Boubyan Bank - KD 51.7 Million (US$181 Million) Net Loss for 2009

Since I wrote this this morning, AlQabas has published a report that BB took provisions of KD66.9 million.

Since I've been following the Rights Offering story, I thought I should continue with the 2009 earnings announcement as the two are clearly related.

Boubyan had a net loss of KD 51,694,899 for 2009.  I'm guessing that we'll see that provisions were the main culprit when more detailed financials are released.    Shareholders' equity declined from KD135,148,400 to KD87,134,661.  The recent Rights Offering has more than restored capital by raising KD126,704,771.

Also the Board quite sensibly has recommended against any dividend for 2009. 

[12:13:8]  مجلس ادارة بنك بوبيان يوصي بعدم توزيع ارباح عن عام 2009‏
يعلن سوق الكويت للأوراق المالية أن مجلس ادارة بنك بوبيان
قد اعتمد البيانات المالية السنوية للبنك للسنة المالية المنتهية ‏في
ِ31-12-2009، وفقا لما يلي:‏
ِ1) نتائج أعمال البنك:‏
البند          السنة المنتهية في 31-12-09   السنة المنتهية في 31-12-08‏
الربح (الخسارة)(د.ك)          (51,694,899)           1,846,045 ‏
ربحية (خسارة) السهم(فلس كويتي)     (44,36)                1,58 ‏
اجمالي الموجودات المتداولة 792,676,816            710,830,820 ‏
اجمالي الموجودات         964,778,554             840,460,750 ‏
اجمالي المطلوبات المتداولة 859,395,276           699,543,124 ‏
اجمالي المطلوبات           875,672,913           702,919,776 ‏
اجمالي حقوق المساهمين     87,134,661            135,148,400 ‏
بلغ اجمالي الايرادات من التعاملات مع الاطراف ذات الصلة مبلغ 3,938,027 د.ك
بلغ اجمالي المصروفات من التعاملات مع الاطراف ذات الصلة مبلغ 685,274 د.ك
علما بأن بنك الكويت المركزي قد وافق على هذه البيانات المالية بتاريخ
ِ24-02-2010.‏
ِ2) التوزيعات المقترحة:‏
أوصى مجلس ادارة البنك بعدم توزيع اى ارباح عن السنة المالية المنتهية
في 31-12-2009 .‏
وعليه سوف تعاد اسهم البنك الى التداول بعد عشر دقائق من نزول الاعلان .‏

Boubyan Bank Capital Raising - Formal Announcement on Rights Offering 85.29% Take-up

Bank Boubyan formally announced the results of their Rights Offering, 496,881,458 shares were sold (85.29% of the amount offered) and capital increased KD49,688,145.

In case you're wondering, BB is speaking about the increase in paid in capital not capital in total.  The shares were offered at KD0.255 per share which represents a share premium of KD0.155 per share.  So the issue actually raised KD126,704,771.800 of which KD49,688,175 was added to paid in capital and the rest to share premium.

As noted in a previous post, the plan is to re-open the Rights Offering because the Legal and Fatwa Department wouldn't permit an offering to third parties.   Earlier post here.   And an earlier one here.

[12:7:17]  ِ.زيادة رأس مال بنك بوبيان
يعلن سوق الكويت للأوراق المالية بأن بنك بوبيان افاد بانتهاء
فترة الاكتتاب طبقا للمدة المحددة في تاريخ 07-02-2010‏
وتمت زيادة رأس مال البنك من 116.523.531/500 د.ك
الى 166.211.677/300 د.ك وذلك بالاكتتاب في
عدد 496.881.458 سهم بما يعادل نسبته 85.289% من
اجمالي الاسهم المطروحة للاكتتاب وعليه فقد تمت اضافة اسهم
زيادة رأس المال للمكتتبين في ارصدتهم بالتنسيق مع الشركة
الكويتية للمقاصة بتاريخ 23-02-20

Boubyan Bank - Capital Raising Follow-Up

It really does pay to think carefully about things, especially if one writes for a prestigious blog like this one.

There was another solution open to Boubyan Bank as Thursday's AlQabas reveals.  One that a moment or two of reflection should have occurred to at least one self proclaimed financial expert:  extend the subscription period.

Here are the main points from a press conference held by the Chairman of BB, Ibrahim alQadi (as reported by AlQ):

1. BB raised over 85% (apparently just enough to be over).
2. All the major shareholders participated:  NBK (40% shareholder); Commercial Bank of Kuwait (20% shareholder) [You recall that there are legal cases ongoing involving CBK, The Investment Dar, and Kuwait Finance House - with the latter two disputing CBK's ownership.  Acquired or not acquired as a result of a default by TID on a repo transaction involving the BB shares,   And, of course, depending on the view of your learned counsel and perhaps as well your own economic interest]; the Social Insurance Institution (4% shareholder) and other unnamed large natural person and legal entity shareholders.
3. But since BB has over 80,000 shareholders many with holdings less than 2,000 - less than 15% of the shares offered were not subscribed for.
4. According to the approval at the previous ordinary general shareholders meeting ("OGM"), the unsubscribed shares were to be offered in a public auction but the Government Department of Fatwa and Legislation refused to allow this.  The Department is I believe part of the Kuwaiti Finance Ministry. If anyone out there knows the reason for this, please post a comment.  Is it designed to protect shareholders' rights - even if they're too "lazy" to exercise them?
5. So the plan is to hold another OGM and extend the subscription period for shareholders registered as of 21 January 2010.  Presumably the dates will be set by the OGM and the price will remain KD0.255 per share.  The Board met yesterday and formally approved recommending  this course of action to the OGM.   No timing for the OGM is mentioned in the article.

Boubyan Bank Capital Raising - 85% Takeup Only

 

AlQabas reports that the recent share offer by Boubyan only received shareholder subscriptions for  495,257 shares which are equivalent to approximately KD127 million. (actually about KD126.3mm)   This is 85% of the amount offered.  That leaves  according to AlQabas 87,398 shares worth some KD20 million unsubscribed for.  

The offer was at KD0.255 per share (a KD0.155 premium over the nominal share value of KD0.100) and extended only to existing shareholders closing on 7 February 2010.   The privileged rights offering mechanism gives existing shareholders the right to subscribe for enough shares to maintain their percentage ownership in the company after the offer closes.    

My understanding is that 583,000 shares were offered - which would make ALQ's numbers above wrong.  Of course, there is another explanation - one which Umm Arqala might well suggest:  that AA is wrong.   Whatever the case, this is an attractive offering price as the shares currently trade around KD0.400 per share.

Al Qabas outlines several options to complete the offering:

1. Boubyan can offer additional shares to existing shareholders.  Any shareholder holding 5% or more would require Central Bank of Kuwait approval.  Absent CBK approval, an existing shareholder could subscribe to a 4.5% stake.
2. Shares could be offered to KIA.   

Personally I think this is not highly likely because KIA sold its  shares just about one year ago.  Earlier post with some background here.

It's more likely that an existing shareholder might buy an additional stake.  The article notes that National Bank of Kuwait (which currently owns 40% of Boubyan) has asked the Central Bank of Kuwait for permission to increase its shareholding to 60%.  And they would be a likely buyer.  As would another investor looking to secure a major block of stock.  NBK's interest is that  they are looking to establish an "Islamic window" to conduct banking operations and sensibly want to ensure that control is firmly in their hands.  At the present they have management control, but not an absolute voting control.   

The article closes by noting that other banks seem happy to invest alongside NBK as several banks had participated in the offering.  That is no doubt true especially since NBK has a good track record in running the businesses it enters.  But then again it just might be that these banks figure that as time passes NBK will  increase its stake in Boubyan and they will be well placed to turn a nice profit on their investment by selling it to NBK.  And would explain as well why a bank or other investor might be interested in the unsubscribed for shares.

Earlier posts on Boubyan including the legal battle between Commercial Bank of Kuwait, The Investment Dar and Kuwait Finance House over the fate of TID's shares can be accessed by using the label Boubyan Bank.

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 .‏

 

The Investment Dar - Latest on Restructuring

According to AlQabas, the Creditors' Committee held a meeting yesterday attended by representatives of those creditors who have agreed to the proposed restructuring plan as well as the Restructuring Officer ("RO").

Key points from the article are as follows:

1. First the article makes a point of describing the RO as representing the creditors.  AA:  In October TID announced it had hired Mike Grant as Chief Restructuring Officer to work as a consultant to assist the Company.  If he is now working for the lenders (but being paid by TID), then this is quite a significant development.  One I suspect reflects creditor concerns about existing management.
2. Discussions have been completed with a number of creditors about loans extended against pledges or assets.  These creditors have been informed that amounts due will be paid under the proposed restructuring plan and no single creditor will get separate funds as happened through last July.  AA: It's hard to imagine a secured creditor able to exit at  par or near par surrendering its collateral to take part in the restructuring.   And, if I am correct and there is no cram down of creditors, their participation cannot be forced.  So I'm not sure what to make of this. Perhaps these are creditors whose collateral does not cover their entire exposure.  In this case then the creditor's decision is predicated on his estimate of whether he'd be better "in" or "out" of the restructuring.  On the July reference, a key concern of creditors is that none are preferred over others, though a creditor has been known to make a "principled" exception when that preferred creditor is himself.  It's a very good idea for an obligor to treat all creditos alike as a matter of managing the creditor group to get a deal.
   
3. Investment Dar Bank Bahrain intends to appeal the judgment against it lifting the precautionary freeze of Investment Dar's assets.  AA:  If accurate, not good news for TID.  IDBB is a very substantial creditor.  If IDBB can tie up or get access to TID's assets, it can threaten implementation of the restructuring.  TID has significant assets outside Kuwait (though I don't think Kuwaiti law provides for a mechanism to force dissenting creditors to join a restructuring so creditors in Kuwait who refuse the restructuring could still sue there).  In Bahrain, TID is a major shareholder in IDBB itself as well as Bahrain Islamic Bank.  TID has major subsidiaries in Europe, Austin Martin and Grosvenor House Apartments.  So there are plenty of non Kuwaiti assets of significant size to attack.
   
4. The creditors discussed the criminal lawsuit against the Chairman of Commercial Bank of Kuwait and one of his assistants as well as other cases filed by TID with respect to its shareholding in Boubyan Bank.  AA:  You'll recall that in 4Q08, CBK and TID had entered into a "repo" agreement for the shares of Boubyan.  CBK's position is that TID defaulted and it was entitled to take ownership of  the shares on default.  TID's position is that the shares are still its property.  From CBK's vantage point, it would rather be a secured lender who took collateral (or the "Islamic" variant thereof) rather than join the restructuring.  In the first case, it recovers at least 100% of principal immediately.   National Bank of Kuwait no doubt remains interested in acquiring even more of BB.  In the latter case, CBK waits for several years with no assurance of full repayment.  And if one believes the earlier AlQabas article on the creditors' valuation of TID's estate, expectations are pretty much for an assured loss.  This is why this matter is of keen interest to the creditors.  Boubyan is a major asset in terms of value.   Getting it into TID's estate enhances their recovery.  Assuming the documentation was drafted tightly (and that is not necessarily certain), CBK should be on firm ground. 
   
5. With respect to TID's 2008 annual financials, the Central Bank of Kuwait has still not approved them.  The sticking point is that some notes and explanations are not yet acceptable to the Central Bank.  It was noted that the CB's approval was an extremely important matter for the creditors as it was a matter of confidence and a major "push" in implementing the deal.  That being said, creditors are apparently willing to move forward if the CB's approval is not obtained within a fairly limited time, then they will go ahead without it.   AA:  There isn't a consistent story on why the CB is refusing to approve the financials.  In its lawsuit reported on in an earlier post, the story was was that the CB objected to the "audit disclaimer".   Now it's that some notes and explanations are deficient.  In discussing this topic the article mentions "additional reserves and accounting entries"  --  perhaps a  hint at some or all of the issues.  My guess is that the CB does not believe the financials reflect the company's financial condition or position and will not release them until it does.  From the creditors' perspective  these historical financials are a matter of trust.  Loans are  settled by cash.   And repayment has to trump trust at this moment. By placing all the company's assets in dedicated liquidation vehicles and requiring that any asset disposition be approved by creditors, the issue of trust (or any lack thereof) is neatly settled.  One also presumes that the condition that future financials are subject to creditor approval would provide reasonable assurance of the integrity of financials going forward.  These of course will be very important in ensuring that the cash flow goes where it should: to repay the creditors.  Presumably, the financials of these liquidation vehicles will be subject to enhanced scrutiny by the creditors' committee as well as their approval.
   
6. There is a reference to 80% as the "final number" - presumably the creditors who have agreed.  
7. The Restructuring Officer is quoted as saying that TID is taking "rapid" actions to increase the value of major and prominent assets (for sale).  Austin Martin is cited as one example.
8. There is also a discussion about expense reduction from KD 14 million per annum to KD 6 million in 2009 with the goal of a further reduction to KD 4.6 million.  AA:  Since TID is essentially embarking on liquidation (or, if not a liquidation, shrinkage to a mere shadow of itself), expenses would naturally go down. Not much rationale for large bonuses - unless these are tied to the amount and speed of asset liquidations.
   
9. The meeting also discussed loans from TID to affiliated companies and the prospects for recovery.  AA:  A list of TID's affiliates in Kuwait suggests that 100% recovery may not be possible from these entities - either on an absolute or a present value basis.
10. Finally, the RO is quoted as saying that they had obtained confirmation from those organizations they had consulted with that the proposed plan is legal.  AA:  The KD64,000 question though is are the creditors who did not agree bound by the plan.  If not, how are the assets then pledged to only a segment of the creditors?      
    

Kuwaiti Banking Sector Review

Al Joman Center for Economic Consulting has issued a report on the Kuwaiti banking sector through the first three quarters of 2009.

Here's the text, which I found, on one of their interactive blogs. Note that the bank labels in the penultimate chart appear to be wrong. I'm presuming this is an early draft.

First, a summary of the data from the report. All amounts in the below tables are KD millions.

A market share summary.  Net loans are after provisions, which are discussed in the next table.

Bank	Gross Loans	Market Share	Net Loans	Net Market Share
Natl Bk Kuwait	7,823	28.4%	7,532	29.3%
Gulf Bank	3,877	14.0%	3,418	13.3%
Commercial Bank	2,676	9.7%	2.402	9.4%
Ahli	2,149	7.8%	2,003	7.8%
BKME	1,637	5.9%	1,544	6.0%
KIB	821	3.0%	761	3.0%
Burgan	2,388	8.7%	2,276	8.9%
KFH	5,472	19.9%	5,036	19.6%
Boubyan	715	2.6%	690	2.7%
TOTAL	27,558	100%	25,662	100%

Analysis of loan loss provisions for total provisions as of 30 September 2009.

Bank	Total Provisions	% of Gross Loans	% of Total Provisions
Natl Bk Kuwait	291	3.7%	15.3%
Gulf Bank	459	11.8%	24.2%
Commercial Bank	274	10.2%	14.5%
Ahli	146	6.8%	7.7%
BKME	93	5.7%	4.9%
KIB	60	7.3%	3.2%
Burgan	112	4.7%	5.9%
KFH	436	8.0%	23.0%
Boubyan	25	3.5%	1.3%
TOTAL	1,896	6.9%	100%

Analysis of loan loss provisions taken during the first three Quarters of 2009.

Bank	2009 Provisions	% Gross Loans	% of Total
Natl Bk Kuwait	35	.5%	7.1%
Gulf Bank	101	2.6%	20.4%
Commercial Bank	74	2.8%	14.9%
Ahli	30	1.4%	6.1%
BKME	34	2.1%	6.9%
KIB	19	2.3%	3.8%
Burgan	50	2.1%	10.1%
KFH	137	2.5%	27.7%
Boubyan	15	2.1%	3.0%
TOTAL	495	1.8%	100%

Now for some introductory comments:

First, individual banks' portfolios differ and therefore the level of provisioning should as well. A bank with a higher percentage of consumer loans would on average by expected to have a lower loan loss reserve than one dealing with below investment grade companies. For example, National Bank of Kuwait has a more international portfolio than the other Kuwaiti banks, though that is only one factor affecting NBK's loan loss reserve.

Second, the management of each institution makes a determination as to the appropriate level of provisions using a variety of assumptions and estimates. Conceivably banks could rate the same loan as requiring different provision levels.

Third, while external auditors review financials including provisions, they have to rely on their assessment of a management's estimates and assumptions and how these are applied to the loan portfolio. It's likely that two different audit firms might hold different views on the required provisions for the same loans. Additionally, in Kuwait the Central Bank must approve the financials of each firm it regulates before publication. Often the Central Bank requires changes as a condition for approval.  You will recall that in November the KSE had warned Burgan and Commercial Bank that they would be suspended from trading if they did not provide their financials by the next Monday.  Both banks made the deadline. But it's a reasonable guess that the financials were delayed due to discussions with the Central Bank about the adequacy of provisions, though this is not the only possible explanation. If provisions were an issue, the discussion was probably not a criticism of excessive provisions.

And now some conclusions:

1. On a macro level, the deterioration in loan portfolios is clear.  As Al Joman notes, 26% percent of the aggregate outstanding provisions were taken in the first 9 months of 2009.  Problematical sectors are real estate and investment firms as well as specific exposure to AlGosaibi and Saad.  Kuwait banks do not seem to have any significant exposure to Dubai Inc.
   
2. Among Kuwaiti banks, NBK appears to have the "best" portfolio. This is no surprise to anyone who knows NBK and Abu Shukry. They've dodged  previous lending problems (e.g., the Suq Al Manakh) due to their generally sound underwriting standards and business prudence.
   
3. Gulf Bank  and Commercial Bank have the highest ratio of provisions to gross loans which is probably a good indication of the riskiness of their portfolios.
   
4. KFH and KIB (the old Kuwat Real Estate Bank), and Boubyan are "Islamic" banks representing some 22.5% of the financing market. BKME sees a growth opportunity here as that is the reason for its decision to switch to Shari'ah compliant banking. NBK, the clear market leader, also is interested in this segment as evidenced by its acquisition of 40% of Boubyan.

KFH Lawsuit Against Commercial Bank of Kuwait - Re Bank Boubyan Shares

AlQabas has an article on the above topic today.

Kuwait Finance House ("KFH") has filed suit to keep Commercial Bank of Kuwait ("CBK") from disposing of shares in Boubyan Bank that it acquired because of a failed "repo" agreement with The Investment Dar ("TID").

KFH which has KD 44 million of exposure to TID apparently is arguing that CBK should not be allowed to sell the shares but rather that these should be placed at the disposal of TID's creditors.  As I understand it (and note that caveat), KFH is arguing that CBK is just another creditor of  TID and should share the collateral with other lenders.  The amount involved is significant.  At the last closing price, some US$387.5 million.  If you'll recall the estimate of assets versus liabilities, the creditors believed there was likely to be a shortfall in TID's repayment.  So including these shares in  TID's "estate" would improve the overall payback rate roughly 9 to 10%.

In any case, as per the article, the High Court has transferred the case to the Experts Department.

Some background:

1. Boubyan Bank ("BB")  was formed in 2004 as an Islamic Bank.  
2. In December 2008 TID sold CBK its BB shares (19.16% of BB) with an option to repurchase.  In effect what appears to be a form of "repo".
3. Around this time NBK received approval from Kuwait Central Bank to purchase up to 40%  of BB.  NBK is interested in BB in order to expand its franchise into Islamic banking.  For those who don't know, NBK is the premier non Shari'ah bank in Kuwait and a very strong contender for that position throughout the Arab world.
4. In May 2009 CBK announced that TID had failed to buy back the shares within the agreed time frame. And therefore it was taking control of the shares.
5. June 14 NBK announced it had agreed to buy the shares from CBK. The price  was roughly $420 million.
   
6. On 16 June responding to a motion from TID,  the Kuwaiti Court stopped the sale pending determination of ownership.
   
7. In July/August 2009, KIA auctioned its 19.8% share in BB.  National Bank of Kuwait  won 13.2% and Securities Group 6.6%.  NBK previously held 14.3% or so.  After the auction, it held 27.5% of BB and was the largest shareholder. 
   
8. NBK acquired Securities Group's shares plus some additional shares.   It is now the largest single shareholder in BB with some 40%.   And at the limit of shares it may own without further approval from the Central Bank of Kuwait.
   

Kuwait Banks Disclose Exposure to Dubai

This won't be a big surprise to anyone out there familiar with GCC banking, but the Kuwaiti banking sector has little to no exposure to Dubai.

Let's run down the statements to date:

1. National Bank of Kuwait- No exposure to any company owned by Dubai Government.  NBK also pretty much avoided the Suq Al Manakh.  Abu Shukry was at the helm there then.
   
2. Boubyan Bank - No exposure to Dubai World or Nakheel.  
3. Kuwait Finance House KFH - No exposure to Dubai World or Nakheel. 
4. Ahli Bank of Kuwait - US$20 million in bonds.  No loans.
5. Kuwait International Bank - No exposure to any Dubai company which has announced a standstill.  This is the "old" Kuwait Real Estate Bank. 
6. Bank of Kuwait and the Middle East -  No exposure to Dubai World or Nakheel.
7. Burgan Bank - No exposure to Dubai World or Nakheel.

Not yet reporting Gulf Bank and Commercial Bank of Kuwait.

Also Arab African International Bank Egypt  - in which the Kuwait Investment Authority ("KIA") holds 49.4% or so - disclosed it had US$700 million in loans to companies in the UAE.

As a final word:  This doesn't mean that Kuwaiti banks don't have exposure to other entities or companies in the UAE including Kuwaiti companies and/or individual investors.

Investment Dar Bank Website Now Password Protected - Adeem Investment Company Website Down for Maintenance/Upgrade

From time to time I like to follow up on my earlier posts to see if there have been any developments. 

So I decided to check today to see if indeed Mustafa Ibrahim AlSalih had resigned his board directorships at Investment Dar Bank Bahrain and Adeem Investment Company Kuwait as had been rumored in AlQabas, a Kuwait newspaper.  For the record:  I have seen no further news confirming that press account.  One would expect that both websites would note the resignation of a board member as significant news.

Investment Dar Bank's website is now password protected.  And the previous link on The Investment Dar Kuwait's website has been removed.  The links to TID's other two banks:  Bahrain Islamic and Boubyan are, however, still there.

In an interesting coincidence Adeem Investment Company's website is also down for unscheduled maintenance so they can upgrade their systems to improve service.