The Investment Dar Restructuring - Push to Secure Creditor Agreement

AlQabas reports that the Creditors Co-Ordinating Committee ("CCC") is undertaking a series of urgent visits on creditors in an attempt to convince them to quickly sign on to the proposed restructuring before the 23 December deadline.

Their two major concerns.

1. The impact of another missed deadline.  
2. The desire to have the restructuring implemented by February 2010.

Of the two, the first has to be the major concern.  If there is another disappointment, could it break the existing group in favor of doing a deal?  And for TID itself, another delay could mean even less chance (and I think the probability is quite low now) of ever emerging from the restructuring as a going concern.

A major focus appears to be Noor Investment Company.  You'll recall that Noor had lodged a lawsuit against TID, which it lost.  However, it seems it has another legal action planned - a new case which will enable it continue its "legal pursuit" of TID.  The CCC is trying to convince Noor that its "best choice" is to agree the restructuring because the affairs of the company have been put in order, the assets blocked and evaluated, and the financials sent to the Central Bank for its approval.

Apparently, Noor is able to pursue its case whether or not it agrees to the restructuring.

A recap of the current situation and some conclusions:

1. As per the last account, some  66% (by amount) of creditors reportedly had signed on to the restructuring. 
2. The Investment Dar Bank Bahrain ("IDBB") was identified as the  major holdout with some 27%  by amount of the outstanding debt. Sources at TID expressed confidence that IDBB would shortly agree. 
3. Since there is no equivalent to Chapter 11 in Kuwait, 100% agreement needs to be obtained. in order to "close the deal".   Dissenting creditors cannot be "crammed down". Hence the CCC's recent actions with non responding creditors.
   
4. It seems pretty clear that there is difficulty in getting the remaining creditors on board.   Perhaps some are waiting to see if the CBK will approve the financials though one would expect that  creditors would have already been given a sense of the contents.  There is also the perennial problem with deadlines:  many will wait until the last possible minute to make up their minds. 
   
5. It's unclear if IDBB has agreed.  One would expect if it had that the CCC and TID would be trumpeting this as a way of creating a bandwagon effect.  In such a case it should be fairly easy  (that's a relative term) to sweep up the remaining 7%.  
6. If IDBB has not yet agreed, TID could be in real difficulty. 
7. The news about visits and a last minute push with non responding creditors implies that things are not going as planned.  Or not going as fast as planned. 
   

As outlined in my previous post, I view the restructuring as a controlled liquidation.   In such a case it's hard to understand why a creditor wouldn't sign up.   The mere fact that the deal is structured as a liquidation means the borrower's situation is dire and there is a risk of less than full discharge of the debt.  Having a legally enforceable charge over the assets and control over their disposal seems to me  a more attractive option for creditors than fighting over the carcass.

The only reason a creditor wouldn't sign up is if he thought he could get a higher recovery by going alone or could somehow force the terms of the restructuring to be revised. Hard to see how the latter would apply so more likely than not it's the first motive at play.  Perhaps, a hope that as a small creditor, the larger ones will buy out one's claim to close the deal.

One counter strategy is to treat dissenting creditors as having agreed.  Under this tactic, payments are made to them in line with the restructuring.  The hope is that while they have a legal right to payment as per the terms of their original contract and a right to sue to enforce that contract, the borrower can tie them up in court for a prolonged period.  Ideally the period of the restructuring or close to it.  And that the court will consider the payments as the borrower's attempt to satisfy the debt.  At some point if enough progress is made in repayment, the dissident creditor may just "give up" pursuit as not being worth the  cost -both direct (legal and other expenses) as well as indirect (time and effort).  Not without risks,  But a potential alternative.