Wednesday, August 25, 2010

The Investment Dar - Creditors Committee "Fed Up" or Posturing for the Central Bank?


Today's (25 August) AlWatan and AlQabas carried two quite different articles on the Creditors Committee.  One can consider these straightforward news items.  And perhaps, just perhaps, attempts to influence the Central Bank's decision making process.

Playing the role of good cop is Bader Abdullah Al-Ali, CEO of Gulf Investment House Kuwait, the official spokesman of Creditors' Coordinating Committee ("CCC").  As reported in AlWatan, he noted:
  1. That the Central Bank of Kuwait had played a pivotal role in the rescheduling expending considerable efforts to bring agreement between the concerned parties.
  2. That the CCC believed the rescheduling remained the best means available and offered the ideal reclamation of lenders' rights.
  3. That the fundamental goal of the CCC was the essential role of involving the lenders in crafting the rescheduling according to generally accepted international principles.
  4. That the CCC was confident that the CBK understood the role the CCC played.
  5. That the CCC hoped for the response of the CBK in the shortest time possible.
Or in other less polite words:
  1. You've done your part and we acknowledge your professionalism.  So now it's time to acknowledge ours.
  2. The plan is fine we, the CCC on behalf of the lenders, crafted it according to generally accepted international principles (which should no doubt trump any purely local or regional views that you might have).
  3. So don't tamper with it.  And be sure not to exclude us in the process.
  4. Get off your duffs and approve it.
The bad cop role falls to unknown sources who have provided AlQabas with the background for its article.
  1. TID's application for entry under the FSL has effectively ended the productive work of the CCC.  The Central Bank has the entire file in its hands.  As a result, the CCC is reduced to holding meetings to discuss the latest developments without being able to influence them.
  2. The FSL represents the last chance of the Company.  If entry is rejected, a myriad of lawsuits against the Company and its management will be launched seeking bankruptcy.
  3. Ernst and Young have bluntly told the CCC that they were engaged by the CBK and have no connection with the CCC or the lenders.  Their marching orders come from the CBK alone.
  4. The CCC, mindful of its responsibility to the lenders, are fearful that actions may be taken affecting the Company without their involvement or knowledge.
  5. As a result, they discussed at their last meeting whether or not they should withdraw and resign en masse.
  6. Adding to their rancor from exclusion from the process are several items, some of which have recently emerged.  
  7. Apparently TID has advised the CCC that it had some KD12 to 15 million of  unpaid Zakat arrears which date from before the crisis.  The CCC do not understand why these were not paid as the associated profit has already been distributed.  There was no note of these in information provided.  Nor does there appear to be any fatwa authorising the delay.
  8. There are increases in salary for one of the senior executives as well as a requested bonus.  (No doubt a "performance" bonus.  And, yes, the term "performance" is used in the same sense as in my recent post on GFH's 2Q10 financials).
  9. The Company's failure to present financials for periods after 2008.
  10. The resolution of TID's file is dragging on and may extend to next year.
  11. The dissolution of the CCC would deal a fatal blow to the Company as the CCC is the glue which binds the "alliance" of consenting creditors.
  12. Failure to obtain the protection of the FSL will lead to thousands of lawsuits which will rain down on the Company.
  13. The article closes by noting the frustration of the CCC with TID's public relations firm who are felt to have issued a torrent of meaningless press releases about nothing.  Adding insult to injury, it seems that TID has incurred payables of 7 million (presumably KD) for these services.  This last bit has me questioning my translation as I'd expect there would be some sort of expense controls in place from the CBK appointed manager and/or the CRO.  So I'm inviting comments on my translation - the last sentence in the Al Qabas article.
Certainly, there's a lot of justification for rancor in the CCC and among the lenders.  They've expended a lot of time dealing with the rather slippery management at TID to get this far.  That matters aren't moving more quickly has got to be distressing.  As I am sure are the latest "shenanigans" of the Company - though frankly speaking, the lenders can no doubt expect many many more during the implementation phase of the restructuring.

But as we did above with the good cop's position, let's translate the bad cop's argument into less politically correct speak:
  1. We, the CCC, are the critical guys in the process holding the creditors together. If we walk, TID comes crashing down.
  2. You're ignoring us.
  3. We're fed up by your inaction and by the Company's shenanigans. (Notice, as usual, AA is being highly charitable.  And my zakat in that respect is being paid on time!).
  4. If we don't get what we want, we're going to take our ball and go home.
  5. Then you'll be the culprit as TID collapses.
While no doubt this tactic does put a bit a pressure on the CBK, in the final analysis it's not very credible.  The lenders are not going to walk away from their best hope of recovery:  the rescheduling and the FSL.

If the Central Bank is looking for way out of approving TID's request, then this may be just the entree they're looking for.    That being said, I don't expect that.  My worst case scenario is that the CBK comes back with modifications to the plan - which by that time the parties thereto should be sufficiently exhausted that they will willingly accept what the CBK wants in order to finally close the file and move forward.

2 comments:

Abu 'Arqala said...

TID had its annual shareholders' meeting for its 2008 financials on Thursday.

In summary, Mr. AlMusallam basically denied the contents of the AlQabas article. He also reassured shareholders that TID was not going to be liquidated because it had excellent assets.

Since you're no doubt all reassured by his statements, I'll take until tomorrow to post the details.

Abu 'Arqala said...

Update on shareholders' meeting here.

http://suqalmal.blogspot.com/2010/08/investment-dar-al-musallam-denies.html