Retail Loan Exposure and NPLs: Emirates NBD Bank

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Almost all of the media coverage of loan problems in the GCC is focused on the commercial market. Scarcely a day goes by without an article on AlGosaibi, Saad, TIBC, Awal, Investment Dar or Dubai World.  It's not just the paid media but also blogs like this.  There's a natural fascination. The story of the average Joe or Abdullah is harder to follow.  The amounts are smaller.  Therefore, the drama seems less.

The major corporates give us exciting amounts with larger than life villains, once proud tycoons now humbled, disconcerted and angry bankers.  The plot lines and therefore the excuses are even more elaborate.  One doesn't excuse a mistake on granting a credit card by recounting the legend of "Big Foot" and the "implicit guarantee".  The BBA doesn't write a letter to the Shaykh to complain that Abdullah is behind on his personal loan.  Sadly, financial journals do not thunder about the irresponsibility of Sanjay in Dubai who skipped a payment or two on his car loan.  Or call on the Shaykh up the road for a bailout.

Yet, all these small loans can add up to one big headache. And the usual pattern of transmission of financial distress is that large commercial firms are hit first with the shockwaves being transmitted to smaller commercial firms and then the public.  

If this pattern repeats itself,  Gulf banks are in for a second wave of NPLs.  What's perhaps more to the point is that since much of the consumer lending in the GCC was done with manifestly weak underwriting standards, this wave may be quite high.  Since I've posted before on this topic, I think I'll just hum the first few bars. You already know this song.

Yesterday again I posted a similar comment.

Today let's look at some data.

60 second summary:   EmiratesNBD's retail NPLs have jumped to 11% of the retail portfolio from approximately half that the year before.

While EmiratesNBD has yet to release its 2009 financials (pending CB UAE approval) it has released a 26 page presentation on 2009.  Though my intent is to focus on retail loans, I will discuss commercial and "Islamic" loans as well to provide a context.

The key pages are 13 and 14.

Slide 13 Asset Quality Loans Receivables and Islamic Financing 

Absolute amounts of NPLs:

1. Aggregate NPLs have increased from AED1.976 billion to AED5.041 billion (155%).
2. Corporate NPLs from AED0.464 billion to AED1.674 billion (261%)
3. Retail NPLs from AED1.305 billion to AED2.685 billion (106%). Note that the retail portfolio is 20% of the corporate portfolio.  Yet, the absolute NPL increase here is larger than the increase in the corporate portfolio NPLs.  That is both a distressing sign and a sign of distress to come.
4. "Islamic" NPLs from AED0.207 billion to AED0.682 billion (229%).

Relative percentages NPLs/Portfolio 2009 and (2008):

1. Corporate 1.3% (0.37%)  This level seems low given the existing level of problems.  I'd guess that 5.0% might be a more realistic absolute minimum for the corporate sector.   And that is likely to be low  unless there are cosmetic "extend and pretend" adjustments or a financial miracle.
2. Retail 11% (5.3%)  - A very large jump.  Admittedly, there is some "noise" here.  During 2009 ENBD made a long overdue switch in definition of a retail NPL from an unrealistic/unbelievable 180 days past due to a more conventional 90 days.  Regardless of how much of the year on year increase is due to the accounting change, the key point is that 11% of the retail loan portfolio is non performing.
3. Islamic 3% (0.94%)

Note 2008 percentages are estimated using 2009 loan data and relative percentages as these do not appear to have materially changed from 2008.  Thus, this should give a rough approximation of the change.

Slide 14 Asset Quality Retail and Corporate Loans and Receivables

Corporate and Sovereigns

1. 96% of exposure is to UAE to "top tier" names with whom the Bank has long standing relationships.  Not sure what that means in terms of creditworthiness measured by the old fashioned yardstick of ability to pay.  I rather doubt that ENBD has a lot of exposure in Abu Dhabi.  Concentrations to obligor groups (Dubai Inc and Dubai Government for example) may be problematical.
2. Loan renegotiations in 2009 did not involve any sacrifice of interest or principal.  Apparently, only extension of payment terms.   Sometimes this is all that is required.   A bit of breathing room for the borrower and then one gets repaid.  Other times it is the first step in "extend and pretend" scenario that turns out less rosy in the end.
3. Real estate "selective financing".  With the existing exposure to Dubai World, this must refer to a  break from past underwriting standards.  Financing  is now restricted to Dubai and Abu Dhabi.  Presumably, with limits suitably scaled for risk.  
4. 55% of the real estate portfolio is due for repayment in next three years.  Given the depressed state of the real estate market, this may not be a particularly robust season for loan repayments.

 Retail Loans

1. Delinquencies are stabilizing across categories and only trending downwards on 33% of portfolio (personal loans).  While it's good they are not increasing, the issue is whether they are stabilizing at high levels.  I suspect this is the case as typically distress in the consumer sector lags that in the corporate sector.  If a business recovery is protracted in Dubai (my  view), then  consumer difficulties are likely to persist and may not yet have hit bottom.  If so, the retail NPLs will continue to increase in absolute and percentage terms.
2. 44% of value of retail loans to UAE nationals and greater than 60% to government employees.  It would be interesting to see the breakdown of NPLs between these categories and "all other" to see if the problem is concentrated in one customer segment.  If government employees (which presumably includes almost all of the nationals) are having financial problems, that would be a sign of very wide distress.
3. The bank is controlling unutilized limits on credit cards.  Not sure I follow this.  Isn't the point of a credit card to have an unused limit?  Is this a reduction in limits not frequently used?  That is,  underutilized limits?  If so, then it would seem the bank is expecting more consumer distress as it is trying to prevent cash strapped consumers from using their credit cards as "last resort" financing.   Though to be fair bankers are usually pretty good at figuring out they should close the corral gate after the horses have bolted.  So it may be a bit of retroactive underwriting - which usually hits largely the good customers.  It would also be interesting to see how many cards were either max-ed out or nearly so.  That could be a sign of more potential bad loans.
4. Like firms who "downsize" instead of 'fire" workers, ENBD has "de-grown" its car loan portfolio.  A good de-offensive move.
5. Mortgages have an average 75% loan to original value.  With the decline real estate prices, it would seem highly likely there are a lot of "under water" mortgages on the books.  Offsetting this ENBD claims that  90% of its customers are "high income"  though I wonder if US$82,000 or thereabouts is really high income in high cost Dubai.  Expect more mortgage problems.

  Other Information

1. Slide 10 with an analysis of the net interest margin.  An 89 basis increase in loan spreads (primarily corporate) and a 25 basis point increase in treasury profits (I'm guessing primarily from loan  benchmark pricing definitions and some gapping) offset partially by an increased cost of funding -  roughly 50 basis points. 
2. Slide 16 with some funding data.  Debt maturity profile: over the next three years the bank has to refinance 79% of its AED24.1 billion debt with 30% due this year.  Offsetting that the bank states it has AED18.5 billion in unused liquidity facilities.
3. Slide 36 has a quarterly review of 2008 and 2009 with asset quality credit metrics. Here you can track the quarterly movements.

There's probably no ultimate credit worry here.  The UAE is not going to let a bank the size or importance of ENBD fail (Oh, did I just glimpse the shadow of an "implicit guarantee"?  Perhaps just an imagined "keepwell").  Probably the major concern is stock performance.  And for term lenders, credit re-rating risk.  It would be unfortunate to prematurely lock in a margin which suddenly becomes too low for the risk.  

Aldar AED 9.1 Billion Sale of Yas Island Assets = Bailout

In its press release on 2009 performance, Aldar noted it had sold some infrastructure and land assets on Yas Island.  Apparently, as the sale was for only a small amount no further details were felt  necessary.  

A week later when it released its 2009 financial report, Aldar noted the sale had been to the Government of Abu Dhabi for AED9.138 billion (US$2.49 billion).  At that point Aldar did not provide any discussion of the profit on the transaction.  Either they spell الشفافية with a capital ش   in Abu Dhabi.   Or the company and the Government were still figuring how to structure the sale.

Today Aldar responded to a letter from the Abu Dhabi Stock Exchange to advise that the sale had been at cost.

Clearly, the Government of Abu Dhabi is bailing out Aldar - either with some additional cash or loan forgiveness.  It appears we'll have to wait for the release of Aldar's 1Q10 financials or the ADX to send another letter to the company to learn how the bailout was structured.

Yas Island website here. 

Gulf Bank NPLs' Predicted to Soar in 2010

As per Dubai's Khaleej Times, both S&P and UBS are predicting a rough 2010 for Gulf banks due to increased non performing loans ("NPLs").  Kuwait, Bahrain, and the UAE are expected to be the hardest hit with Saudi and Qatar banks enjoying better fortunes.

UBS estimates that currently 12.2% of HSBC UAE's loans and 9.5% of Standard Chartered UAE's loans are non performing.  It also predicts that for UAE banks as a group NPLs will reach 15%  and remain high during the next three or so years.

On the other hand, the CB UAE sees the NPL ratio climbing to 6.4% (up from 4.4%) in 2010.

Clearly, both scenarios can't be right. 

I'm betting on an increase - fueled by the knock on effects of the Dubacle on the corporate sector as well as personal loans.  There is a time bomb in the GCC with the latter.  Banks have been imprudently lending to consumers and allowing them to pile on unsustainable amounts of debt. 

Kuwaiti Banks to Provision 100% for Saad and AlGosaibi?

AlQabas quotes unnamed banking sources that banks and financial firms have decided to increase provisions against their exposure to Saad and AlGosaibi to 100% in light of the fact that the condition of  the two Groups as not reassuring regarding the possibility of collection of the amounts due.  And that some banks have already received verbal instructions to do so.  (Presumably from the Central Bank, though this is not stated in the article).

One local bank pursuing Saad in court is said to have been surprised by the violent, confrontational and fierce tactics used by Saad to resist which means that the legal battle will be long.  In such circumstances it's not possible to leave the balances open or uncovered.  (This may be AlAhli Bank which was identified earlier as pursuing a court case against Saad in New York).

A banking source  (note now singular) is quoted as being pessimistic about recovery stating that the two factors of time and expenses to wage the protracted legal battle probably mean a net recovery of 20% to 25%.  (It's unclear if the recovery  amount includes interest or is just the principal.  And whether the calculation is face value or present value.  In any case it's small.)

The Investment Dar - Text of Press Release From Creditors' Meeting

 

Here's the text of TID's press release on Nasdaq Dubai of its meeting with its Sukuk certificate holders in Kuwait yesterday.

Pretty much what the press already reported and which I have already commented on. 

Here's also the press release TID published at the KSE.

[14:5:54]  ِ.تطورات خطة اعادة الهيكلة المالية لشركة دار الاستثمار ‏

يعلن سوق الكويت للاوراق المالية بانه ورد اليه الان من شركة دار الاستثمار ‏

بان الشركة واللجنة التنسيقية التي تمثل البنوك والمستثمرين قد عقدتا اجتماع

مع البنوك والمستثمرين للوقوف حول اخر التطورات فى اجراءات خطة اعادة ‏

الهيكلة والانجازات التي تم تحقيقها والتي تضمنت تجهيز المستندات والهيكل ‏

القانوني وكيفية تطبيق خطة اعادة الهيكلة للشركة .‏

وقد ناقشت الشركة واللجنة التنسيقية مع البنوك والمستثمرين خيار الدخول ‏

فى قانون الاستقرار المالي وذلك فى سبيل تطبيق اعادة الهيكلة المتفق عليها ‏

من قبل ما يزيد عن 80% من بنوك ومستثمري الشركة .‏

وقد تمت الموافقة على خطة اعادة الهيكلة من قبل غالبية البنوك والمستثمرين ‏

ما عدا عدد قليل يرفض الدخول فى الخطة مع العلم بان تطبيق الخطة يضمن ‏

استيفاء جميع المستحقات المالية لجميع البنوك والمستثمرين .ان قانون ‏

الاستقرار المالي يوفر الضمانات القانونية التي تسعى لها شركة دار الاستثمار

واللجنة التنسيقية فى سبيل تطبيق الخطة المتفق عليها.‏

ان خيار انضمام الشركة الى قانون الاستقرار المالي بعد الموافقة عليه من قبل

مجلس ادارة الشركة لن يؤثر على الوضع القانوني والتشغيلي للشركة من ناحية ‏

النشاط التجاري ،باعتبارها شركة استثمارية ذو محفظة تضم اصول تشغيلية ‏

ذات قيمة مضافة تعمل فى مختلف القطاعات والاسواق.‏

And what they published on their website.  You'll note here they state everything is ready to go - all the legal documents prepared - but not having all the creditors on board is frustrating implementation of the restructuring.

Gulf Finance House - Text of S&P Rating Increase to CCC-/C

 

GFH published the text of S&P's recent upgrade in its ratings today at the BSE - a scant five days after it was issued.

Apparently, it has not yet found the time to update its ratings page on its website which still shows its ratings as of 25 November 2009.  But I suppose one shouldn't demand that it update its webpage on some sort of draconian rush schedule.

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.

Dubai World Rescheduling - Draft Restructuring Plan to Be Presented?

 

Two reports out.

Maktoob quoting a Reuters story quoting unnamed bankers states:

1. DW will put forth an initial proposal to creditors as early as this week, but problems valuing Nakheel are delaying finalization of the Plan.  AA:  That probably means the values at Nakheel are much less than anticipated.  And does one use current depressed values?  Or assume that these will increase over some time period?
2. "what's being offered will not be as bad as feared"  AA:  Perhaps a good negotiating strategy.  If banks are worried about a 40% haircut a 20% haircut might sound "good".

The Financial Times has another take also from unnamed bankers - presumably a different lot that Reuters spoke to:

1. Meetings with major creditors in London starting this week.
2. Initial outline plan to be offered.  Two options.  Bigger haircut and shorter tenor.  Smaller haircut and longer tenor.  Some injection of new funds.
3. Potential for split among creditors as different groups may wish to see any new funds or concessions focused on those members of the DW Group with most impact on them.  By way of example, the article mentions local banks possibly preferring support being directed to Nakheel and Limitless given exposure of other local bank clients to these two entities.

This is a key issue.  As I posted earlier, often the most contentious debates and negotiations in a restructuring take place among the creditors.   The problem for DW is that if the creditors get hung up among themselves, DW suffers as well.  And the Emirate.

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.

3-1

 

Enough with the injuries.

Majid Saif AlGhurair Resigns from RAKBank

Here's the press release.

Anyone who knows why please post.

If you know what "Final Greetings" are, please also post on that.  It sounds rather ominous.  Sort of like a "final warning".

NBAD Requests Cancellation of Approval to Buy Back Shares

 

A rather curious announcement over at the ADX.  The UAE SCA agreed to NBAD's request to cancel its previously granted permission to buy back up to 10% of its shares.

Why is this strange?

NBAD had obtained permission earlier from the SCA to re-purchase its own shares.  The decision whether to purchase shares or not was entirely in NBAD's hands. 

In other words, it needed no official sanction not to purchase it shares.  And therefore did not need to obtain cancellation of the authorization.

As you'll recall, the IMF had expressed some concern about the capital levels of UAE banks.  Also when the government has given you "rescue" capital, it would be a bit ungrateful if you were to buy out your existing shareholders.  I suspect that the Central Bank had a quiet word with NBAD to encourage them to get the cancellation.  In that way the CBUAE does not have to rely on the discretion of NBAD not to repurchase its shares.

Since NBAD is one of the more conservative local banks, if I'm correct other banks with similar permissions may suddenly develop a CBUAE-sparked desire to cancel them.

Global Investment House Wins Deal of the Year Award for its Restructuring (!)

 

GIH proudly announced that the Islamic tranche of its debt rescheduling won the Euromoney Award for "Most Innovative Deal" of 2009.

Some comments:

1. AA recalls a time in the past when firms did not brag about their restructurings. Then a restructuring  was considered the financial equivalent of being arrested for drunken driving.  One  generally didn't speak of it for fear of reminding the public that one had been pulled over for less than prudent behavior.  I guess when the problem is someone else's fault it's OK to speak about it.   If you missed GIH's 10 page apologia for its restructuring, you might not know that  the "International" Financial Crisis (no, not the "Global" Financial Crisis) is to blame.  GIH's business model and GIH's management definitely had nothing to do with this.  Really, you have GIH's word for that. 
2. I couldn't suppress a snicker (or maybe that was a guffaw) when I read  "innovative structure of the deal which has enhanced the stability of Global’s financial platform".  That's like describing having one's gangrenous leg  amputated as enhancing one's health.  It was hopefully a life saving operation.  But it was one necessitated by the failure to to properly care for the original wound.  Or in this case one's business strategy.
3. Awards not only tell us something about the winner but also about the competition.  When AA was in high school gym class, through the fortune of surnames I was always paired with the same fellow to run laps.  I won every race by a very large margin.   For a brief moment, I fancied myself another Abebe Bikila.  Apparently there weren't that many innovative deals in 2009 - either in general or in the Islamic sphere.
4. I'll refrain from applying that principal to GIH.  Investment banks like to brag about everything.  You should see the self praise in pitch books!
5. O tempora o mores!  "The award was in recognition for Global’s professionalism and transparency in dealing with the banks during the restructuring process".  That speaks volumes about the professionalism and transparency of the competition.  When being honest distinguishes one from the competition we are indeed in sad times, though perhaps this has something to do with the award being for the "Islamic" tranche.

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.

Capitalism, Risk Management & Football

An insightful piece from Simon Kuper in today's Financial Times.  A Minsky moment on the pitch?

As with all stories, there are exceptions that prove the rule. 

The sons of Herbert, George, and Arsene made no such mistakes.

The Investment Dar Court Case with BLOM Undermines Islamic Banking

 

One of the reasons that many people prefer to deal with Islamic Banks is that they claim to hold themselves to a higher standard of behavior than conventional banks.  In fact many Islamic Banks emphasize this claimed distinction in their marketing literature.

Recent developments in a court case brought by Banque du Liban et d'Outre Mer ("BLOM") Beirut against TID prove sadly that you can't always believe what you're told.  Or sold.  

Seems that BLOM advanced some US$10.7 million to TID under a Wakala structure.  TID got into financial difficulty and did not repay.  Happens all the time.  Or frequently enough so that it shouldn't be a shock.  What happens next is what separates the ethical from the unethical.

As reported in The Guardian, TID is now arguing in an English court that it shouldn't have to pay any profit (interest) to BLOM because the deal did not comply with Sharia law and was therefore void.  A small point: TID's Shari'a Board had approved the deal at the time it was concluded.

This tactic speaks volumes about TID's ethics or perhaps more precisely lack thereof.  

Bankers are generally expected to conduct their affairs with the interests of their clients foremost - regardless of the religion they claim to profess.  That is, one deals ethically and fairly with one's clients. 

When bankers engage in Trust arrangements, they are held to an even higher standard.  A wakala is an Islamic trust arrangement.  

When one professes that on top of these normal banker virtues one's business is guided by a religion, then the standard of behavior it seems to me should be even higher.

Sadly, it's hard to avoid drawing the conclusion that TID's sudden "religion" in this case is a matter of selective application of the Shari'a.   And therefore the religious scruples on display are more feigned than real. I'm willing to bet that BLOM is not the only financial institution in a Wakala structure like this.  And if it were inside the restructuring, TID's objection would vanish.  This episode probably also provides an explanation why TID's creditor banks insisted on certain things during the negotiations and incorporated certain requirements in the rescheduling agreement - steps generally above those taken by banks in  most restructurings.  When one is forced to deal with those whose ethics appear questionable,  the wise person  prudently implements many safeguards. Let's hope the restructuring is sufficiently so equipped.

A failure to live by the creed it professes is the least of TID's offenses in this case.  More importantly, through its behavior TID is doing fundamental damage to the good name of Islam and  concept of Islamic banking.  All for expediency. And for a rather small price.  A pretty clear indication of the value it ascribes to both.

More importantly, this case introduces a new risk for those who do business with "Islamic" banks.  A risk that is difficult to evaluate.  And therefore difficult to mitigate.  That an "Islamic" bank will seek to abrogate contracts or major elements of contracts based on retroactive re-interpretation of their compliance with Sharia.  Or perhaps more precisely what they claim Sharia is based on what's currently convenient for them.  What's surprising as well is that a court in London has apparently agreed to entertain TID's argument.  One hopes that the court is merely allowing TID to raise this claptrap, but will render a just verdict.

This sort of legal risk fundamentally relates to the ethics of one's business partner.  Generally, it's hard to know this for sure until one's partner is in a difficult or inconvenient situation.

The problem a potential creditor or depositor faces then is distinguishing between an Islamic Bank and  an "Islamic" Bank.  The latter being a bank that merely professes Islam as a marketing slogan.  (Sura AlBaqara Ayat 8 would seem the appropriate scriptural reference.) 

There is an ironclad law of finance.  Or at least there should be.  If you cannot adequately assess a risk, do not do the deal.  The danger is that market participants will apply that principle across the board and simply refuse to deal with Islamic Banks.

This is a very serious matter.  One wonders what the Central Bank of Kuwait and TID's Shari'a Board think of TID's legal strategy.  Do they think that it is in the interest of the Kuwaiti banking sector or true Islamic banking?  I guess we'll know by the action they take.  Or don't take.    

Gulf Finance House - S&P Increases Rating to CCC

 

S&P announced that he had raised the rating on S&P from SD (selective default) to CCC-/C with a negative outlook.

Negative factors affecting the rating were:

1. Weak liquidity
2. Debt repayments coming due in the near term
3. Concerns about ability of GFH to implement its plans to improve its liquidity or revenues
4. Lack of longer term financing

S&P would raise GFH's rating if it is able to:

1. Raise additional sources of liquidity, including longer term financing
2. Develop new business activity as operating cashflow is minimal.

Major UAE Banks Have Rengotiated AED15 Billion (US$4.1 Bn) in Loans - Signs of Writeoffs to Come?

The National reports that three of the UAE's largest banks have renegotiated some AED15 billion in loans.  To be clear this is the stock of renegotiated loans as of 31 December 2009.

1. EmiratesNBD - AED7.8 billion in 2009 on top of an existing AED2.5 billion.
2. NBAD - AED3.2 billion
3. First Gulf Bank - AED2.5 billion

Some comments.

1. It's common practice for a bank to renegotiate a loan with a client if the client cannot fulfill the original terms.  This is often the smartest thing to do.  Court windups are costly - both in terms of time and ultimate recovery.  No more so that in the UAE which has one of the worst insolvency regimes in the region.  The goal of any banker is to get back as much of the contractual amount due as is possible.
2. Under IFRS loans are included in the "renegotiated" category if a material change has been made that is a concession the Bank would normally not make or terms of the loan have been amended.  So for example if the interest rate has been reduced.  Or if changes have been made in repayment schedules - extension of maturities.   So some changes may not reflect fundamental credit weakness in terms of ultimate repayment but a bit of slack - a lower interest rate, an extra six months for repayment.
3. That being said, can renegotiations be used to push problems into the future?  Yes.  Do banks sometimes do this?  Yes.   
4. Looking at NBAD's 2009 financials (Note 4), they have classified roughly AED557 million of the AED3.183 billion of renegotiated loans as "OLEM"  which means weak  or watch credits.  Those monitoring  the health of NBAD would want to keep an eye on the OLEM category which has gone from AED454 million at FYE08 to AED3.3 billion.  "Non Pass" loans were AED3.0 billion at FYE 2008 and AED2.3 billion at FYE 2009.  An improvement not only in amount but as well in allocation among the classifications.
5. Looking at FGB's financials (Note 32.2), renegotiated loans were AED836 million at FYE08 increasing to AED2.456 billion at FYE 09.  FGB's watch loans increased to AED1.2 billion from AED0.8billion.  There has also been a fairly dramatic rise in the amount of "non pass" loans (= weaker credits) from roughly AED3.5 billion to AED6.3 billion. 
6. Therefore, I think that when looking for potential future problems, the OLEM or "Watch" category  is probably the best early warning indicator, followed by a close eye on the movement in renegotiated credits.

TIBC Administrators to Pursue Debtors

 

The Gulf Daily News reports that TIBC's Administrators,  Trowers and Hamlins, advised creditors that they had secured funding from a group of major creditors and were preparing to go after major debtors of the Bank to secure repayment.

This is an interesting development.  

You'll recall that the Ernst and Young Report on TIBC certainly left the impression that there had been massive fraud at the Bank with the implication that there was little prospect for recovery.

Clearly, creditors wouldn't be putting in more money if there wasn't a real prospect of a reasonable recovery.

Aayan Leasing and Investments Near a Rescheduling Deal with KFH?

Citing sources at the company, AlQabas reports that Aayan received verbal approval from Kuwait Finance House to its proposal to reschedule its KD395 million (US$1.38 billion) outstanding debt at the end of last week.

As soon at the company secures the agreement of all its local creditors, it will approach foreign creditors and holders of its sukuk - who represent 25% of the total debt.  Aayan has been negotiating with its creditors for about one year now.

Earlier post on restructuring proposal here.  Other posts on Aayan (relating to suspension of trading on KSE) can be accessed by using the label "Aayan".

International Petroleum Investments Abu Dhabi Refinances US$2.5 Billion Loan

 

Gulf News reports that IPIC has refinanced a US$2.5 billion loan maturing this June with a three year term loan of the same amount.

The original loan was part of a US$5 billion financing announced 4 August 2009.  Two tranches each of US$2.5 billion.  Tranche A was a one-year facility designed to be refinanced with a capital markets issue.  At the time the market reported that pricing was 250 basis points for the first six months, then 350 basis points for the next six months.  And if extended beyond that date, 400 basis points.  Tranche B was a two year term loan, which at the time was reported to carry a 350 basis points margin.  Each lender had the right to agree a one year extension on its portion of the loan.

According to Gulf News the new loan is at 150 basis points margin with commitment fees of 150 basis points for commitments of US$200 million with lower fees for lower amounts.  

As described this doesn't sound like a traditional "commitment fee" but more an upfront underwriting/participation fee.  A one time "up front" flat fee.  Such a fee would vary directly with the size of the lenders' underwriting in the loan and final take.     

A traditional commitment fee (on undrawn balances) would be the same percentage for each lender but applied to the respective undrawn amounts of their commitments during some period, e.g., semi-annually usually.

Assuming a US$200 million take and that this is a underwriting/participation fee, a bank making a US$200 million commitment to the loan and holding that amount as a final "take" would have an asset with an effective margin of 202 basis points per annum - or 52 basis points over the stated margin.

Taking this story at face value, it shows that:

1. Unlike Dubai, Abu Dhabi has access to the market and to term funds.  It has raised a three year loan to refinance a maturing one year loan.  
2. The margin on the new loan appears to be much lower than on the previous loan.  Without knowing the front end fees on both loans, it's not possible to calculate the exact differential, but it appears to be substantially less on the refinancing - perhaps as much as 200 or more basis points.
3. Capital markets are not offering an alternative for a take-out or not offering as attractive pricing as the loan market.  So IPIC has refinanced in the bank market.

Dr. Mohammad Daud Bakar on Sukuk Structures

A brief analysis from a recognized Shari'a expert (Malaysian view) courtesy of Zawaya.

Bahrain - Crown Prince Meets Arcapita CEO To Show Support

AlAyyam Newspaper reports that the Crown Prince HE Salman Bin Hamad Al Khalifa met with the CEO of Arcapita, Atef AbdulMalik.    If you don't read Arabic, here's an English version from Gulf Daily News.

The message is pretty clear.

When you're having a rough patch, it's nice to have a friend.  It's even nicer when the friend is someone influential.

As noted before, Mr. AbdulMalik is one of  distinguished band of brothers - all prominent in regional banking.

Embassy of the Kingdom of Bahrain Washington DC Honored for Its Activities

 

 

 

H.E. Houda Ezra Ebrahim Nonoo

Ambassador of the Kingdom of Bahrain to the United States of America

The Gulf News reports that the Embassy of Bahrain has been recognized as one of the ten most active embassies in Washington DC as per a survey conducted by International Investors.  And I'd guess - even putting aside some national chauvinism - that the District has to be considered to be in the Premier League for embassies.

But it's not hard to win awards when you have a dedicated, hard working team, including an Ambassador who is first rate.

الف مبروك ومبروك

Boubyan Bank - Vice Chairman Resigns To Become Chairman of Warba Bank

Boubyan announced on the KSE today that its Vice Chairman Mr. Jasaar Dakheel AlJasaar had resigned as he had been elected Chairman of Warba Bank.  He submitted his resignation effective 23 February.  However, the Board decided to push the effective date to the coming ordinary general meeting of shareholders. Presumably to avoid having to nominate an interim Vice Chairman and appoint a new board member.  As posted earlier, there is anticipation that NBK will be inserting some of its "people" on the Board given its 40% shareholding.  Nominations for the board opened today (2 March) and extend to 16 March.

Text of press release (Arabic only) below.

[9:53:52]  ِ.استقالة نائب رئيس مجلس إدارة بنك بوبيان ‏
يعلن سوق الكويت للأوراق المالية بأن بنك بوبيان قد أفاده بأستقالة ‏
السيد / جسار دخيل الجسار ، وذلك نظراً لاختياره رئيساً لمجلس ‏
إدارة بنك وربة وأصبحت استقالته نافذه من تاريخ 23-2-2010 ‏
كما أفاد البنك بأن مجلس الإدارة الحالي قد تقدم بأستقالته التي ستصبح ‏
نافذه بتاريخ انعقاد الجمعية العمومية المقبل علما بأنه تم الإعلان عن فتح ‏
باب الترشيح لانتخابات مجلس الإدارة في الفترة من 2 إلى 16 مارس 2010 .‏

Gulf Finance House - Confirmed: US$100 Million Loan Revised Repayment Agreed

 

A follow-up to my earlier post.

GFH issued a press release today that it had agreed a repayment schedule on its US$100 million Wakala facility due 3 March 2010.  

US$20 million will be paid this month and 4 equal installments of US$20 million every six months thereafter.  As I commented before, GFH must be really strapped for cash as this is a rather small amount for the first payment.  I was expecting something more in the US$30 million to US$40 million range.  

What's interesting is that the LMC syndicate has agreed to much less favorable terms than the  West LB syndicate:

1. West LB received two-thirds of the amount due it on the original maturity date.  The LMC syndicate only 20%.
2. West LB extended the remaining US$100mm for six months.  LMC extended the remaining US$80 million for two years - with an average life of one year.
3. Not hard to tell which financial institutions are looking out for its shareholders.

Some comments on the press release:

1. I don't see this announcement at the Bahrain Stock Exchange, the Kuwait Stock Exchange, the Dubai Financial Market or the London Stock Exchange.   This is information material to the trading of shares. Of course, the regional three banks in the facility may not have finalized their answer until after the markets were closed - though it's hard to imagine them working past London's close. But there was a press report on this in the press yesterday - at that point an unconfirmed rumor - which contained information which by any criteria would be material to an investor.  A responsible company would have made sure an announcement was at the stock exchanges bright and early this morning - either to confirm the press report (negotiations concluded successfully) or to state that negotiations were still in process. 
2. To call this a new facility strains credulity.  This is a rescheduling of an obligation that GFH was unable to pay. It is an attempt to make something out of a "busted play".
3. This is less a demonstration of faith "in GFH’s business model and the strategy that the Bank’s management team are following" than it is lenders restructuring a loan that the borrower cannot repay on its due date.  
4. Selling assets one has suddenly "discovered" are non core, firing staff and other cost cutting measures are not a strategy.  They are tactics designed to deal with the failure of one's strategy.
5. Talk of GFH"s business model is misplaced.  At this point, GFH is in search of a viable business model.  Its old model is precisely why it cannot pay its debts on time.  When it demonstrates that its plans for the future are more than words on a page, it can speak of its "business model".
6. The date on its press release needs to be amended.  This is like the previous "magical date" press release from 4Q09.
7. GFH has yet to update its website for the first downgrade by S&P. 

Awal Bank & The International Banking Corporation - Update on Legal Investigations Including House Arrest of Maan AlSanea (?)

Here's a summary of a 17 February report from  AlWatan Newspaper (Bahrain) on the latest in the AlGosaibi/AlSanea affair.   For those who are interested in Mr. AlSanea's fate, you'll want to at least read #7 below.

AlWatan's article is based on an "informed source".

First, the head of the Public Prosecution Nawaf (Abdullah) Hamza, has formed a  panel of independent experts to provide an independent opinion on the financial statements of Awal Bank and The International Banking Corporation.  (Digression from article:  While not stated by AlWatan, clearly this report will be used as part of the justification for the levying of charges.  In 2007 the Public Prosecutor's Office also known as   النيابة الكلية  was given jurisdiction over the investigation of all financial and economic crimes.  At that time Mr. Hamza joined the office leaving his post as Head of the Middle Prosecution Office, though at that point he was not made head of Public Prosecution).

1. The investigations continue at both banks.  Lately the focus has been on management and employees.  It's not clear just how far down the management ladder the investigation is proceeding.  The article uses the terms "managers and employees".  
2. Among the parties being interrogated at the CEO and members of the Executive Committee at Awal Bank.
3. The investigation of Awal's Head of Operations has been completed.  There are no further details in the article on what the results were.
4. In the past 10 days, Awal's CEO has charges directed against him.  He has been released against an unspecified bond and forbidden to travel.  Later the article uses the term "rasmiyan" to refer to charges against the CEO of TIBC.  So assuming the insertion of that additional word was deliberate  and has significance, Awal's CEO appears not to have been formally charged with a crime.
5. Awal's Head of Treasury and Foreign Exchange has been released against a BD2,000 bond and forbidden to travel.  AlWatan does not mention that formal charges were levied.
6. The CEO of TIBC has been formally charged with breach of trust and stealing two billion dollars from AlGosaibi Company for Commercial Services (Bahrain).  He has been released from custody against a BD10,000 bond and forbidden to travel. 
7. The article lists five cases pending against Maan AlSanea in Bahrain: (a) Awal Bank v Maan AlSanea, (b) Bahrain Islamic Bank v Maan AlSanea and Others, (c) Bahrain Islamic Bank v Maan AlSanea and Others, (d) Hasan Sharif and 18 Others v Awal Bank (labor case),  and (e) Salah AlKawaari v Awal Bank (labor case).   I suspect the latter two cases were brought by individuals whose employment was terminated and who feel that their termination process and payments were not fair.  It is not uncommon for a dismissed employee in Bahrain to lodge a complaint with the Labour Ministry.  If the employer and employee cannot reach a solution among themselves, then the dispute proceeds to the Labour Court for a decision.  So, perhaps a more accurate statement is that there are three commercial cases against Mr. AlSanea.  With all the downsizing going on in Bahrain, just about every bank who let someone go, has at least one Labour case against it.
8. Also that a freeze (block) has been put on the assets of Mr. AlSanea and his family in Bahrain and that he has been forbidden to travel until the completion of the investigation.

That last point, the reported arrest, seems to be a topic of some interest out there from the number of hits this blog gets related to that topic. 

A couple of observations. 

First, as you've noticed from the cases pending against some of the senior managers of the two banks, they have been released from jail (against rather small bonds considering the allegation of the amounts involved) and forbidden to travel.   I'd guess that would involve surrender of one's passport. That is a modified form of house arrest, meaning in this case that they can move about within the country but may not leave.  No electronic ankle bracelets and stay at home rules.  Just to be clear I have not seen any credible report that Mr. AlSanea has been arrested/jailed.  I'd also note that modified house arrest would be fairly normal procedure for someone accused of a major crime.  Or someone who could be a material witness in an investigation.

Second, it's not clear to me if Mr. AlSanea is currently in Bahrain.  If he's not, then the Bahraini prohibition on travel would be theoretical rather than practical - at least until he entered the Kingdom.  My impression is that he is in Saudi Arabia, probably in AlKhobar.  If so, he's probably subject to similar restrictions on travel in the Kingdom. 

In the interest of fairness a couple of points.  And it's very important that all who follow news on these cases keep these two points in mind.

First, this post is based on a newspaper article.  It is not an official statement issued by the Public Prosecutor or any other official body in Bahrain.  Reports in the press are not always complete or accurate.  "Informed sources" often aren't. And note that AW's article seems to be based on a single source.   

Second,  individuals named in this post (either directly as in the case of Mr. AlSanea or others by their titles) may have been accused of wrongdoing.  However, at this point, there have been no convictions by any competent courts of any criminal or civil offenses.  And it is only the courts that are competent to issue such judgments.

Gulf Finance House - US$100 Million Loan Revised Repayment Agreed

The National reports that GFH has agreed repayment terms with on its US$100 million "Islamic" facility arranged by the Liquidity Management Center Bahrain.

US$20 million this month and then 4 equal installments of the remaining balance every six months commencing this September.

Interestingly enough, the US$300 million syndicate was able to secure a  66.7% immediate repayment, while the LMC syndicate only 20%.   

If this report is true (see next paragraph), either GFH is really strapped for cash or the LMC syndicate of Islamic banks is being really kind.  I'm guessing it's the former.

However, it should be noted though that this is not an official announcement but a report based on "an informed source". 

ABC Launches US$1.11 Billion Rights Offering

Details here.  Note offer price is par.  Key issue will be whether ADIA steps us to participate. 

Earlier post on Rights Offer here.