial performance, GIH reported 1H10 losses of KD1.9 million roughly half of 1H09's KD3.8 million, though it should be noted that for the full year of 2009, GIH's losses were KD20.5 million. 

KFH's support provides a nice safety net for GIH's future which Mr. Al-Ali sees as bright.

9 comments:

2paisa said...

Having earlier worked with a KFH company, I have seen first hand how KFH works when it comes to its associates/subsidiaries. They bring in consultants (mostly retired, way past their prime but have done favors for KFH CEOs and belows). KFH might send a Indian or Egyptian analyst to sit at the company as their officer/rep but mostly follows what the highly paid consultant says.

The problem with all these companies is that though liability does not shrink with crisis, their asset values have significantly shrunk and some of the assets are worthless (non-clean titles, structures that try to work around laws that strictly forbid such transactions). The purpose of restructuring in some cases is to defer the losses that eventually will have to be taken restructuring or no restructuring.

Vanguard said...

the title up should have been Vanguard but something in sign up got mixed up

Anonymous said...

Hello:
May be you want do an analysis of Islamic investment companies business models, and why so many of them are struggling. Is it because they rely on real estate??? : ::: : purchase a piece of real estate, inflate its prices, mark it to market, inflate the assets value, make a phony profit sell it to an associate company, then buy back and continue the same cycle. And in between they go to the bank, barrow short term to support long term activities and if they are lucky the bank gives you money to finance the capital of a new company to buy a whole Continent or build a tower in Mecca.

Abu 'Arqala said...

Vanguard

Thanks for your comments.

To be fair many a non Shari'ah compliant investor has engaged in the very same behavior. And many a non Shari'ah compliant lender in "extend and pretend".

At the end of the day it may be more about professionalism and standards than religion.

Abu 'Arqala said...

Anonymous

There's little that I could add to the analysis you provided.

It's a proven business model as they say - though ultimate results may differ from those promised.

Vanguard said...

AA,
Totally agree with you that it is more about professionalism and less rather nothing about religion. I was just telling you how KFH works.

Anonymous said...

we are not talking about religion, its people who use religion to make money, "Tijara, wa Tijar Aldeen".

Ps:. This has nothing to do with this article, may I suggest you change this HUGE picture of suoq almanakh or make it smaller. When you load site, there is no headline to attract the reader. It is not reader friendly
Good luck

Abu 'Arqala said...

Anonymous

Thanks.

Yes, I believe this is well covered in 2:8.

Also for the tip on the header. Problem is I have a fond spot in my heart for the SAM. Whenever I go to Kuwait, I stop by for a visit. And imagine the hub bub of days gone by. Of the Fursan.

Abu 'Arqala said...

Vanguard

Point taken.

My comment was meant primarily for other readers who may infer certain behavior as belonging only to "Islamic" banks and financial institutions.