When times are good, one announces a new loan with great fanfare and self congratulation. Once one has defaulted the situation changes. Repayment of one's contractual obligations - previously taken as a given - is no longer certain so one announces the "successful" making of a repayment. This is also a strategy to burnish one's now tarnished name with a bit of "good news".
Today GIH issued press releases on the DFM, BSE and KSE announcing that it had successfully repaid US$50 million in principal on its restructuring for value 21 July.
As noted, with this repayment and the first US$28.9 million repayment in April, GIH has repaid US$78.9 million on its restructuring, 46% of the amount due by 10 December 2010, Plus an additional US$20 million in interest.
It has also repaid some KD20 million in bonds (US$68,7 million).
In very rough numbers, GIH has about US$2 billion in debt. The above amounts (excluding interest) are roughly 7% of the total. That this amount is low is not surprising - the repayments schedule has been designed to give some breathing room for asset price appreciation. It begins with rather modest payments in the first year which then increase in the latter years. The problem GIH faces is that the tenor on its restructuring is an unrealistic three years. So the increase is rather sharp. And represents a very real minefield for the Company particularly if the economic recovery is modest or slow.
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2 comments:
Yes - rather like boasting of deck chair availability on the Titanic.
For sheer brass my prize goes to a certain US Law firm. While visiting the ABC New York branch back in the 1990's I saw what I took to be a deal tombstone. In a way it was - it was for the restructuring of a defaulted real estate syndication. perhaps a new business opportunity for AA? Plenty of deals in the GCC would qualify, with plenty more to come.
Laocowboy2
In today's fast-paced world of modern banking, there are two fundamental business principles:
(a) cross selling
(b) one stop shopping
Raising funds for a company (debt or equity), then restructuring that debt or equity a bit later is an good example of incorporating the above into one's business.
Master practitioners also are able to secure the (M&A) mandate to sell off "non core" assets or IPO them as part of the restructuring. Along with a bit of corporate strategy revision when one's "proven business" model needs a tweak.
A few years later one can begin the process again.
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