The Investment Dar - Creditors Press for Movement on Asset Sales

AlQabas has a report on the meeting in Dubai between TID and the Creditors' Co-ordinating Committee this Tuesday.

Here are the key points from the article.

The first topic discussed was the sale of Boubyan Bank shares where the desire is to get the best possible price.  Mike Grant, the Chief Restructuring Officer, is reported to have briefed on a meeting with National Bank of Kuwait in which they evidenced continuing interest in purchasing the shares assuming that TID and Commercial Bank can come to an agreement.  NBK is said to want to purchase at the market price.  The article then mentions that the price should be no less than KD0.600 per share.  BB has been trading at around KD0.540 to KD0.560 the past few days.  So I suppose that's not an unreasonable price. The article notes that the BB shares are outside the asset realization program under TID's restructuring so that they are not pressed to sell them.  NBK is awaiting a formal written response on the potential sale, including the proposed sales price.

The second topic has to do with the sale of assets that are subject to the restructuring.  Nothing has been done until now because of the previous legal cases which frustrated the closing of the restructuring.  Now with TID's entrance under protection from the Financial Stability Law, it's expected apparently that up to eight more months may pass before the restructuring will be finalized.  Since TID has to pay 5% of the principal amount during the first year, the lenders are encouraging the company to develop a clear asset sales plan so that it will be ready to spring into action when legal formalities are completed.  One target is to have foreign assets ready as the expectation is that these will be able to be sold quicker than Kuwaiti assets.

The Company has written expressing its commitment to move forward, but has apparently noted that there might be circumstances outside its control - a decision by the FSL Court or the Central Bank.  No doubt, this message sent more than one shiver down the creditors' spines.  And probably revived some of the previous concerns about management - the sort that motivated creditors to ask the Central  Bank to put a monitor into TID.  TID's letter in this regard has been forwarded to the Creditors' Co-Ordinating Committee's lawyers for study.

The Investment Dar Clears Another Hurdle in Its Restructuring

Citing a well connected but unnamed source, AlQabas reports that the Financial Stability Law Court has issued a decision halting all legal cases against TID.  As you'll recall the FSL procedure is that upon the receipt of a request from an investment company (accompanied by all necessary documents), the FSL Court issues a temporary stay and notifies creditors who have a limited time in which to submit their objections.  That step has come to an end with the Court upholding TID's entry under the FSL process.

So while as AlQabas headline says "TID Breathes a Sigh of Relief After the Freezing of Court Cases Against It".  The next step is for the Central Bank to study the proposed restructuring plan and report back to the Court on whether it supports it or not.

I think the CBK will approve the plan.  It's an important step in restoring financial stability to the country.  So if it has a reasonable chance of success, the CBK will probably approve.

As well, a decision by a Kuwaiti Court does not necessarily stay court actions in other jurisdictions unless those jurisdictions are convinced that the proceedings in Kuwait under the FSL are equivalent to their own bankruptcy/insolvency/restructuring regimes.  Again I think other jurisdictions will give Kuwait the benefit of the doubt.

AlQ notes one wrinkle and that is that ("Islamic") murabaha holders had conditioned their acceptance of the restructuring on their being given priority of payment over other creditors given the difference of their position versus other creditors.  Essentially that argument was that they had deposit or trust arrangements as discussed in an earlier post.

The article goes on to note that the recent travel disruptions in Europe had caused the postponement of Creditors Co-ordinating Committee meetings.  The CCC will meet on Monday and then with TID with on  Tuesday.  Venue Dubai.

Topics are the possibility and modality of the accommodation with Commercial Bank of Kuwait regarding the Boubyan Bank shares.  Creditors are reportedly concerned about two things.  First, that time is a factor.  A key concern is that if a fixed price contract is struck, BB shares may decline in value before implementation.  Then the parties interested in buying (note the use of the plural) will decide to pick up the shares in the market rather than pay above market.  Second, the creditors want to discuss getting their cut of the proceeds from any sale. 

Other topics are the role of the CCC in the period while the FSL process moves forward (CBK review, approval, etc). A process expected to take several months. And whether the Chief Restructuring Officer should be given additional duties for the implementation phase.

Previous posts can be accessed using the labels "The Investment Dar" and "Financial Stability Law".

The Investment Dar - 2008 Results KD80.3 Million Loss

TID has issued a press release on its 2008 financials (Arabic only).  The actual financial report or extracts from it (balance sheet, income statement, etc) don't appear to have been released yet.   So this is a preliminary review.

What are the major financial headlines?

1. 2008 net loss of KD80.3 million.
2. Total assets of KD1,200 million.
3. Total liabilities of KD1,000 million.
4. Shareholders' Equity of KD168.5 million.  A quick look at the above numbers suggests that this does not include minority interests.

Once the financial reports are issued, I post again with an analysis of the numbers.  

The announcement had some other important information:

1. First, we (that is TID) were able to pass through this crisis of asset valuation (definitely nothing to do with our business model) through patience, deliberateness and sound planning.  I'm going to pause for a moment or two while I compose myself.  Luckily at this hour there is no Turkish coffee to spill.  There is apparently plenty of praise to go around and it's only fair to mention all those who deserve it, including oneself.  
2. Elsewhere in the press release TID thanks the Central Bank and the Governor again, the Central Bank's "man" at TID, investors, banks, the Co-Ordinating Committee, TID's advisors, the creditors' advisors.
3. We confirm the soundness of the financial position of TID the improvement in the value of the assets with the recovery in markets  will enable us to discharge all of our obligations.
4. We are committed to implementing the terms of the restructuring which more than two-thirds of our creditors and investors approved as the best solution to exit from the crisis.
5. A significant component of all our assets have values much higher than their accounting values.
6. The provisions and write-downs are both unrealized and temporary.
7. A couple of times elsewhere in the release it's mentioned that more than 80% of creditors and investors approved the restructuring plan as the best way forward.

Now fair is fair (and AA is nothing if not fair).  Earlier I had granted an award of sorts to Dr. Esam Janahi and Gulf Finance House for creative thinking in press releases about their own financial difficulties.  Private sector competition of course. 

Tonight I'm going to have to re-award that honor to Adnan Mussalam and  his team at TID.  Dr. Janahi and his team are going to have to settle for the silver.

How was TID able to pull off this last minute sprint for the Gold?

The three primary factors in their victory were (in order of importance).  

1. Their trumpeting that their losses are not just unrealized.  But are also temporary. 
2. The self-praise. While the entire phrase "with patience, deliberateness and sound planning" was especially well crafted, it was the bit about sound planning.  That's sort of like the chap who  doesn't know how to swim, jumps in the English Channel, gets pulled out just before he goes down for the third and final time and then credits his athletic training and foresight for not drowning.  It takes a special sort of competitor to pat himself so vigorously on the back after falling into such a self-made disaster.
3. Presenting recourse to the Financial Stability Law as a major positive instead of the last recourse to prevent the restructuring from unwinding. 

Of course there were some negative marks for not mentioning the soundness of TID's business model.  Not having a reference to non core assets also cost a few points, though not that many since TID probably has to sell off most or all of its assets to repay its creditors.  It's difficult to use that last expression if one doesn't have a reasonable amount of core assets.

But in the game of life one doesn't have to be perfect, just a bit better than the other contestants.

The Investment Dar - Central Bank Approves 2008 Financials

AlWatan (Kuwait) carries a press release issued by TID announcing that the Central Bank of Kuwait had approved its 2008 audited fiscal report.

What a difference a day makes!  From a bitter lawsuit against the Central Bank to what might charitably be described even by local standards (and AA is a very charitable guy) as fawning praise.  

After thanking HE Shaykh Salim Abdul Aziz Al Sabah, Governor of the Central Bank of Kuwait for approving its 2008 financials, TID takes this apparent first opportunity to launch into an encomium which occupies the major part of the press release.  TID praises the wisdom,  high level of professionalism, advanced technical proficiency, and hard work of the Central Bank in preserving not only the financial sector but the entire economy of Kuwait from the thick clouds of the global financial crisis which affected all parts of the globe.

The press release also notes that TID's assets have improved with the turn in the market, its financial position is strong, and it will meet its obligations.

The press release ends with thanks to Ahmed AlWunyan of the Special FSL Court who accepted TID's restructuring after studying it with the Central Bank of Kuwait.

The Investment Dar – “Out of Breath” in Its War on Many Fronts

Update:  AlQabas had a more upbeat assessment in its Monday 12 April issue.  Here' s the link to my post.

So says AlQabas. 

First, let's review what AlQ had to say. Then some comments.

AlQ cites the following issues:

1. TID's 2008 audited financial report remains "frozen" at the Central Bank of Kuwait which refuses to approve it. Reportedly this is leading to a loss of confidence among many creditors that the restructuring plan will be implemented. 
2. The legal case by AlMasar Leasing – involving debt in excess of KD10 million – poses a threat to creditor acceptance of the restructuring plan. AlMasar is close to the implementation of the judgment in its favor and has obtained a precautionary block on assets sufficient to repay the debt. TID has filed an urgent challenge (motion) to stop the implementation of the order. The Court is reviewing TID's motion. Legal sources say that there are fears that the creditor alliance will disintegrate if AlMasar's judgment is upheld and enforced. That other creditors will see courts as a way to get their money back "early". 
3. The legal struggle with Commercial Bank of Kuwait over Boubyan Bank remains unsettled. AlQ says that in its weekly meeting held right before the end of last week TID took the pulse of the Creditors' Coordinating Committee about a potential negotiated settlement to this dispute. Details were not discussed. The goal was to determine if there were any creditor objections. If not, then TID has a green light to proceed. 
4. Also at the same meeting the CC discussed whether to retain the Chief Restructuring Officer in the coming phase or replace him. Three international firms reportedly have submitted proposals as well as the existing CRO. Details of the four proposals were reportedly not discussed.
   

Now to the comments.

1. Indeed TID has to be a bit short of breath with all the battles it is facing. Clearly, this case is quite different from that of Global Investment House. The key difference is a lack of confidence.   The Central Bank isn't confident in the financials.  Dissident creditors apparently think expensive and messy court cases offer a higher prospect of recovery than the restructuring - though they could be hoping to prompt a buyout by other creditors if they threaten to destroy the restructuring through their recalcitrance.  The rest of the creditors clearly want a monitor at TID.  All this makes for a very fragile situation.  
2. Why hasn't TID's audited 2008 financial report been released? Why is the Central Bank refusing to sign off? Presumably, TID's auditors, the local affiliates of KPMG and PwC, have completed their audit. Unless there is a substantial problem in their opinion (say an adverse opinion or a disclaimer), they have signed off on the "numbers". If the latter is the case, the Central Bank  would appear to be saying it doesn't trust the audit work of two major firms.  Ouch!  This is not just a slap at TID but also at these two firms.  
3. Why doesn't TID just give the Central Bank what it wants?  Quibbling over numbers would seem rather silly when the patient is  barely alive in intensive care.  The rumors are that the Central Bank is demanding additional provisions and reductions in the carrying value of assets. Seems simple to just sign on the dotted line. - whatever the results.  Historical statements from 2008 are just that history.    It's hard to see there being a major impact on the banks.  They have their own advisor's (Morgan Stanley's) cashflow focused analysis on the best path to recovery. And without any audited financials a significant number of them have decided that the restructuring is the "best" deal for them.   And, as I've written before, this looks a lot like a disguised liquidation.   So how would adverse financials change that?  The diagnosis would remain the same.  And the conclusion very likely the same.  A fire sale by a liquidator is not a good recipe for recovery. 
4. It must be is that the additional amounts are so large that they pose a serious problem.  Negative shareholder equity would probably  greatly complicate recourse to the Financial Stability Law if not make it impossible. The FSL is designed to rehabilitate companies.  Not to provide cover for a  liquidation. No clear cut Chapter 7's need apply. Similarly, there could be other problems.  A law that if losses exceed a certain portion of  paid in capital, the firm must raise more or enter formal liquidation.  Sometimes problems like these can be solved by having an Extraordinary General Meeting of shareholders vote to use reserves (share premium, mandatory and voluntary reserves to offset retained losses).  Presumably, if it were that simple a matter then  TID would take the step.   If it's a need for additional new equity, that's probably something that shareholders probably aren't particularly keen to do right now.  So the battle on the financials is to prevent getting into a worse situation.
5. The real issue with AlMasar would seem to be it's formal objection to TID entering under the protective wing of the FSL.  There are other creditor cases out there, e.g. BLOM.  Yes, AlMasar has the "block" on some assets.  But if TID is successful with the FSL won't that solve its legal problems, especially those in Kuwait?  So isn't the FSL objection the key? The AlQ article is silent on this topic. 
6. Also the comment about AlMasar success leading other creditors to similar action is probably correct in one sense.  But, if all the creditors rush for the exit, the ultimate recovery is going to be  affected.   If any bank's creditors and depositors suddenly asked for their money back, no bank could pay them back immediately. Not Deutsche Bank.  Not National Bank of Kuwait.  And TID is very very far away from being in NBK's very strong position. The best recovery is going to come from a controlled process.   Hopefully, the banks have figured this out by now, though I suppose in a panic logic is the first casualty.
7. Boubyan turns not only on the relative strength of the two parties' legal positions but more importantly on the ability of the weaker party to tie the shares up in court for years and years.  In terms of legal advantage, I think the legal definition of the transaction is  critical  If the  original transaction is considered a sale, then CBK owns the shares which it bought at a bargain price.  TID had the opportunity to buy them back but failed to do so.   Tough luck.  Unless in consideration of "equity" the Court allows TID the opportunity to go "back in time" and complete the repurchase.  In which case, it would make abundant sense for the banks to lend TID the money.  Lend $200 million, get shares worth $400 million, sell them to NBK and  put a cool $200 million  extra into TID's estate.  If it is a secured loan, then CBK owes TID  the excess of the realization proceeds from the collateral over the  repayment of the loan.   In which case  the result is the same as the Court sanctioned "time travel" mentioned above.   In terms of waiting, Commercial Bank probably has a less urgent need for the cash than TID.  Luckily for CBK, NBK is running the show at Boubyan so the likelihood of something going really wrong going there is fairly low.  That should put a floor of sorts under the share price - assuming there are no legacy problems from before NBK's stewardship began. And make waiting a bit more palatable, though there are signs that shareholders at CBK aren't particularly happy now - if AlQ's account of the recent OGM is accurate.
8. The debate over the continuing role of the CRO is pretty clear evidence of the creditors' continuing lack of confidence in TID's management. Under the restructuring, they are taking TID's assets into companies they will control (assuming that AlQ's earlier account of the restructuring is correct).  Yet, they still seem to feel they need an on site minder at TID.   Usually in a restructuring the creditors would form a committee to monitor the borrower.  Or perhaps require an accounting firm to do periodic reports to confirm the borrower was discharging its obligations.  Both of these mechanisms on a post facto basis.  That is, the creditors check on the borrower after the fact -  to review its conduct in the last quarter.  It seems that with TID the creditors want a monitor for  "real time" monitoring.  With the assets in separate (from TID) holding companies,  it's unclear just precisely what the CRO will monitor.  Will he run those holding companies?  And how will his position fit in with that of the Central Bank "monitor"?  Especially, since if TID is successful in getting under the FSL umbrella, the Central Bank is probably going to have a monitor  in the company to keep an eye on things.  This isn't a trivial matter since the expense isn't trivial.  The creditors are in effect saying we're willing to pay a price to make sure we keep an eye on TID's management.

The Investment Dar - Creditor Files Objections to Resort to Financial Stability Law

AlQabas reports that Al Masar Leasing and Investment Company  has filed a formal objection with the special Circuit Court at the Kuwaiti Court of Appeals to TID entering its restructuring plan under the aegis of the Financial Stability Law.

As you'll recall (and if you don't here's the link), any interested party may object to an investment company's use of the FSL within 15 days of receipt of formal notice that the Court had provisionally accepted the debtor's request.

AlQabas says that perhaps other companies will also object -  though it seems to the window for objections should be closing soon.  TID filed its request around 10 March and announced the Court  had accepted its request on 11 March.  Even though it would take some time for the Court to prepare the necessary notification letters and for creditors to receive them, there can't be that much time left.  

The Court gets to make the final decision on any objections. 

As a side note, it appears that the Central Bank of Kuwait has not yet approved TID's 31 December 2008 financials.  From the above link on the FSL, you'll see that the CBK plays a key role in the FSL implementation process.

Commentary on The Financial Stability Law by Attorney Abdul Razzaq Abdullah

Here's an interesting piece on the FSL by Attorney Abdul Razzaq Abdullah of the Kuwaiti law firm Abdul Razzaq Abdullah and Partners.

In the article he makes the point that legal protection from creditors under the FSL is not automatic.  There are procedures to secure the initial protection and then the debtor must continue to fulfill its obligations under the restructuring in order to maintain it.

Another of his key points is the key role of the Central Bank of Kuwait in the process in both the initial approval and subsequent monitoring.

The Investment Dar - Court Accepts TID's Petition to Enter FSL Process

TID announced on the KSE Sunday that Advisor Muhammad Abdullah AlWunyan, Agent for the Court of Appeals,  Member of the Technical Committee, and Head of the Special Office for Company Restructuring had accepted the petition and accompanying documents submitted by TID to place its restructuring under the Financial Stability Law.

According to the FSL, the acceptance of this request means that legal proceedings are now stayed.   However, this is not the end of the matter.   This now launches the procedure described in my earlier post.  Here's some additional background on the FSL.

Creditors have fifteen days after receipt of notice to object to the stay.  If there are no objections or if there are but the stay is upheld, then the Court has to determine the financial position of TID and whether with the restructuring TID can function as a going concern.   Whether the Court will accept the work already done by the Creditors' Co-Ordinating Committee or require this work to be performed again will become clearer as more time passes. 

Arabic text of TID's press release below.

[13:0:22]  ِ.تطورات خطة اعادة الهيكلة المالية لشركة دار الاستثمار ‏
يعلن سوق الكويت للاوراق المالية بان شركة دار الاستثمار افادت بانها تقدمت ‏
بطلب الى رئيس الدائرة الخاصة بطلبات اعادة هيكلة الشركات بمحكمة الاستئناف ‏
طبقا لاحكام المرسوم بالقانون 2 لسنة 2009 بشان تعزيز الاستقرار المالي .‏
وبتاريخ 11-03-2010 قرر المستشار محمد عبد الله الونيان وكيل محكمة ‏
الاستئناف وعضو المكتب الفني ورئيس الدائرة الخاصة بطلبات اعادة هيكلة ‏
الشركات بمحكمة الاستئناف قبول الطلب المقدم من شركة دار الاستثمار بشان ‏
الدخول فى قانون تعزيز الاستقرار المالي والمستندات المرفقة به وامر ادارة ‏
الكتاب بالمحكمة باستيفاء باقي الاجراءات المقررة بالمرسوم رقم 2 سنة 2009 ‏
بشان تعزيز الاستقرار المالي.‏
واستنادا الى نصوص المرسوم بالقانون رقم 2 لسنة 2009 بشان تعزيز الاستقرار ‏
المالي يترتب على قبول رئيس الدائرة الخاصة بطلبات اعادة هيكلة الشركات ‏
بمحكمة الاستئناف لهذا الطلب وقف كافة اجراءات التقاضي والتنفيذ المدنية ‏
والتجارية المتعلقة بالتزامات الشركة وذلك لحين الانتهاء من التصديق على خطة
اعادة الهيكلة .‏

The Investment Dar - Issues Press Release on Filing under Financial Stability Law

Here's Investment Dar's press release announcing they had filed for protection under the FSL.  

Looks like they're having something problems with their  HTML code as the formatting in the press release is askew.

You can access earlier posts on TID by using the label "The Investment Dar".  And on the Financial Stability Law by using the label "Financial Stability Law".

The Investment Dar - Formally Requests Financial Stability Law Protection

Citing "sources close to the Creditors' Coordinating Committee", AlQabas reports that TID informed the Committee that its Board met two days ago and unanimously agreed to seek legal protection for its restructuring plan under Kuwait's Financial Stability Law.  The Company has submitted an official request to the concerned authorities.  A response is expected in approximately 14 days.

TID is holding creditor meetings in London to sweep up the banks that did not attend its Kuwait or Dubai briefings - mostly European banks.

TID will be the first investment company to avail itself of the "Chapter 11-like" provisions of the FSL.  If accepted, the company will be able to cram down the dissenting creditors who have frustrated its attempt to implement the restructuring.

Still apparently unresolved are TID's 2008 audited financials.  I expect not having these done might complicate matters under the FSL.

The Investment Dar - Local Banks Reportedly "Comfortable" with Use of Financial Stability Law

Quoting unnamed banking "sources" AlQabas reports that local banks seem to be comfortable with TID using the Financial Stability Law as a tool to implement the restructuring.  As you're aware, while TID has advised that it has all the necessary legal documents ready, it has not sought to implement the restructuring because dissenting creditors are still pursuing the company in court.  The FSL contains a cramdown mechanism and so this would be a way to remove the legal weapon from their hands.

Two other points in the article worthy of note - perhaps much more worthy of note than the first for the implications they carry.

1. Morgan Stanley (advisor to the Creditors Committee) reportedly has two studies - an optimistic and a pessimistic one.  Under the former the banks recover 100% of their dues.  Under the latter 78%.  AA:  This is perplexing because in such a case it would make absolutely no economic sense for a creditor to sue.  Are the facts being fixed around the FSL requirements?  What's also clear here is that when the restructuring is over, TID which has pledged all its assets to the restructuring is going to left as little more than two guys, one desk and maybe a prepaid phone.
2. The sources also did not hide their concerns (literally fears) as to how the FSL might be applied to TID.  This would be the first use of the law.  AA:  I've posted some thoughts on possible issues.  One major stumbling block remains the company's 2008 audited financials and the Central Bank of Kuwait's apparent insistence on what would seem to be from the debate between CBK and TID to be rather substantial provisions and write-downs.

It's pretty clear that creditors (or at least 80% of them) are eager to close this file by implementing the restructuring.  Perhaps, the authorities in Kuwait are also interested in removing this case from the newspapers.  If there is a will, a way can be found.

Earlier posts can be accessed using the label "The Investment Dar".  My thoughts on the FSL are here and applicability to TID here.

The Investment Dar and the Financial Stability Law - What's Involved?

 

TID has been unable to secure the acceptance by 100% of its creditors to its restructuring plan.  A sufficient number of these creditors have launched or plan to launch legal actions.  Since these actions could derail the restructuring, TID has recently indicated that it is considering resorting to the cramdown procedures available in Kuwait's Financial Stability Law to stop this legal threat.

Let's run through the pertinent bits of the FSL.

1. TID has stated it does not require any new financing so it will focus on the legal protections afforded under the FSL.  That's probably a good thing because I rather doubt that Kuwaiti banks would rush to lend TID more money even with a 50% Kuwaiti Government shortfall guarantee. 
2. The basic condition for the cramdown procedure is that the investment company have sufficient capital, be able to continue its business and meet its obligations.  The FSL is not to be used as a cover for winding-up companies.  TID would then be subject to a study of its viability.  The question is can it pass?  My recollection of earlier accounts of the restructuring is that the restructuring seemed to be pretty much a disguised windup.  All the assets were being pledged to the lenders and all of them would have to be sold in order to have the possibility of 100% repayment.  That probably explains why 20% of creditors have chosen not to get on to the restructuring "boat" but are pursuing their claims in court.
3. The FSL requires that that study be performed by a specialist company.  To determine if it is viable and as well to provide the basis on which to found an appropriate restructuring plan.   Will the Court take the existing analysis on TID and the "agreed" restructuring plan with no need for a  new study?  Or will it require another study of TID's financial standing and viability?  Note that as per the Implementing Regulations Article 43 this study is the same as if TID were applying for financing under the FSL (Implementing Regulations Article 23).  If a new study is undertaken, could this reopen the terms of the restructuring deal?
4. And here the issue of TID's 2008 audited financials could be critical.  As of yet, the Central Bank of Kuwait has not yet given its approval.  All the press reports I've seen indicate that sticking point is asset valuation - with the CBK pressing TID to take some significant writedowns or provisions.  These must be quite major because the parties have been arguing over them since late last summer (by my calculation).  It's hard to see the FSL process going forward without audited financials.  They are for the "magic" date of 31 December 2008.   If the CBK mandated write offs are severe as they appear to be,  then TID may be on the borderline between solvency and insolvency.  And recall the test is not just solvency but capital adequacy.
5. Under the FSL, the CBK must appoint or approve the specialist who undertakes this study.  Will the CBK approve the creditors' or the company's consultants?  The choice could be material in determining whether TID "passes" or "fails" the viability test.  Earlier press reports said that there was a rather wide value in assessment of repayment with the company's consultants very optimistic and the creditors' consultants predicting a significant shortfall.  No doubt one reason why some creditors are pursuing repayment through the courts.  One potential solution would be to throw both studies out and come up with a new one.
6. But, if a new consultant is engaged, there is a "danger" that it could come up with its own restructuring plan.  One that might have terms not to the liking of one or both parties.  For example, an extended repayment tenor.  A debt to equity conversion.  A haircut.  And even if no such dire things occur, TID and its creditors may be looking at four+ more months of waiting.
7. As part of the process, the Central Bank of Kuwait must provide its own report on the restructuring plan to the Court.  Presumably, its statement would be critical.  If it opposed the restructuring, that would likely greatly lessen the Court's probability of approving the deal.  If it supported the restructuring, that would be a powerful argument for the Court to approve.  This process also apparently gives the CBK the opportunity to comment on the plan itself.  To suggest helpful amendments or new points.
8. Assuming the plan is approved by the Court and then implemented, the CBK becomes the monitor of adherence.  That could prove a double edged sword as in the discharge of these duties, the CBK make a decision one or both parties might not like.  
9. Finally, as per the Law, if the agreement is implemented by the Court and TID subsequently breaches  it, the CBK can ask the Court to abrogate the restructuring, thus re-instating creditors' rights to sue under their old contracts.  With a deal outside the FSL, there might be more scope for "forgiveness" by the banks over borrower transgressions under the agreement.

Of course, there is an old financial principal at play that can trump all of the above.  Where there is a will there is a way.  Or to paraphrase a canny Scot, facts are sometimes fixed around the policy.  AA has seen this done more than once during his career.  Sometimes as an observer.  Sometimes as one of the "repairmen" who helped "fix" something.

The Investment Dar To Enter Financial Stability Law Process

 

Two articles on TID and the FSL process.

The first from The National and the second from AlQabas.   Both seem to be largely constructed around TID talking points.

1. The Central Bank of Kuwait is "resisting" approving TID's 2008 financial statements.  AA:  Or from another perspective TID is resisting providing the CBK with financials satisfactory to it.  I find it hard to imagine that the CBK is capriciously refusing to approve TID's financials.
2. A "small minority" of creditors are frustrating TID's attempts to implement its restructuring plan which will result in a 100% repayment to all creditors.  AA:  Either TID is plagued with creditors who can't recognize a really great deal when it's offered to them.  Or some creditors don't think they're going to get paid back and are willing to take their chances in court.  When one considers the amount of money a typical court case of this sort costs, one might get an idea of the extent of these banks' (a) recalcitrance and pig headedness or  (b) assumption about the eventual repayment under the restructuring.
3. The recalcitrant group is described as a "small minority".  AA:  From where AA sits 20% is a significant minority of creditors.  A small minority would be perhaps 5% or so.
4. TID is considering availing itself of the Financial Stability Law.  It doesn't need any financial help from the government and would use the FSL merely to cram down these pesky recalcitrant creditors.

It's pretty clear from the tone of TID's comments relayed in these two articles that indeed the wheels have come off the restructuring deal or perhaps more precisely never were on the deal.  You'll recall the one that TID said had achieved sufficient creditor acceptance to go forward.

Kuwaiti Financial Stability Law

This post summarizes what I consider to be  the key points in the Law for the Strengthening of Financial Stability ("Financial Stability Law" or "FSL").  I'll follow-up with a second post to discuss issues relating to TID using the FSL for its rescheduling.

On 26 March 2009, the Amir of Kuwait issued the FSL as Decree Law #2 of 2009.  He had dismissed the Majlis Al Umma on 18 March so the Majlis' ratification took place after the new elections of 16 May. 

So you can follow along and as well perform your own analysis, here's the English language version (note the Arabic text above governs). Also here are the draft implementing resolutions in both Arabic and English.  

The FSL is composed of  Preamble and 5 Sections with a total of 33 Articles.

1. The Preamble provides the legal basis for the law as well as definitions (Article #1).
2. Part 1 Banks.  The Government acting through the CBK will provide a guarantee to banks to cover shortfalls in their provisions for (a) loan losses or (b) declines in their local security and real estate investments - all of which assets must be existing as of 31 December 2008. (Articles 2 – 7). 
3. Part 2 Productive Local Business Sectors.  Provides for a State of Kuwait guarantee for 50% of certain types of collateralized new finance offered by local banks to companies in this sector. (Article 8 – 9). 
4. Part 3 Investment Companies. Chapter 1.  Provides procedures for restructuring debt outstanding as of 31 December 2008 for solvent companies.  As part of the program,  the CBK will provide a guarantee of up to 50% of  collateralized new facilities  to facilitate a restructuring.  (Articles 10 – 14). 
5. Part 3 Investment Companies Chapter 2.  Establishes the legal basis and mechanism for a US Chapter 11-like cramdown of creditors (Article 15 – 21). 
6. Part 4 Penalties.  Outlines the penalties to be applied for supplying misleading information or attempting to exploit the law. (Articles 22 – 27). 
7. Part 5 General and Final Provisions. (Articles 28 -33).
   

Part 1 "Banks" 

1. The Kuwaiti Government will provide an adjustable guarantee for provisions and investment "shortfalls" against credit facilities and investment portfolios existing as of 31 December 2008. Shortfalls in provisions on assets created or acquired after this date will not be covered. 
2. Changes in values of the portfolio as of 31 December 2008 occurring in 2009, 2010 and 2011 will be considered and the guarantee adjusted. 
3. After 1 January 2012 the guarantee may not be increased. 
4. Banks have to continue to monitor these assets and make efforts to collect them. The program is not a license to walk away.
5. Banks are required to build provisions to cover the deficit.  Starting from 31 December 2011, they must take provisions of at least 8% of the shortfall per year.  Thus, the guarantee is intended to be reduced over time.  It is not bailout (government assumption of the shortfall) but as a bridging mechanism to allow the banks time to take the required provisions.
6. The guarantee will be for a maximum of fifteen years with a 1% per annum guarantee fee. 
7. If a bank cannot cover the deficit over time, the KIA has the right to subscribe for sufficient equity to cover the shortfall.  This is the potential bailout, though it comes with increased government ownership.
8. The Central Bank of Kuwait (CBK) will set the terms of the guarantee including  conditions to the issuance of the guarantee: costs controls (including over management salaries and bonuses), imposing mergers, etc.  To get the guarantee the bank must secure shareholder approvals to these conditions.
   

Part 2 "Productive Sectors" 

1. The Kuwaiti Government will provide a guarantee of up to 50% of new  collateralized facilities extended by local banks to companies from productive sectors. 
2. The loans may not be used to refinance existing debt. Nor are they to be used by the borrower for "speculating or trading" in real estate or securities.   They are supposed to be used so the company can conduct its core business to the benefit of the Kuwaiti economy.
3. Loans are for a maximum of five years and must have regular principal amortization during their term. As noted above, they must be sufficiently collateralized.
4. The guarantee will cover 50% of the net loss after collateral has been realized and applied to the entire loan. So this is a shortfall guarantee, not an absolute guarantee of 50% of the face amount of the facility.
   

Part 3 "Investment Companies" - Chapter 1 – Restructuring Plans. 

1. Companies will be screened to determine if they  have sufficient capital (الملاءة) and are able to continue in business and face their financial problems.  Thus, the FSL is designed to help Investment Companies with liquidity problems not those with solvency problems. 
2. Specialist firms – appointed by the CBK or proposed by the company and acceptable to the CBK – will undertake studies to determine the financial condition of the firm and prepare a report taking into consideration the three points mentioned above. 
3. The FSL makes a particular point of noting that to be granted a facility the company must have   الملاءة.  I've seen this term most frequently used to mean adequate capital so it would appear it's not just a case of having a positive net worth but having sufficient capital and reasonable leverage to  be able to continue its business.
4. If the study is positive (the company meets the three tests) and the CBK believes it is qualified for the FSL program, the State will provide a guarantee for up to 50% of new finance provided by local banks. The new finance may be used for two purposes only.  First to settle obligations to local parties (but NOT local banks) that were outstanding as of 31 December 2008. Second, to support rescheduling to foreign banks and financial institutions, provided that the initial cash repayment not exceed 25% of the debt with the remainder rescheduled as per the specialist firm's study above. 
5. The company must provide sufficient assets by way of collateral to cover in full the company's rescheduled obligations and the new loans made under the FSL.
6. With respect to Kuwaiti banks providing such loans, the Government of Kuwait will include this new finance in its guarantee provided in Part 1. (The one exception to the 31 December 2008 asset rule).  Note banks are not forced to provide such loans. 
7. There's also a provision for the injection of capital by shareholders or the KIA into the investment company.  Again the government has the right to subscribe for equity.  And can take over the company if the capital need is large enough and the existing shareholders don't step up.
8. The CBK will appoint a local bank as manager of the restructuring. It will determine the amount of new loan to be provided by local banks and the collateral to be taken.  It will take part in negotiations with foreign creditors to craft a rescheduling. The Central Bank of Kuwait must approve the terms of the rescheduling.  In effect then the manager will propose these terms to the CBK, but the CBK will have the final word. 
9. The restructuring plan will have similar restrictions on expenses and a requirement for possible mergers along with CBK imposed changes in the management and organization of the company. As with banks, the investment company must obtain agreement from its shareholders to these conditions before it can obtain the guarantee.
   

Part 3 "Investment Companies" Chapter 2 Legal Matters. 

1. The FSL establishes a special Circuit Court at the Court of Appeals.  This Court has  exclusive jurisdiction to review and rule rescheduling plans on a summary basis.  Its decision are final and not subject to any appeal.
2. The CBK or the company may present a restructuring plan to the chief judge of this special court along with all documents necessary to support the plan. Once the chief judge records receipt of these documents there is an automatic four month stay of all legal action. All creditors must be notified. 
3. Any interested party may appeal but the appeal must be (a) lodged within 15 days of receipt of notice of the original decision and (b) well organized and giving a reason why the stay should be lifted. The Circuit Court will make a decision whether to continue the stay.   A mere objection without reasons will be rejected.
4. If the Court decides to uphold the stay, CBK then will cause a detailed study to be made of the financial position of the investment company. The study should be submitted within four months, though there is a provision for an additional extension of up to four months. The restructuring plan will then be submitted to the Court for its approval or rejection. 
5. If the Court approves the plan, then all legal cases are stayed. If it rejects the plan, affairs return to their pre-stay condition.  In this case, creditors may again seek redress through the courts.  The judgment of the court is final. The company must then advise all creditors. 
6. In the case where the plan is approved, the CBK monitors compliance. 
7. If after a rescheduling plan is approved and implemented and the company fails to comply with its terms,  the CBK shall refer the failure to the Court to render the restructuring plan null and void. In which case creditors regain their rights to sue under the original loan contracts.
   

Parts 4 and 5 deal with respectively "Penalties" and "General and Final Provisions". If you're interested you can take a look.

Some quick observations: 

1. The FSL is designed for solvent companies, except for banks where the CBK guarantee program is designed to forestall mandatory declarations of insolvency and wind-ups. 
2. The programs under the FSL come with a heavy price tag. The CBK may mandate cost cuttings, changes in organizational structure and force mergers. The Government has the right to become a shareholder.  Any new loans must be collateralized.
3. The bank and investment company programs are unlikely to be used, except in extreme situations. 
4. The guaranteed loan  program for productive sectors is also unlikely to be utilized.   Banks are being careful with new loans.  They certainly won't be making new loans to clients already past due. Companies are going to have trouble finding unpledged collateral sufficient to support new loans.   With the decline in asset values, banks have asked companies to top up existing collateral.  Not much is left to support loans of any value.

The Investment Dar - Restructuring "Deal" Unravelling?

Quoting a source connected with TID's Creditors' Co-Ordinating Committee ("CCC"),  AlQabas states that last week the CCC asked TID if it wanted to pursue a restructuring under Kuwait's Financial Stability Law.  This apparently because significant numbers of creditors refuse to join the restructuring and  continue to pursue repayment through legal cases.

AlQ says that TID's did not respond with a direct answer but said that it would give its position at meeting Sunday with creditors in Kuwait and then Monday with creditors in Dubai.

If you've been reading this blog, you know that I've been fairly skeptical about the announcement that TID had a deal with its creditors given the absence of a cramdown mechanism under Kuwaiti law. There is an exception for an investment company licensed by the Central Bank of Kuwait  which submits to the Financial Stability Law.  Otherwise, an obligor needs 100% of its creditors to have a restructuring binding on all creditors.  TID  claimed that more than two-thirds of its creditors had agreed its plan. 

If this article is correct, the wheels appear to be coming off TID's "deal". 

As to the Financial Stability Law, as far as I know no obligor has yet undertaken a rescheduling under its provisions.  But when the storm is severe, any port may be preferable than the high seas.

It seems pretty clear that if the FSL were an "easy path" it would have been taken before.  And this probably explains why TID wants to explain its position on the FSL face-to-face. 

I'll follow up with a post on the FSL shortly.

Kuwait: Central Bank Governor Tells Investment Companies There Are Only Two Choices: Debt Restructuring or The Financial Stability Law

AlQabas reports  that the Governor of the Central Bank of Kuwait delivered a short and sharp message to Kuwaiti investment companies at his last meeting with them.

He is reported to have told them that they have only two choices in front of them.  Accordingly, they should abandon pleas for increases in liquidity, the lowering of interest rates, or the purchase of company assets.

Instead they have to choose from one of the two courses of action:

1. Agree a rescheduling with their lending banks.  Some investment companies have done this which proves it is not impossible. It's incumbent on other firms to begin this process.
2. Submit themselves to the Financial Stability Law mechanism.  He noted that to date there have been no cases so one cannot say what the results will be.  

He criticized companies for failing to confront and disclose their current situations.  A fact that he related to the size of their problems.

What's clear is that many of these companies are still in denial about the extent of their problems.  And that they are in the typical borrower's "delay and pray" mode.  If I don't formally recognize the problem, it doesn't exist.  Maybe a miracle will happen.  Asset values could reach their previous heights.  The government will launch a bail-out.  Sadly, this has happened enough times in Kuwait to make this a credible strategy.  A profound sense of citizen entitlement - even when unjustified - is one of the legacies of a "rentier" state.  And of course, local banks who funded these wise investments similarly are looking for a way out of the predicament.  So there are two sets of voices calling for a government "rescue".

The Investment Dar - More Bad News on the Restructuring

If yesterday's news in AlQabas wasn't distressing enough, here's another.

Key points from the article:

1. Khatif Holding Company (I think this is the Kuwaiti PE/VC firm) has withdrawn from the Creditors' Committee.  As such, its resignation means it is not agreeing to the extension.
2. The Creditors' Co-Ordinating Committee ("CCC")  has yet to secure a sufficient level of acceptance to proceed with the initial steps of implementing the restructuring, e.g., transferring TID's assets to the holding companies.
3. As well, many of the existing creditor agreements are not final.  Others are pending and the  article says that the committee has "built great hopes on them".
4. Part of the problem is that in many cases there are funds or syndicated facilities.  In some cases the agents have asked for more time to get their shareholders or participants to agree.  In some cases it appears the agents themselves are not agreeable which complicates getting approval from the shareholders or participants.
5. As noted before, those who financed TID through wakala or murabaha transactions believe that they are not "lenders" but rather have a deposit or trust arrangement and therefore have ultimate priority of payment over lenders.  If that view is legally upheld, they might well secure 100% repayment.
   
6. Complicating matters is the fact that there are 149 separate creditor entities - banks, funds, individuals, wakala holders, murabaha - and each group has its own characteristics which require different methods of accommodation.
7. While creditors may agree to these first steps to implement the restructuring, there will be another decisive phase in February where they will have another option to refuse.
8. Finally, the following companies were identified as those who intend to pursue legal actions to secure repayment:  Khatif Holding Company, National Investment Company, Aref Investment Group, Al Masar Company (Kuwaiti Leasing Company?) , Noor Investments plus unnamed numerous others.

Apparently, the plan (at least according to AlQabas' sources) is to extend the time period two weeks and then if results are not obtained another two weeks.

TID seems to be in a very difficult position.  It's unclear how two weeks or four is going to be sufficient to overcome the various obstacles in path of securing creditor agreement.

If a significant enough group of creditors believe they have legal priority, it's going to be hard to get them into a restructuring where the creditors themselves estimate that TID cannot pay back 100% of principal.   If in fact these creditors do have a legal priority, they have absolutely no incentive to join.  The other creditors are left with the prospect of a bankruptcy - with the inevitable further loss of value in the remaining estate.  One solution might be to pay off this creditor group assuming it's not too large.  Then go forward with the remaining TID assets to maximize recovery.

Another would be to hope the government would lean on the recalcitrant creditors to force them to agree.  If it does this, it seems to me that the Kuwaiti Government would want to avoid taking any steps that could legally undermine the legal status of Islamic structures, e.g., interpreting wakala and murabaha transactions as equivalent to loans.  Kuwait is the second largest GCC market (by assets) for Islamic banking.

I wonder if TID will be the first case under the Financial Stability Law?

The Investment Dar - Dissension in Creditor Group?

AlQabas has a fairly negative report on this Tuesday's meeting of the Creditors' Co-Ordinating Committee with lenders.   

Here's a quick recap for those who don't read Arabic, plus a few opinions.

1. The restructuring plan is a five year term with increasing principal repayments:  6% in the first year, 10% in the second, 12% in the third year.  There also seems to be some accommodation to be made to small creditors, though the nature of that arrangement is not specified.  AA:  This leaves 72% of the loan to be repaid in the last two years.  Fairly typical in a difficult situation.  Banks structure a deal to restore the loan to performing status - those all important interest payments with a bit of principal reduction - in the near term.   After a couple of years of the borrower making those (easy) contractual repayments, a restructured loan can be considered performing and no longer need be reported in IFRS-based financials as restructured.  And, perhaps more important, as long as contractual interest and principal payments  aren't past due (usually 90 days), the loan is performing from a regulatory standpoint. No need for provisions or non accrual.  So with a  repayment schedule like this, the hope is that things will work out  in the future (a miracle).  Or failing that  those later maturities can be extended later.  Another benefit is that loan officers can present a five year restructuring to  credit committees.  Both can then pretend the loan tenor is only five years, when it may really need to be seven or more.   Today everyone can be happy.   The future day of reckoning  hopefully will be the problem of some other chap at one's bank.   In other words push the difficult bits of the problem to the future.  Extend and pretend.  Or if you're an "Islamic" banker, delay and pray.   I'm guessing the "deal" for small creditors is designed to secure more positive votes for the  restructuring proposal rather than a sudden burst of conscience. 
   
2. The plan is to get the approval of 66% of the creditors to declare effectiveness.  Legal advisors to some creditors are quoted as saying that the Committee Spokesman is either ignorant of or ignoring the law.  100% of creditors need to sign up.  If 100%  don't sign, then those who have not agreed remain free to pursue legal action.  AA:  Usually by now, especially in a difficult situation, banks have decided that their best course of action is to "go along" even if they don't believe.  At this point usually there are some small creditors looking to get bought out by refusing to vote yes.  The absence of a Chapter 11-like legally enforceable cramdown on dissenting creditors makes this a viable strategy.   100% is required for the deal to proceed.  The small creditor hopes that  if he is difficult enough, the bigger lenders with much more at stake will want to avoid recognizing a big loss, and so  will buy him out.  But  I think there is more going on.  What I think we're seeing here - assuming this article is correct - is that there is a significant group of creditors (at least 34%?) who don't want this deal.  That view is bolstered by the article mentioning two lenders - one with claims of KD20 million (US$ 70 million) and another with KD30 million (US$105 million) who are in the "no" camp.  An indication that major lenders not just small ones are opposed.  You'll remember (if you read this blog) my earlier comment about Wakala transactions perhaps being "outside" a rescheduling as they are "trust" transactions not deposits.  Perhaps, these lenders hold such obligations and feel confident of a favorable legal outcome.
3. The article also states that a large number of attendees at the creditors meeting (the word "aghlabiya" is used) complained about a long-winded boring presentation and useless details in the presentation of the plan.  So much so that they are reportedly going to ask for  detailed information in writing so they can study.  AA:  Usually these meetings turn out to be mini circuses (minus the bread) with lots of lenders speaking, many sadly who have little idea about banking or law.  And many with less than helpful ideas.  It is no fun being the chairman of such a meeting.  Again there appears to be more going on.  What I'm taking away from this comment is that  there remain substantial differences among the lenders about the way forward.  And if lenders lack confidence that the Co-ordinating Committee is up to the job, that is not a recipe for progress. 
   

Taking the article at face value, I would expect the deadline is going to have to be moved into next year.  Lenders apparently still need to be persuaded that this is the best deal and that failure to accept it means they will lose more than if they sign up.  If by now they are not convinced, a lot more work will need to be done to persuade them.  With upcoming holidays, not much chance of making the 23 December deadline.  

TID has yet to release its 2008 fiscal report.  Each day longer it is still in the water, the harder it will be for it to restart its engines and earn enough to pay banks back.  And even if it does,  it may be left fundamentally wounded by this delay.  While banks have a responsibility to their stakeholders to get their money back, they also have a responsibility to the borrower not to needlessly damage it.

We may be getting near the time to consider rescheduling under the Financial Stability Law. 

The Investment Dar - Creditors Fail to Approve Standstill Agreement - Time for Plan B

Subsequent to this post, TID announced majority approval of its Standstill Agreement.  See updated news here.

The Investment Dar has announced that it will be calling meetings with creditors and investors in Kuwait and Dubai on 24 and 25 November respectively to present its restructuring proposal.  Creditors will then be given some time to accept or reject the plan.

As you'll recall, 12 November was the deadline for creditors to vote on the proposed Standstill Agreement.  Since the press release is silent on that topic, it's pretty clear it failed.  Something predicted here at Suq Al Mal.

The Company and its advisor are now going to Plan B.  Under this scenario they will try to make the Standstill moot by persuading creditors to accept the restructuring plan. 

The upcoming meetings will be critical for TID's restructuring. TID is in a difficult situation and success is likely to be difficult to achieve. The one thing in its favor is the size of its debt  - KD 1 billion (US$3.5 billion).   There is a term describing the behavior of conventional lenders faced with huge loan losses: "Extend and Pretend".  Given the "Islamic" nature of TID and a good number of its creditors, a more apt phrase may be "Delay (the loss) and Pray".

The difficulty is that TID and its advisors are not going into the meetings with any perceptible positive momentum.  The Standstill failed to garner enough support.  There is no success to build on.

In fact TID has achieved a standstill of another sort - no progress - an definitely unwelcome standstill.

Also they are burdened with some fairly negative baggage:

1. Creditor skepticism
2. An apparent lack of a leadership among the creditors to sell the restructuring
   

The earlier requests for a CRO and a Central Bank of Kuwait appointed  monitor point to a high  degree of skepticism among creditors.  The no vote on the Standstill Agreement  shows  no change in this attitude. 

In an earlier post I commented that the change of name of the creditors' committee from a "Steering Committee" to a "Co-Ordinating Committee" seemed to reflect a lack of willingness of key creditors to take a leadership role in advancing the restructuring.  Bolstering this negative view is the lack of any public statement attributed to the Committee in the press.   In fact, the names of the banks  and other creditors comprising the Committee have not been publicly disclosed.   They are not only invisible but it seems silent as well.  A situation much different from that in the Global Investment House restructuring. And one that represents a real negative given TID's situation.  TID needs a champion among the creditors.  It appears to have none.

As I said before, getting creditors to agree to a debt restructuring is like herding cats - even with leadership and a firm hand from key creditor banks.   It takes a lot of work and a lot of knocking together of heads.

It's not just the matter of bridging gaps among the creditors and forcing compromises to arrive at the term sheet.  It's also a matter of controlling the process so it doesn't get derailed or needlessly prolonged by creditors who don't know what they are doing or are trying to use their recalcitrance to engineer their exit.

The first group are composed of creditors  that complicate the process with pointless, trivial, silly or impossible conditions. And sometimes all four at once.  They waste time in closing the restructuring as their points have to be debated and resolved.  With strong leadership these distractions can be kept  to a manageable level.  There is also an equal chance that a creditor will come up with a "brilliant" idea that actually does harm.   In one debt restructuring a bit further East, a smart creditor insisted that it be allowed to re-engineer the cash flow capture mechanism (a device to ensure that excess cash flow is used to prepay the loan) to make sure it was proper.  The result of its brilliant financial engineering was that  the borrower had to pay 50% less under the new and improved cash flow sweep than the original mechanism.  You can guess how reluctant the borrower was to agree to this!   Sadly none of the creditors seemed to notice!!

Also there are always one or two small creditors that refuse to go along,  planning that bigger creditors desperate to avoid a loss of their much larger stakes will buy them out so the restructuring can close.

In this environment, the smart strategy is not co-ordination.  It is leadership and, if required, coercion. 

After the upcoming meetings, creditors will be given time for a response.   I suspect the next critical milestone -that approval date - is likely to be in January.  I'd guess at least late January to accommodate the upcoming holidays.

If Plan B doesn't work, the borrower may be forced to puts its fate under Decree Law 2 of 2009 a/k/a the Financial Stability Law ("FSL").   That suggests that a post on the FSL - issued by the Amir during the Majlis AlUmma's well deserved "vacation" - might be in order.