GFH issued a press release earlier today in which it advised that it had made a US$300 million provision for its investment in the Legends Project - part of the multi billion US dollar "Dubailands" complex.
GFH was one of the pioneer developers of mega real estate projects in the GCC - Bahrain Financial Harbour - benefiting it is said from business relations with important personalities. From Bahrain it quickly spread its wings across the MENA region with similar projects and then beyond. It's specialty was what it billed as "infrastructure development".
The business model was the typical "Islamic" banking mark-up model and GFH generated some 80% of its income from these projects.
Before the global problems of 3Q08, the bank was beginning to try and diversify away from over dependence on real estate. Since then, the bank has been struggling to develop a new business model. This is evidenced by the comment in the press release on Dubailand. When a firm starts talking about the disposal of "non core assets", it's a pretty good bet (though not 100% certain) that there are problems in the business model.
That being said, it successfully raised US$300 million in new capital this "2 November/October", a US$100 million convertible murabaha transaction with Deutsche Bank 15 November, plus an earlier sale of the bulk of its shares in QInvest (Qatar) plus an planned $100mm convertible murabaha with Macquarie.
As a result the bank has increased its liquidity, though it faces debt maturities of US$350 million in 2010, US$100 million in 2011 and US$175 million in 2012.
Recent changes in management are probably related to the change in strategy as well as strengthening of the management team. The previous CEO was only in place five months before departing. It's probably worthy of comment that his successor though as Acting CEO, Ted Pretty, was previously with Macquarie. Here's his bio from his earlier appointment.
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