Boubyan Bank - Legal Struggle Between Commercial Bank and TID

Two articles in AlQabas today on the latest developments.

To recap late in December 2008, TID and Commercial Bank of Kuwait engaged in a US$200 million repo transaction. involving TID's shares in Boubyan Bank.  TID sold the shares to CBK against US$200 million and was to buy them back in 2009.   TID failed to settle the buyback.  In May 2009 CBK declared tthat he shares were now theirs.  Later they were on the verge of selling them to National Bank of Kuwait for a price reported to be US$420 million when TID got a "restraining" order.

What's at stake here?

1. For CBK an apparent tidy profit.  Also putting aside the profit, it has to be concerned that if this transaction is unwound, it could become part of TID's restructuring.  Not a happy outcome.
2. For TID a loss of highly liquid asset with significant value.  You'll recall that KFH has sued CBK trying to overturn the "sale".  As a participant in TID's restructuring, KFH has a clear self interest in getting as many good assets into TID's estate as possible.
3. For NBK in either case a motivated seller (TID or CBK) and the chance to increase its stake in Boubyan to 60%.   And, as one of my Kuwaiti friends said the other day,  probably the quickest way to increase both prudent business conduct and good corporate governance in the Kuwaiti financial sector is for NBK to purchase a firm.

The first article says that TID announced that the Supreme Court Commercial Circuit refused to hear its appeal of the earlier judgment against TID over the sale of the shares of Boubyan Bank to Commercial Bank of Kuwait.   TID intends to appeal noting that the judgment against it was in the Court of First Instance.  Also it noted that it had succeeded in the past in getting a freeze order on the further disposition of the shares pending resolution of the larger case, though the shares are temporarily registered in the name of CBK.  Some 221,425,059 shares.  At yesterday's closing price of KD0.520 per share, the stake is worth roughly US$403 million.

The second article says that NBK is "open" to working out a solution to the struggle between the two parties.  Apparently, the Central Bank "Monitor" appointed at TID, Ayyad Thafiri (Dhafiri in Kuwaiti dialect) has been exploring a solution.  CBK is reported to say they don't want anything but their money.   NBK is an eager buyer.  Time will tell if this account is correct and if the parties can work out a settlement.