Showing posts with label Gulfinvest. Show all posts
Showing posts with label Gulfinvest. Show all posts

Wednesday 1 September 2010

Kuwait Stock Exchange Suspends 5 Additional Companies for Failure to Pay Listing Fees


The KSE announced that it had suspended seven companies from trading due to failure to pay 2010-2011 listing fees.  Two of the companies, Shabka and Safat Global, were already suspended for failure to pay the previous year's listing fee.

While financial distress is not the only reason why a Company might not pay the fee, it's a pretty safe bet that most of the companies on the list did not pay for that reason.  Six of them  them have already been suspended for failure to provide financial reports.  Some for quite extended periods.  For those previously suspended, I've highlighted the word  "موقوفة " in blue.

The companies are (listed in the same order as the Arabic):
  1. International Investment Group
  2. Gulf Invest  aka Gulfinvest International
  3. Pearl (Lu'lu) Real Estate
  4. Safat Global
  5. Mushrif Trading and Contracting (the only company on the list not suspended for failure to provide financials)
  6. Al-Abraj Holding
  7. Shabka Holding
 
[10:26:55]  ِ.إيقاف شركات عن التداول لعدم تسديد رسوم الاشتراك السنوي ‏
يعلن سوق الكويت للأوراق المالية بأنه تم إيقاف تداول الشركات
التالية لعدم تسديد رسوم الاشتراك السنوي لعام 2010- 2011 ‏
اعتباراً من اليوم 1-09-2010:- ‏
ِ1- المجموعة الدولية للاستثمار ‏(المجموعة د)(موقوفة) ‏
ِ2- الشركة الخليجية الدولية للاستثمار ‏(غلف انفست)(موقوفة) 
ِ3- شركة لؤلؤة الكويت العقارية ‏(لؤلؤة)(موقوفة) ‏
ِ4- شركة الصفاة العالمية القابضة ‏(صفاة عالمي) (موقوفة) ‏
ِ5- شركة مشرف للتجارة والمقاولات ‏(مشرف) ‏
ِ6- شركة الابراج القابضة ‏(الابراج)(موقوفة) ‏
ِ7- شركة الشبكة القابضة ‏(الشبكة)(موقوفة) ‏
علما بان اخر موعد للسداد هو 31-08-2010 .‏
علما بان اخر موعد للسداد هو 31-08-2010 .‏

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 .‏

Monday 5 April 2010

Shuaa Capital on Gulfinvest Kuwait and Ahlia Holding Company


Since I posted on this topic yesterday, it's only fair to note that Shuaa has made an announcement on the DFM today.

PRESS RELEASE

SHUAA says no impact from Gulfinvest default

Dubai, 5 April 2010 – SHUAA Capital expects no major financial impact resulting from the statement by Gulfinvest to the Kuwait Stock Exchange regarding its default on a AED 200 million loan to Abu Dhabi Commercial Bank. SHUAA had entered into a guarantee in respect of this loan in 2007, and confirms that it will fulfill its obligations as they become due. As part of SHUAA's diligent risk management process, the Firm took prudent action and made a provision for the loan guarantee at the end of the year 2009. This information has been made available to the market in the financial statements which are available on SHUAA's website.
Since September last year, SHUAA's new management has taken decisive steps to reduce risk exposures emanating from non-core businesses and expects no further material impact or downside risks arising from legacy issues of the Firm. SHUAA has a clear focus on maintaining and developing its leadership positions in its core fee generating businesses.

- ENDS-

The last paragraph is of course true.  

However, I'd like to give a tip of AA's virtual tarboush to the term "legacy issues".  Like "legacy assets" and "non-core" assets, it's one of my favorite financial terms. 

Shuaa Capital Gulfinvest Kuwait and Ahlia Investment Company


You've probably seen the press reports that Gulfinvest had defaulted on a AED 200 million loan extended to it by Abu Dhabi Commercial Bank which Shuaa Capital had guaranteed. The loan was to partially finance Gulfinvest's purchase of  19.2% of Ahlia Investment Company (since 2007 Ahlia Holding Company) from Shuaa.  As a result of the default, Shuaa is now obligated to pay ADCB AED 200 million.

How did Shuaa get in this situation and what are the consequences?

Sixty second summary:
  1. Shuaa has already taken an AED156.6 million provision (in its 2009 annual report) so the financial pain is already felt.
  2. Recovery prospects are probably best characterized as difficult given that Ahlia represents roughly 73% of Gulfinvest's assets. 
  3. The story of the sale is complicated.  Shuaa seems to have been motivated to provide the guarantee so that it could close the sale.  The profit on which was 26% of 2006 net income.
  4. Gulfinvest appears to have paid a significant premium over "market" price for the acquisition.  Almost twice market!
Now the details.

Those with long memories will recall that Shuaa's 2005 acquisition of Ahlia had been controversial in some quarters.  As far as I know, no regulatory action was taken against Shuaa for the transaction.  Here's one article about the ESCA.  And there is nothing on file against Shuaa at the DFSA for this transaction.

In 2006 it sold all of its shares in Ahlia to Gulfinvest, in whom Ahlia was a significant shareholder.

As the below press release from the KSE 29 July 2006 discloses Gulfinvest bought 100% of Emirates Company for Opportunities Ltd #3 which owned 115,730 shares of Ahlia for KD51.9 million.   This is what the press release states but it's clear from Ahlia's 2006 financials that the purchase must have been for 115.73 million shares. As an unrelated (to this story) comment, you might find Note 27 (Related Party Transactions) and 32  (Regulatory Violations)  in Ahlia's report interesting reading.

Here's Gulfinvest's 29 July 2006 press release on the transaction.

[7/29/2006-7:58:14]  ِ(غلف انفست) تشتري "شركة الامارات للفرص المحدودة 3" بمبلغ 51,9 مليون د.ك
يعلن سوق الكويت للأوراق المالية أن الشركة الخليجية الدولية للاستثمار
ِ(غلف انفست) قد قامت بشراء "شركة الامارات للفرص المحدودة 3" بالكامل،
وذلك بمبلغ قدره 51,9 مليون د.ك (واحد وخمسون مليونا وتسعمائة ألف
دينار كويتي).‏
علما بأن "شركة الامارات للفرص المحدودة" تمتلك عدد 115,370 سهم
من أسهم الشركة الأهلية للاستثمار.‏
وعليه، تصبح ملكية (غلف انفست) في الشركة الأهلية للاستثمار 30,17%‏
بشكل مباشر وغير مباشر، وذلك بدل ملكيتها السابقة البالغة 11,03%.‏

If we look at the 2006 annual audited 2006 financials for Shuaa Capital Note 8, we get more details. The sale price was AED 656.744 million and Shuaa recognized a gain of AED 67.821 million.  This represents roughly 26% of Shuaa's 2006 net income of AED 262,43 million.   Strong incentive to "close the deal"!  And maybe take a bit of credit risk.  And maybe in retrospect a bit too much.

What motivated Gulfinvest is less clear.  In the period around the end of July 2006, Ahlia was trading at KD0.240 or so.  A glance above shows that Gulfinvest paid almost twice market price for the shares!!!

Let's go a bit deeper.

In Gulfinvest's 2006 Annual Report Note 2, we see that it actually only paid cash of KD37.9 million.  It financed the remaining KD 14 million by using KD1.7 million in dividends from AIC to pay Shuaa and KD12.3 million though a note payable (presumably to Shuaa) which carried interest of 7.75% p.a.   It also recognized some KD15 million in goodwill on the purchase.

In its 2007 Annual Report, Gulfinvest disclosed in Note 8 that this receivable was settled during 2007 by utilizing a portion of the term loan "availed from a bank in the UAE".  The term loan is for KD14.96 million.  The term loan appears to be some KD2.697 million larger than required.  

Could the difference be interest?  And how can we put a boundary on the interest calculation?  The convenient thing is that Shuaa's fiscal year 2006 ended  31 March 2007.  At that point as per  Note  33 in its 2006 annual financials it is showing an AED 207 million guarantee.   It's a safe bet that this is this loan.  So the maximum period for interest is from August 2006 through March 2007 or 8 months.  At 7.75% that's KD0.634 million.  In rough numbers leaving KD2 million or AED 26 million of apparently extra  (note the qualifier "apparently") debt which Shuaa has guaranteed.

The press reports that Shuaa helped Gulfinvest get the loan from Abu Dhabi Commerical Bank.  The loan was secured by  the pledge of the 19.2% stake in  Ahlia bought by Gulfinvest.  But ADCB also wanted and got Shuaa Capital's guarantee.  Perhaps a sign to Shuaa that it was taking on more credit risk that it bargained for.

With the default and the legal obligation of Shuaa to pay ADCB, some press articles have remarked that this is yet another headache for Samir Ansari, Shuaa's CEO.  However, a glance at Note 33 in Shuaa's 2009 financials (now a December Fiscal year end) shows that it already took an AED 156.643 million provision.   So the headache was recognized long ago and preparations made.  The financial pain has been taken.  Or largely taken.  If the provision proves later to be insufficient, the likely additional amount seems clearly manageable - and not life threatening to Shuaa.

Once it pays off the ADCB loan, Shuaa will step into the shoes of ADCB  with Gulfinvest's  other creditors  to negotiate the debt rescheduling.  

From a quick glance, recovery looks difficult.

As per Gulfinvest's 30 September 2009 financials (the latest I can find) Gulfinvest has KD63.4 million of assets.  Of this total KD46.1 million is represented by Ahlia.   It's now trading at roughly one-tenth of its value on 29 July 2006.  And roughly KD20 million of that now belong to Shuaa.  Other creditors (excluding Shuaa) are some KD34.6 million.