Tuesday, September 21, 2010

The Investment Dar - Dubai Creditor Meeting

TID held a creditors' meeting in Dubai 21 September.  Both Al Watan and Al Qabas have accounts.

The Al Watan (Taamir Hamaad) article is fairly bland - no fireworks.  Adnan Al Musallam  is quoted as reiterating TID's firm desire to repay its debts, adding that the reality of the financial crisis made it incumbent  on everyone the obligation to work together to reach the restructuring.   

He also proposed the formation of a holding company capitalized at between KD300 million to KD400 million - to be administered by the banks and investors - as the vehicle to settle TID's debts.  The rationale appears to be to ensure compliance with the Central Bank of Kuwait's new rules on investment companies.  Apparently to shift the debts off TID's balance sheet along with the assets - thus  improving TID's performance under the CBK's  three ratio tests.  He said that he had requested the executive and legal management of the Company to study this matter.

On the other hand Al Qabas (Mohammad Sha'baan) has a more fiery story (not unexpected) of creditor "anger".  In the Al Qabas version, some creditors are on the verge of a confrontation with TID and its Board over the following:
  1. A belief that parties outside the formal management/Board structure of TID are really making the decisions
  2. That the Company is deliberately stalling progress
  3. That the creditors have been overly patient during the past two years but have gotten nothing from the Company
  4. Board Members are deliberately missing meetings with creditors and provoking confrontations in order to evade responding to creditor requests.  A central point is the creditors' demand that they be kept fully in the picture as to what is going on at TID, including efforts to comply with the Central Bank's new regulations for investment companies
  5. That some creditors are prepared to bring legal action against all parties - including against the Creditors' Coordinating Committee,  if there is an attempt to impose the restructuring plan without 100% creditor acceptance or acceptance by an absolute majority of creditors.   AA:  This is a puzzling statement.  It's pretty clear by now that all creditors are not going to accept the plan.  And equally that the whole point of recourse to the FSL is to cram down dissident creditors.  Al Qabas' informed sources may be less informed than they claim.
  6. That TID has apparently stopped its program of salary reduction for senior management and that the salary scale has reverted to what it was in the boom years.  AA:  This is similar to the earlier theme about creditor anger over a raise and bonus for a member of senior management.  A neat way of attempting to finesse this is to eliminate a reduction and say that technically the fellow is not getting a raise but rather his salary is being restored to what it was prior to the reduction.  Unclear if this is what is going on. 
  7. That some Board Members through related companies they control, companies which are partners with TID in certain assets, are gaming the realization of assets.  AA:  This is the fundamental creditor fear - that asset disposals will be gamed to reduce the banks' realization proceeds.  Not an unreasonable fear in the land of egregious related party transactions.
Two quite different accounts, though it should be noted that Al Qabas is speaking about creditor discontent which might manifest itself in the future not battles raging at present.

There's a creditors meeting today in Kuwait for those creditors who missed Dubai.  Hopefully, more detail will be forthcoming.

It's no surprise that creditors' patience is wearing thin.  It's been over two years.  The Central Bank is still reviewing whether to allow TID to use the FSL as cover for its rescheduling.  TID has yet to release any 2009 financials - either quarterly or fiscal year 2009.


The Rageful Cynic said...

Excuse my French, but if this were a segment on The Daily Show, it would be called "Clusterf*ck to Bankruptcy"....

laocowboy2 said...

If there isn't a restructuring/winding up "Moore's Law", there should be. Sad experience has taught me that the longer the process goes on, the less the creditors eventually get - and that the only winners are the lawyers and accountants. Damn - should have studied Law instead.

Chapter 11 said...

Given abuse of debt over the past cycle by groups such as TID, Saad, Global, Dubai Inc etc there must have been a time where most of these equity owners must have thought - damn, im absolutely MILKING IT.


Funny to think that now.

So now, with all this crap that we're seeing in pathetic treatment of creditors, stagnant court cases and the like, can we just get one thing out of this cycle, and thats some f***ing proper bankruptcy laws... Seriously... Its not rocket science kids.

Abu 'Arqala said...

Bankers are like barkeeps.

They have to know when to cut off a customer from credit - to avoid over lending.

In my few short days, I've seen many a lender upsize a bond or loan because there was additional demand. Whether the client has a productive use for the funds seemed to be a secondary consideration to the bankers' bonus.

And when money is lent at ridiculous rates, all sorts of marginal ventures suddenly seem to make sense at the borrower. Just the sort of transactions the wheels come off at the first downturn.

Distressed said...

Does anyone know what the latest is on the restructuring plan for TID? I've read through all of the posts but still would like any colour on the following:

a) Does the restructuring envisage the debt to be zero-coupon?

b) Am I correct in that maturities will be extended by 5 years?

c) Will there be some form of debt-for-equity swap?

d) Are all creditors pari passu?

e) Would a potential buyer of the Sukus be privy to the same information as the Wakala Payables, Murabaha Payables and other Bilaterals?