Oqyana Group - KD72.6 Million Loss for Fiscal 2009

AlQabas reported on Oqyana's annual general shareholders meeting which was held at the Ministry of Commerce and Industry.  As you might guess from the latter statement, that's not a particularly favorable development.  The MOCI doesn't rent out space for meetings.  When a company has a shareholders meeting there, it's because the Ministry has instructed the company to hold one so that it can convey  information directly to the shareholders, usually to advise them of regulatory and other violations  by the company.  These days the MOCI seems to be holding a lot of such meetings.

AlQ mentions two of the comments made by the Ministry:  the Company's financials were delayed.  And it had not registered a piece of property it owns in Bahrain in its own name. Oqyana's Chairman, Nabil Jafar Abdul Rahim noted that the delay was because of the delay in Stehwaz preparing its financials and Oqyana holds 100 million shares in Stehwaz (!).  As to the second comment, he noted that the Company had set up a 100% owned Bahraini subsidiary to hold the real estate.

The Chairman also commented that the primary cause of the Company's loss of KD72.6 million for 2009  versus a gain of KD98 million the year earlier was the revaluation of assets.  Or perhaps more precisely devaluation of assets.  Shareholders' equity stood at KD369 million at FYE09 versus KD429 million the year earlier.  Total assets were down from KD493 million to KD438 million.  

Oqyana holds both Stehwaz and The Investment Dar shares in its investment portfolio.   What value they are being carried by Oqyana is not clear.  If you're not aware, all three companies can be considered distinguished business partners and members of The Investment Dar Group.

Abdul Rahim also noted that Nakheel had given the Company a two year extension to develop its property in Dubai.  Originally the property was to have been developed within 42 months ending in 2009.  Oqyana was unable to secure the necessary financing.  So the extension.  It's unclear  but presumably it's two years from 2009.   Recently, it's been knocking on the doors of local and other banks looking for between US$50 million to US$100 million in loans to move forward.  But it has had no success so far.   

As I'm sure The Real Nick can confirm, a real estate development company without access to loans is in dire straits.  Sort of the equivalent of "The Donald" losing his ego.

On the subject of financing, the Chairman noted that the Company had obtained a loan from a bank in Bahrain against shares of Stehwaz.   This apparently dates from more than a few years back given that Stehwaz has been in rather distressed conditions for some years now.

A new board was elected consisting of Mr. Nabil Jafar Abdul Rahim and representatives of TID, Safwat Real Estate, Efad Real Estate (also affiliated as a business partner with TID), and Adeem.  

If you're not familiar with Adeem, you can link here to "The Navy Seals" of the Investment World!  You can also use the tags "Adeem", "Stehwaz" and "The Investment Dar" to find earlier posts on those entities if you're interested.

Commercial Bank of Kuwait - New Board The Godfather in Kuwait

An interesting post by Sal over at Alphadinar.    Why Dherar Al-Rabah was Appointed Chairman of Commercial Bank of Kuwait. 

Stehwaz (Istiwath) Holding Company - Shareholders' Legal Complaint Against Board and The Investment Dar

AlQabas reports that 47 shareholders of Stehwaz Holding Company -شركة استحواذ القابضة  - have raised a legal complaint against the board of directors, the auditors and the parent company, The Investment Dar ("TID").  As its name implies, Stehwaz is involved in mergers and acquisitions as well as pre IPO transaction.  The company has some 5,000 shareholders.   TID and Efad Group are the major shareholders.  Efad is also a major shareholder in TID.

AlQabas describes this as an "unprecedented" action by shareholders against a Kuwaiti company.

These 47 shareholders' allegations (and note that word) consist of the following:

1. After undertaking the increase in the company's capital to KD 250 million, TID caused the company to enter into a series of contracts for its benefit allowing it to take most of the capital of the company.
2. One example is the sale of Madar Investment Company - which allegedly resulted in a KD 50 million profit for TID and no benefit to Stehwaz.
3. Another item in the list of complaints is the company's lending activity.  The shareholders allege that it is unclear if  KD 3 million obtained by the Board is loan or another type of facility.
4. Exaggeration (overstatement) of goodwill in the amount of KD 50 million.
5. A pattern of conducting real estate transactions solely with related parties - reaching an amount of approximately  KD 300 million.  Stehwaz supposedly conducted these with  just three related parties  from among the founding shareholders.  The complaint specifically raises the point that no real estate transactions were undertaken with other market participants.  The thrust here seems to be a concern over purchases of real estate.  That logically would be one of overpayment.   AA:  In 2007, Stehwaz had KD 450 million in total assets.  The company has not released its 2008 financials.
6. Funding provided to TID via wakala and tawarruq transactions - a major issue given the constrained financial position of TID.

The complaining shareholders are requesting guarantees from those parties who benefited from the transactions described.  That is the first step in seeking to impose personal liability on  member of the board of directors.  An initial (statutory) fine of KD5,001 is also being requested as well for the decline in share value to KD 20 fils.

The Court is to hear the case 11 February.

Some observations.

1. Another bit of bad news for TID in securing creditor agreement to its rescheduling proposal, particularly in light of the charges made in this complaint.  Without full details and noting that this is only a complaint and not a legal judgment against TID, these are the sort of activities that could be behind the Central Bank's delay in approving TID's financials as well as some of the content of the restructuring proposal.  Earlier post here. 
   
2. As well, this suit is reminiscent of some of the issues that the Ministry of Commerce and Industry is pursuing with respect to related party transactions. Earlier posts here and here. 

It's important to re-iterate that these are unproven allegations at this point.  The Kuwaiti Courts will determine if they have legal merit and if sufficient evidence is provided to substantiate them.  In any case this is not good news for TID, particularly at this critical juncture.