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 .‏

AlJoman - Why the Kuwait Stock Exchange Needs Strong Regulation

Earlier this month AlQabas published a lengthy summary of a recent report by AlJoman Center for Economic Consultancy.  Here's the full report from AlJoman's website.  

You'll notice that AlQ has reordered the topics.  We'll work with AlQ's order in this post.  

The article is a blistering attack on market manipulation and regulatory failures. 

1. Al Joman says that there are about 15 main "investment blocs" that each control from 2 to more than 10 companies that are active in the KSE.  According to its analysis only a very few of them engage in professional or responsible behavior. 
   
2. Three of the groups have fallen and AlJ expects at least one other to this year.
3. The first group mentioned is the Abraj Bloc (Abraj Holdings, Shabka Holdings, and International Leasing and Investment).
4. The second is the Ahlia Bloc (AlAhlia Holding Company and Gulf Invest).
5. The third the International Group Bloc (PetroGulf, Grand, Investors Bank, Usul, and International Investment Group.)
6.  It then turns to a discussion of large and unjustified losses to the shareholders of the companies comprising these groups - which it notes shake confidence in the KSE as well as harm its foreign reputation stating that they consider that removing these distressed companies from the list of traded companies (presumably an expulsion from the KSE) would be considered a positive step. even if only partially (meaning this step by itself is not sufficient).  And that it is possible to lighten the harm caused shareholders and the economy by  removing  these long notorious companies instead of having let them continue to exhausting shareholder money for a long time and in a clear open fashion visible to all.  Clear responsibility for this state of affairs is laid upon the management of the KSE.

I've sort of given away the plot here.  The original research report by Al Joman begins "innocently" enough with a discussion of  the decline in KSE trading in April compared to May.   After presenting some comparative statistics, AlJ begins to describe the reasons.  The first hint is the comment that negligent traders have discovered there are more paper companies and so have become more selective in trading.  Turning to its list of factors, the first item is the lessening of manufactured or imaginary trades or trades agreed beforehand.  Which have come to everyone's attention through increased complaints.  The impact of the new capital market law which criminalizes these wrong practices.  The second is exceptional "feverish"  trading in transport or logistic company  as shares as part of an organized propaganda and scheduled effort to to spread rumors.  Manipulated volumes and prices.

Not too far into the report and it's pretty clear that this is not your normal market analysis.

It only gets better.  Comments on those responsible for cheating numerous innocent traders.  Management from the companies themselves, media circulating lies - print, satellite television, internet sites (heavens an attack on bloggers!).   Than an absolutely blistering attack on the KSE.

Some discussion of the Commercial Bank of Kuwait 11 April Board meeting and the responsibility of directors under the title "Commissioning Not Entitling" (my loose translation).  Calling for independent investigations of board conduct at troubled companies to find out the real reasons for losses and the decline in asset values along with steps to recover funds if board members are guilty of wrongdoing.

The end of the article deals with a review of 2009 earnings predictions by 4 newspapers in Kuwait along with AlJoman's.  And some comments that so far (not all firms have reported results yet!) net income for the two year period 2008-2009 is approximately zero.

An interesting factoid - as of the date of AlJ's report only 25% of Kuwait's 333 companies had reported 1Q10 earnings.  One suspects the delay is not due to needing a lot of time to add up the profits.

AlAbraj Holding "Small" Shareholders Call for Emergency Ordinary General Meeting

PLEASE NOTE THIS POST IS ABOUT A KUWAITI COMPANY, NOT THE UAE COMPANY ABRAAJ.

Both AlWatan and AlQabas report that small shareholders in excess of the 10% required under Kuwaiti Commercial Law have banded together and engaged a law firm to raise a complaint against the Ministry of Commerce and Industry and the Kuwait Stock Exchange for failure to discharge their supervisory duties with respect to AHC and to lodge the formal demand that the MOCI call an emergency ordinary general meeting of shareholders.  The meeting would be designed to protect the rights of the small shareholders in the company, including the right to elect a new board.

You'll recall the Boubyan Bank is pursuing a legal case to have AHC declared bankrupt.  

Also AHC is currently suspended from trading on the KSE for failure to provide its financials  for 31 October 2009 and 31 January 2010 within the required time.

The AlQ article is longer and has some more details, including that the Boubyan debt was incurred to purchase a majority stake in International Leasing and Investment.    According to the KSE, AHC  currently owns some 39.28% of ILI.

With respect to AHC itself small shareholders own 58.5% of the company and large shareholders some 41.5%.

Kuwait Court Delays Action in Boubyan Bank Case Against AlAbraj Holding

AlQabas reports that legal sources informed it that the Court decided on 20 April to postpone action in Boubyan's bankruptcy case against AlAbraj until 6 June.  This appears in part to be to allow the addition of a fifth defendant, an unnamed local bank, in the case.  The article also notes that Boubyan had filed a motion to compel other Kuwaiti banks to disclose any AlAbraj assets they held.  No doubt in an attempt to block these and eventually realize them.

Boubyan's attorney reportedly asked the Court to set the future hearing as soon as possible given the long and persistent delays so far. (Welcome to the GCC court system!).  On a closing note, AlQ comments that Boubyan's (separate) case against the Board of Directors for temporary compensation is scheduled for a hearing on 27 April.

AlAbraj Holding Headed for Bankruptcy?

Citing informed sources, AlQabas reports that the meeting held yesterday among AHC's creditor banks did not reach agreement on a restructuring after discussion of the company's current situation and the possibility to restructure.  It's therefore expected that AHC might be the first Kuwaiti company to declare bankruptcy. 

Just a caveat, there are several companies that use the word Abraj (Towers) or Alabraj (The Towers).  This is the Kuwaiti Company, AlAbraj Holding Company.

Al-Abraj Holding Company Kuwait - Latest Developments in Bank Boubyan Lawsuit

AlQabas has a short item on the lawsuit by Boubyan Bank against AHC under the headline "Banks Request Delay in Bankruptcy Proceedings Against AlAbraj".

Two days ago the High Court - Commercial Section - adjourned its session until 20 April to study the case raised by Boubyan against AlAbraj Holding.   Legal sources are quoted by AlQ as saying that the delay was in response to a request from the Company itself as well as from three local (Kuwaitit) banks.  In its original complaint, BB asked that the Court freeze AHC's accounts with other banks and declare the Company bankrupt.  The banks want time to study BB's legal complaint as well as their records regarding AHC's account with them.

For those reading this post, there are at least three companies which use Towers (AlAbraj or Abraj) in their names.  AHC is a Kuwaiti company.

Earlier posts can be accessed using the label "AlAbraj Kuwait"

Kuwait Stock Exchange Suspends Trading in AlAbraj Holding

If you wondered what happened, AlAbraj did not get its 31 October 2009 fiscal year end financials to the KSE.  

And so the KSE has suspended trading.  Announcement below.

[8:38:8]  ِ.وقف التداول بأسهم شركة الابراج القابضة اعتبارا من اليوم ‏
يعلن سوق الكويت للأوراق المالية انه قد تم وقف التداول بأسهم شركة الابراج ‏
القابضة اعتبارا من اليوم الاثنين الموافق 01-02-2010، وذلك لعدم تقديم ‏
البيانات المالية السنوية للسنة المالية المنتهية فى 31-10-2009، فى الموعد ‏
المحد

Kuwait Stock Exchange Warns AlAbraj Holding on Trading Suspension If Financials Not Provided by 31 January

The Kuwait Stock Exchange issued a public warning today to AlAbraj that if it did not produce its fiscal year statements (AlAbraj's fiscal year ends 31 October), it would be suspended from trading.

The Company is involved in a legal case with Boubyan Bank over its non payment of KD45.2 million of debt. This is an indication of significant financial issues at the company which are no doubt responsible - at least in part - for the delay in release of its financials.

Here's the text (Arabic only) of the KSE announcement.

[14:27:1]  ِ.تذكير (ابراج) الالتزام بقرار لجنة السوق رقم(16)‏
يعلن سوق الكويت للأوراق المالية واستنادا الى قرار لجنة السوق رقم (16)‏
لسنة 1987، والذي يلزم كافة الشركات والصناديق المدرجة بتقديم البيانات
المالية السنوية في موعد أقصاه ثلاثة أشهر من تاريخ انتهاء السنة المالية،
فانه وفقا للقرار المذكور على كل شركة مدرجة في السوق الالتزام ‏
بتقديم بياناتها خلال المدة المذكورة اعلاه ، وحيث ان شركة الابراج القابضة ‏
ِ(ابراج) تنتهي السنة المالية بتاريخ 31-10-2009 واستنادا للمهلة المذكورة ‏
اعلاه فإن اخر يوم للاعلان عن هذه البيانات المالية هو يوم الاحد ‏
الموافق 31-01-2010 .‏
وبنائا علية فإن ادارة السوق سوف تقوم بوقف التعامل في اسهم هذه الشركة في ‏
حال عدم تقديمها البيانات المالية السنوية في الموعد المحدد .‏

Boubyan Bank Statement on Lawsuit Against AlAbraj Holding

In its "Disclosures" section, AlQabas has two lines giving Boubyan Bank's reason for the lawsuit.  The Bank took the action because AlAbraj stopped settling its debts with Boubyan, which the Bank states total KD 45.2 million in aggregate - owed to both the Bank and some of its clients.  Boubyan also notes that in addition to raising the bankruptcy petition against AHC it has filed a "responsibility complaints" against some of AHC's former board members.

You'll recall that in its statement to the KSE, AHC had described its debts as recently having been reduced to KD39 million.  It's not clear why the difference.  Is AHC referring only to principal, while BB is including interest?   Earlier post here.

In any case, what is clear is that BB appears to be the major and perhaps only real creditor of AHC.

Boubyan Bank Lawsuit Against Al Abraj Holding

Al Abraj Holding Company Kuwait issued a press release on the Kuwait Stock Exchange today (text below) regarding press reports that Boubyan Bank had filed a bankruptcy case against it for non payment of loans.

In its press release AHC makes the following points:

1. The loan from Boubyan was made in order to purchase a majority stake in International Leasing and Investment Company.
2. The loan was secured by the shares in ILIC. 
3. With the decline in shares, the cover of the loan by the shares was less than agreed.
4. Given that fact and that the company stopped servicing its debts, BB resorted to a court case. 
5. The Company received no formal advice/warning of the case from BB nor any official notice from the Court.
6. Recently ILIC reduced its debts from KD 51 million to KD 39 million.

A bit of background on ILIC.

Islamic Development Bank Jeddah and Abraj are listed as the two main shareholders but I don't know recent percentages of holdings.  The Company states that it operates according to Shari'ah principles in providing leasing services.  It also makes investments in other companies.  This seems to be a major activity.

You'll recall that ILIC is one of the six companies suspended from trading on the KSE, due to failure to release financial statements.  The Company has not published its fiscal year 2008 nor any interim statements for 2009.  In May last year it announced that the Central Bank of Kuwait had given it permission to hire Citibank as a consultant "as a specialized consulting agency, to examine and evaluate the company development and suggest the appropriate solutions".   

The Company is clearly in financial distress. 

Many of the names in its portfolio are Kuwaiti companies.  And many of those are known to be in distress.  There was an interesting phenomenon in Kuwait in the period just prior to the crash in 3Q08.  Many industrial and other companies in Kuwait were making their profit from wise investments in the KSE rather than their core businesses.  And that profit was largely based on increases in the carrying value of investments rather than ongoing cashflow.   Money was borrowed from banks eager to increase their business to make these investments.  And when they turned out to be an apparent wise idea, more money was borrowed to make even more investments.  Banks were similarly eager to increase their business even more.  A true meeting of commercial interests.

And, as though familiar with Kuwait know, there is often a  "network" of related  individuals and companies who trade shares not only to make a profit but also to prop up share prices.   And perhaps  in so doing keep local bankers happy with their collateral values as a result.  The recent story of Nafais is just one example.  For those who read Arabic, AlQabas has an account.  For those who don't here's AlphaDinar's take.

Unfortunately, when the KSE "retreated", many an investment company ship was left stranded.  And many a local banker felt his ankles get wet.  Some their knees.  A few their thighs.

While it's unclear just how AHC reduced its debt by KD 12 million, one might understand that BB felt left out, which may be another motive for its lawsuit.  If one isn't servicing one's debts, how does one reduce indebtedness roughly 24%? 

To close out the story on Boubyan.  Like many other financial institutions in Kuwait, BB is increasing its capital.  BB by 50%.  583 million new shares are being issued at 155 fils (55 over par value).  The rights offer will take place between 24 January and 7 February for shareholders of record as of 21 January.

AHC press release below.  

[8:33:52]  ِ.ايضاح من (ابراج)بخصوص ما نشر فى احدى الصحف المحلية امس ‏

يعلن سوق الكويت للاوراق المالية بان شركة الابراج القابضة تود ان توضح ‏

بخصوص ما نشر فى احدى الصحف المحلية امس حول رفع بنك بوبيان لدعوى افلاس ‏

ضد الشركة ،تفيد الشركة، بان مديونيتها لبنك بوبيان ناتجة عن شراء الشركة

لحصة الاكثرية بالشركة الدولية للاجارة والاستثمار وقد كانت هذه المديونية ‏

قد تمت تغطيتها بشهادة اسهم تغطى الكفالة البنكية مقابل القرض وبسبب ‏

انخفاض اسعار الاسهم تم كشف التغطية الى ما دون المتفق عليه وبسبب ‏

توقف الشركة عن سداد اقساط القرض فقد لجئ البنك الى القضاء لتحصيل ‏

القرض علما بانه حتى تاريخ هذا الكتاب لم يصل اى اخطار من بنك بوبيان ‏

او من قبل المحكمة رسمي بخصوص القضية المشار اليها .‏

وتفيد الشركة بان اجمالي القرض كان 51 مليون د.ك تقريبا وصل بعد التسديدات ‏

الى 39 مليون د.ك تقريبا .‏