Global Investment House – Review of 1Q10 Financials & Analysis of Future Prospects

GIH released its 1Q10 financials last week. 

Most of the commentary I've seen (and I certainly haven't seen it all) has focused on the headline numbers, a net loss of KD15.5 million versus KD69.9 million the year earlier period.

For its part the Company touts the underlying revenue stream from its Asset Management Business, a 9% reduction in "General Overheads" and the fact that it made a USD28.9 million first payment on its rescheduled debt. On 28 April so technically outside the 1Q. But when you're looking for good news, it's important to look hard.

Let's look a bit behind these headlines. And, as well, peer into the future. 

As one poster noted, it's all well and good to speak about the past. But what about the future of GIH? How does it chart a course to viability?

As a basis for looking to the future, let's ground ourselves in 1Q10 performance. This earlier post may also be useful in setting the context.

1Q10 FINANCIAL PERFORMANCE AND COMMENTS

Auditors Report

There is a matter of emphasis regarding the US$250 million deposit that GIH placed with National Bank of Umm AlQaiwain. NBUQ has blocked this deposit asserting that GIH committed to buy convertible securities. GIH holds it was merely an expression of interest not a binding contract. The courts of competent jurisdiction in the UAE are currently adjudicating the matter. This amount – roughly KD72.3 million – is significant in relation to GIH's total equity of KD177.3 million and even more to its KD 145.8 million in equity excluding minority interests – a truer measure of the capital available to the firm.

Convertible securities issued by firms in the UAE seem to pose a recurring significant danger to both investors and issuers. If legal matters (proper drafting and law) can't be resolved, I'd suggest local authorities consider banning these.

You might be wondering why the auditors have not referred to GIH's ability to make payment on its rescheduled debt. Generally, the test is ability over the next year to make payment. Apparently, they're comfortable the Company will be able to do so. We'll discuss cash needs for 2010 in the "future" section.

Income Statement

Net operating revenues were a loss of KD0.4 million compared to a loss of KD45.8 million in 1Q09. The bright spot in both quarters was Fee and Commission Income at KD5 million and KD6 million respectively – mostly driven by GIH's asset management business. 

Jumping to the Cashflow statement, Net Cash from Operations is KD9.4 million and KD0.4 million respectively. If one adjusts for changes in assets and liabilities (removing these) and including interest actually paid (that's the KD3.1 million and KD11.7 million at the very end of the Operations section), cash flow from ongoing operations is negative KD7.2 million versus a negative KD40.8 million the year earlier. An improvement but still problematical. Something that shows the critical need to increase revenues to pay the light bills. Debt repayments are another major cash outflow.  And discussed in Financing Activities below. 

On the expense side, for analysis I  add Personnel Expenses and Other Operating Expenses to get ongoing "Core Operating Expenses" (ignoring for a moment interest expense).  Expenses independent of the financing structure of a firm.  It's also a good cash proxy for the amount that GIH needs to pay to keep the store open. 

In 1Q10 the total is KD7.53 million. In 1Q09 KD7.52 million.  Despite talk of a 9% improvement, overall there is none.  What's not explained is why Personnel Expenses have increased roughly 18.6% to KD2.9 million from KD2.5 million. Presumably, if these were one time payments (perhaps connected with downsizing), GIH would have highlighted this fact. Since they did not, then the presumption has to be that they are not. (Hint to GIH:  A little more disclosure could be useful, particularly if you've a good story to tell).

Interest expense was KD6.7 million though as the Cashflow Statement shows only KD3.6 million was paid. You'll note (if you care to trawl through GIH's website) that in the past interest expense and cash interest paid have closely tracked each other. I suspect the difference here has to do with the timing of the payments on the restructuring – which now appear to quarterly timed off the January signing of the rescheduling, viz., April, July, October, January.

Balance Sheet

Cash and Banks at KD92 million includes KD31.8 million (34.6%) at subsidiaries. That amount is not automatically available to GIH to meet its cashflow needs. The subsidiaries would have to either dividend the money to GIH or could, I suppose, lend it to GIH. The latter something we've seen before. 

Medium Term Borrowings have increased by some KD8.6 million. Since it's unlikely that new creditors are advancing funds, what could account for this? The restructuring fee of 1% flat and the time proportional fee of 0.25% p.a. which are to be capitalized. A rough estimate is KD5.5 million. With the unpaid interest of KD3.6 million – we're within the ballpark of the change. Though one would expect unpaid interest to be in Other Liabilities. Perhaps FX movements account for the difference? Also in Note 14 there's an intriguing but unexplained shift of some KD10.6 million from "Islamic" to "conventional". A voluntary shift by creditors for the rescheduling?

Total Equity is down some KD45.5 million from 31 December 2009. and roughly KD100 million from 31 March 2009.  For the 1Q10/FYE2009 change  KD17 million of  the decline is in Controlling Interests' share – the core equity of GIH.  Chiefly as a result of the loss for the Quarter.  Non Controlling Interests' share is down some KD28.4 million due to disposal of subsidiaries.  (I'm guessing the impact of Al Thouraia).  

Note 13 discloses that GIH holds some 89 million of its own shares (6.78% of equity).  These Treasury Shares were bought for KD59 million and have a market value of  KD9.3 million at 31 March 2010 (15.7% of the purchase price).

Cashflow Statement

In connection with the Income Statement above we looked at the major cashflow  items  in Operating Activities. 

One other item that jumps out is the KD18.2 million cash loss on disposal of subsidiaries. You'll recall from the Income Statement that GIH reported a KD1 million gain on disposal of subs. Since GIH needs cash to pay its light bills and its hungry creditors, this is quite perplexing. Why would the Company incur a net cash loss of KD18 million? Why not just hang on to the asset?

Note 5 provides the explanation. On 14 March 2010, GIH liquidated Al Thouraia recognizing a KD0.824 million accounting profit, while experiencing a KD18.725 million cash outflow. The liquidation extinguished GIH obligations in the amount of KD125.6 million. The rationale for KD18 million tradeoff is suddenly a lot clearer. It also inters the corpse of Al-Thouraia – a matter which GIH no doubt wishes itself and the market to forget. The company had already taken some preliminary (burial) steps in that regard. After the announcement with great fanfare in June 2008 of its private placement of Al-Thouraia, GIH appears to have gone silent on the topic. No mention in its 2008 annual of the great success in raising KD180 million. No press release. But then I may have not looked hard enough. The only GIH driven publicity I could find was a Bloomberg press item referring to advertisements that GIH placed in the Kuwaiti press in November 2009 noting that the Appeals Court had ruled it was not guilty in a civil case brought by a Japanese real estate firm regarding this transaction. Earlier that year in May GIH acquired effective control of Al-Thouraia in a non-cash asset swap transaction which allowed it to proceed with the removal of the life support tube.

GIH: THE FUTURE

Cashflow

Expenses

Let's start here. This is the "nut" that GIH needs to crack to get back to sustained profitability. As mentioned above, GIH's 1Q10 Personnel Expenses were KD2.9 million for a yearly run rate of some KD11.6 million. This is pretty much the level it ran for 2009 – KD11.9 million. 

Other Operating Expenses were KD4.6 million or an annual run rate of KD18.4 – which is 10.3% below 2009's KD20.5 million. 

Core Operating Expenses are therefore roughly KD30 million per year.

Interest Expense was KD6.7 million or an annual run rate of KD26.8 million. In 2009 GIH was subject to penalty interest so a comparison to 1Q10 is not useful. That being said, GIH's 2010 run rate is based on current low interest rates. Rates will eventually increase and so will GIH's interest bill. Normally, interest expense is included in operating expenses. 

Summing these up, GIH has annual "light bills"  (Core Operating Expenses and Interest Expense) of roughly KD50 million per year - the sum needed to keep its store open before any principal repayment of its debt. 

In the analysis below I'm going to use Core Operating Expenses to look at the long term since GIH's current strategy would eliminate the need for large amounts of debt .  Its chosen lines of business not being capital intensive. That gives a more long range view. Then we'll look at Core Operating Expenses plus interest when looking at the nearer term – the critical next 3 years.

Debt Service

In 2010 GIH is obligated to pay 10% of principal under its restructuring. KD50.1 million. Curiously, short term debt in its 31 December 2009 financials was KD61.8 million – some KD10.7 million more. To give GIH as much benefit as possible, we'll use KD50 million. In 2011 the amount is 20%  = KD100 million In 2012 it's 70% =  KD350 million.  In addition GIH owes KD40.9 million on Bonds for a total of KD390.9 million that year.

A table is probably the best way to summarize and present estimated Cash Outflows. To give GIH the best possible scenario all expenses are held constant. No inflation. No salary or operating expense increases. No change in interest rates. That means both the margin (even though it steps up) and the base rate. All in all a very "good" case.

All amount in KD Millions.

Cash Outflow	2010	2011	2012
Personnel	11.9	11.9	11.9
Other Operating	18.4	18.4	18.4
Core Operating	30.3	30.3	30.3
Interest	26.8	24.1	15.0
Debt Repayment	50.0	100.0	350.0
Bond Repayment	----	-----	40.9
Financing	76.8	124.1	405.9
TOTAL OUTFLOWS	107.1	154.4	436.2

 

Some quick observations. 

1. Reductions in Core Operating Expenses are marginal in terms of making the mandated payments. A 50% cut in Core Operating Expenses – if such were possible – will not meet the cash outflow needs. 
2. Sales of assets or creditor rotation (replacement loans or new equity) are key to fulfilling obligations. 
3. A KD100 million Rights Offering provides only a near term "relief". It does not solve the problem. And, if made this year or next, the investor is making a bet on the potential conversion of GIH's assets. 
4. Refinancing in the debt markets looks problematical because the "wise" banks have bunched up 70% of the maturities into a single year. If the deal were say five years, GIH might be able to reduce its debts to a more comfortable level while hopefully building up retained earnings if management's view proves to be more correct than mine.  Both factors plus time for debt markets to recover would facilitate bank refinancing. The logical conclusion is that the current lenders are the most likely source of loans in the next three years.

Cash from Operations

The key to understanding GIH's potential for revenue generation is understanding the economics of  its professed new business model. It is essentially service / transaction based focused on three lines of business ("LOBs"): asset management, investment banking, and brokerage. Commonly, these businesses have fairly modest fees – in the range of 2% to 5% levied against volume of transactions or assets under management. 

Contrast that with the principal investment model. And its close cousin the investment sales model. In the pure proprietary investment model a firm buys an asset for its own account. Representative profit margins range from 20% to 25% per annum. In the investment sales model, a firm buys and asset and places all or part of it with investors. In this business, while the firm earns placement, management and performance fees, the real money usually is in the mark-up over cost. The firm buys something for US$1.00 and sells it to its clients for US$1.30. Think Investcorp, Arcapita, etc. So a 25% to 30% one time up front fee on the amount placed along with the placement fee (1 to 2%) plus any later ongoing performance or management fees. Quite attractive margins.

As you can see from the relative profit margins, there is a clear implication for the volume of deals needed to deliver the same revenue stream.

There is also another key difference. In the pure proprietary investment business the firm does not depend on clients. It therefore does not have to worry about securing or maintaining client confidence. Its profitability is driven from the IRR on its investments. To secure returns, it merely needs access to capital and the ability to select good deals on average. Client confidence and marketing expenses only are important to such a firm if it intends to follow an investment placement model.

GIH's historical performance provides a bit of context on revenues for looking forward.

LOBs	2006	2007	2008	2009	2001E
Asset Mgmt	18.7	20.7	21.1	17.6	17.5
Investment Bkg	12.9	6.7	24.9	1.0	0.7
Brokerage	NM	0.7	4.4	2.9	2.1
Other	0	2.0	0.6	0.0	0.0
TOTAL	31.6	30.1	51.0	21.5	20.3

Two quick notes:

1. Immediate caveat re 2010E. GIH is the Bharti's advisor on Zain. While no doubt the fee will be larger than the KD0.7 above, it's unlikely that Bharti is paying GIH a "Goldman" fee (otherwise they would simply have hired Goldman). Supporting that analysis is the fact that Bharti is from a rather thrifty country that doesn't like to pay fees unless money is being raised – like another thrifty country to their East. 
2. Also note that Asset Management includes management, placement and performance fees. Of the three, management fees have historically been the largest.
   

So how does GIH meet the KD30.3 million Core Operating outflow assuming that KD20 million in Fee Income represents its ongoing base? 

1. Increasing AUM by 50% seems a bit of a stretch given the state of markets and the state of investors' pocketbooks. Unless Ms. Maha's friends at the Haya are predisposed to lend a helping hand. 
2. Generating KD10 million in brokerage seems a stretch as well. The markets are subdued. Even if markets suddenly become buoyant, it's hard to see this reaching more than KD5 million over the next three years. 
3. That leaves Investment Banking to raise between KD5million to KD 8 million (no change in brokerage). 

Two variables affect GIH's ability to offer Investment Banking services.

First, debt or equity issuance.

1. Macro conditions in the market. Are investors in a buying mood? Do they have the cash?  Do they have access to debt?
2. On the micro level GIH's appeal to issuers depends fundamentally on GIH's placement power. Before it selects a firm, an issuer has to believe that that firm can place the paper. And of course to earn the fee one has to actually place the paper. 

Second, advisory work.

1. As above macro conditions are key.  Do market conditions encourage asset buying?  Is financing available?
2. At the micro level, what is the perceived value added by the investment bank.  For regional deals, GIH boasts a fairly good reputation for research as well as local knowledge.

At a 5% fee for either, GIH only needs to generate KD100 million to generate KD 5 million in revenues.  KD 200 million if the fee is half.  It would seem that this is doable - given the right macro (market) conditions.

Taking GIH's revision in strategy as a long term commitment,  the long term path is much easier. - in terms of meeting expenses.  But see below.   Assuming there are no future significant principal investments, in the future GIH won't need a lot of debt. 

But we're three years away from that future.  In the critical next three years, it's hard to see this roughly KD20 million per year in interest expense being covered from operations.  

So it's likely that on an income statement basis GIH will incur losses. A very rough guess is somewhere around KD 20 million per year – with a fairly wide standard deviation maybe KD10 million or so. 

New loans are unlikely. As is new equity for the reasons discussed above.  And note that new capital wouldn't address the income statement though it would provide the critical cash needed to pay the interest bills.   Given GIH's condition cashflow is more critical than numbers on the income statement - though as I'll discuss below they are interrelated.

And here let's retrace our steps back to the long term view.  It  won't do for GIH to break even going foward.  It will have to earn a fairly decent return on capital.  Let's say 10% is fair.  That means earning another KD15 million or so.  It's hard to see Investment Banking making up the difference.  So there is a long term profitability issue for GIH's management to grapple with.

All this leads back to the topic of revenue and cash generation.

In client oriented businesses such as GIH is focusing on, client confidence is key to keeping existing business and obtaining new business. And given GIH's margins, significant volumes are required.

So now's an appropriate place to review client confidence.

It's a sad fact that clients tend to simple-mindedly associate the bottom line of a firm with that firm's management's skills. When profits are good, management is smart. When losses are incurred, management is dumb and perhaps even dishonest. Little consideration appears to be given to the overall trend in markets. It's very easy to be a clever boots when the markets are booming.   One finds the real clever boots  - like Abu Shukri - in down markets.

GIH has incurred significant losses over the past two years. On the positive side, at least  these losses are not unique. A lot of other "players" in the market had losses. Going forward, the key to damage control is closing the chapter on red ink as soon as possible. Based on my above analysis, that may be difficult as GIH attempts to build increased scale in their chosen LOBs.

More importantly, GIH distinguished itself from other serious market participants by getting into a rescheduling. And here just to be clear, I don't consider the abundance of Kuwaiti "investment" firms in trouble serious market participants. It was only their managements and perhaps a few other misguided parties (some shareholders and some credulous customers) who envisioned them as sophisticated investment banking power houses.  They weren't HLHZ or Stephens much less Goldman. 

By its very nature a rescheduling raises profound concerns about the viability of a firm. It takes many years to shed the aroma of near death. And where management has not been changed, there is a concern that the same captain and crew may run the ship aground - if not on the same shoals, similar ones.  GIH may have won an award for its rescheduling, but the fact the market notes is that it rescheduled.  Investcorp, Arcapita, NBK Capital have not.

Beyond that, if a client feels that a firm is ethically challenged, it is likely to be reluctant to do more business. Clients react rather negatively when they lose money on an investment that underperforms. And much more intensely when they lose money and feel something was not halal in the investment manager's conduct. The "funding episodes" involving Global MENA Financial Assets and Al Thouraia may be weighing on some market participants' minds. To be very clear on this point, GIH has not been convicted of any wrongdoing on these or other matters. 

However, client reactions are driven by perception not necessarily by reality. At one point, many "serious" investors believed that Mr. Madoff had a secret but sure fire way to beat the market. They acted upon that perception.

So a large part of GIH's efforts have to be directed to restoring market confidence. That explains the public relations campaign. It's apologia for the past, largely focused on its conduct during the rescheduling as opposed to how it got there.  Awards.  Accolades.  And its current visibility campaign ("We're Back and Better than Ever") - touting fund awards, issuing research and market commentary. Worthy of note is that Kuwait's two main papers – AlWatan and AlQabas which generally represent different political tendencies – have been largely supportive of GIH of late. 

All this suggests to me that GIH doesn't have an easy slog. 

1. Its economics are difficult both on the operating side (business model) and financing side (the short-sighted restructuring imposed by its "wise" lenders.)
2. And it still has work to do on its market reputation. 

These two factors are interlinked in a feedback loop. An "event" in one area affects the second which in turn affects the first.  One of GIH's tasks is making sure that as many of the events that occur are positive while focusing the lions' share of management time on asset sales.  Failure to meet obligations under the rescheduling is the critical danger.  What that may mean is that GIH won't be able to devote the resources  and management attention to building for the post three year period. 

Suq Al Mal Contact Form Launched

 HMG Now in Public Domain

In response to unprecedented demand  (well, there was one reader and she asked twice), earlier today Suq Al Mal announced the launch of its Contact Form to its readership.

Pictured above, the reaction of the obviously delighted crowds as imagined by Abu Arqala (third on left).  Yet another demonstration, as if one were needed, of Suq Al Mal's proven business model and the confidence of the market in this site and its management. 

So, if you want to send a side message, you now have a way.

However, my strong preference remains that you add a public comment directly to one of my posts.  This fosters dialogue and debate.  And, as can be seen from the instances when it  has happened, dramatically improves the quality of what's on this blog.

You'll find the link on Suq Al Mal's elegant Home Page near the top of the right hand sidebar under the aptly named heading "Pages".  There's always a constant creative tension here at SAM between subtlety and the obvious!

Dr. Omar Bin Sulaiman Freed After Repaying Dh51.5 Million in "Bonuses"

The National reports that Dr. Bin Sulaiman has been released after repaying Dh51.5 million in funds he was alleged to have misappropriated as bonuses during his tenure as head of the DIFC.  

As the article notes, the Dubai anti-corruption law provides an "out" if the funds are returned.  It's unclear if the return of funds constitutes an admission of guilt or is equivalent to a "nolo contendere" plea.

For more on this topic, you can check out Ken's post earlier this week at WallStWTF.    

Dubai World - Debt Rescheduling Deal Headline Terms Agreed In Principle

The press has been positively atwitter with news that Dubai World has struck a deal with its creditors.  

Even the normally circumspect The National is excited.  "Dubai World clinches US$23.5bn debt deal" trumpets its business page,  though it does note that: 

"The deal has been clinched with the seven members of the co-ordinating committee representing 60 per cent of Dubai World’s total bank lending over the “headline economic terms” of the restructuring proposals announced in March."

So what we have in effect is an agreement in principle with the creditors' committee on the very big picture terms - not on all the details.  A "bit" more work to do.  Presumably, the plan is to sell the basic plot line to the other creditors and then negotiate the details.

I haven't seen the structure outlined in the press - but I may have missed an article or two.

But we can turn to the press release  DW issued today.   Curiously, their press release has the more sober headline "Dubai World Agrees Headline Economic Terms in Principle with Coordinating Committee". 

The debt will be divided into two tranches:

1. Tranche A:  US$4.4 billion.
2. Tranche B:  US$10.0 billion with three options. 
3. Detailed repayment schedules are not specified.
4. Nor are interest rate margins.
5. Nor is the nature of the shortfall guarantee - normal option or enhanced option.
6. Each lender will receive a pro-rata share in Tranches A and B - with his choice of options in Tranche B. 

Tranche A

1. Final maturity five years.

 Tranche B.

1. Final maturity eight years.
2. Options 1 and 2 are available to US dollar lenders.  
3. Options 1, 2 and 3 to lenders in AED.
4. Option 1- The Increased Shortfall Guarantee Option - Lenders in Tranche B #1 will benefit from  an increased shortfall guarantee if the borrower cannot refinance or repay at maturity.
5. Option 2 - The Higher Interest Rate Option - Lenders in this tranche forgo the  increased government shortfall guarantee but get an unspecified "PIK" (payment in kind) interest.  As I understand this, it means that interest will be capitalized and paid at maturity.   Thus, on a present value basis, the nominal interest rate is higher than the effective yield.  They apparently get to "keep" the standard shortfall guarantee.
6. Option 3 - An Even Higher Interest Rate Option - Lenders with facilities in AED  may forgo the entire shortfall guarantee (both standard and increased) but get a higher cash payment and PIK coupon.

It seems that DW is being sensitive to the needs of its creditors.  

Without specific details - many of which appear still being worked out -, I'm reserving comment for now.  The major issue will be the haircut even if as some journalists have noted it is no longer being referred to.  As mentioned earlier, most visible will be the IFRS accounting mandated haircut as any negative interest margin is going to be buried in the aggregate interest revenue and expense numbers of the individual banks.  While it be nonetheless real, it will be invisible.  And therefore to a good banker won't exist. 

That being said even at this stage there is one key comment that can be made:  a stock market tip.  

Look carefully at the names of the banks in the Creditors' Co-Ordinating Committee - they are responsible for 60% of the US$23.5 billion.  You now have a powerful insight into their original credit underwriting process.  And apparently their risk retention policies. Normally, you'd have to pay a lot of money to get  inside information like this.  Luckily, the banks have decided to defray the cost. so you don't have to . Adjust your portfolios accordingly.  Banks with weak credit underwriting skills and processes are likely to make the same mistakes over and over again.  "Sophisticated" lenders who believe in the Tooth Fairy and the Implicit Guarantee are just as likely to believe in some other mythical financial creature. 

The Investment Dar – Review of 2008 Financials

Further to my earlier post, in which I discussed primarily the auditors' report on TID's financials, here are some additional comments.

Treasury Shares

The Consolidated Statement of Changes in Equity and Note 18 (Page 30) shows that TID and its associates owned 60,708,612 in Treasury Shares with a cost of KD45.224 million and a market value of KD6.192 million (13.7% of cost!). 

This is significantly larger than the holdings disclosed in TID's 3Q08 financials of KD9.820 million or 14,097,720 shares. 

Two reasons for the change. 

1. First, the inclusion of holdings of associates. 
2. Second, some minor 4Q08 buying by TID itself. 

Of the two, the associates' holdings were the most important factor. 

1. As at 31 December 2007, they held 35,019,092 shares at a cost of KD21.630 million and at 31 December 2008, 45,135,892 shares at a cost of KD34.993 million. 
2. As of the end of 2008, TID itself held "only" 15,572,720 shares.
   

Let's take a look at trading activity. Unfortunately, TID has not restated its interim financial reports for 2008 so we cannot determine quarterly trading patterns for the associates. 

1. In 4Q08 TID purchased net KD0.411 million. And for the entire year actually sold some KD1.2 million worth of Treasury Shares.  
2. For all of 2008, TID's associates purchased 10,296,800 shares for KD13.363 million. That would mean an average purchase price of KD1.321 per share. When I look at the KSE records for 2008, it seems that March 16 and 17 are the only two trading days with a price of KD1.320 when some 12 million or so shares traded.

Assuming that TID's associates bought their 2008 shares at market and looking at TID's own trading position, it seems there were no significant 4Q08 share transactions by the Group to influence its price – a time when one might have expected an effort to prop up the market value. 

Notable high volume days were 25, 26, and 27 November when 31.4 million, 14.4 million and 15.2 million shares traded roughly in the KD0.220 range. And then again on 17 December when 31.4 million shares traded at KD0.203. And finally on 23 December when 42.3 million shares traded at KD0.157.

Investments at Fair Value through Profit or Loss

In Note 5, Page 19 we learn that "Unquoted local funds with a fair value of KD55,575,647 as of 31 December 2008 (200&7: KD60,710,023) are in funds managed by the Group. Approximately, 52% of the assets of these funds of KD65,287,835 are held by the Group under Murabaha and Wakala payables."

Murabaha and Wakala Placements

Note 7 Page 20. A couple of points here. 

First, as you'll see M&WP with non financial institutions jumped from KD12.7 million in 2007 (7.3% of all M&WP) to KD43.3 million in 2008 (37.6%). From the Note these do not appear to be with related parties. However, TID has some KD51.2 million placed with a related party as of FYE2008. 

We also learn that as of 31 December 2008, it did not hold any collateral on these placements but subsequently acquired KD33.9 million of collateral (exact nature unspecified). 

KD51.2 million represents 44.4% of M&WP which seems a "bit" excessive in terms of risk concentration, especially since collateral seems to have been an afterthought. This amount is roughly 25.4% of FYE08 equity, though year end equity has been depressed by losses and fair value declines so it may be fairer to look at 30 September 2008 equity when the ratio was 11.3%. This analysis assumes of course that TID had no other exposure to this same related counterparty.

Financing Receivables

Note 8 Page 21. TID advises that subsequent to 31 December 2008, it acquired 8.7% of the equity in Bahrain Islamic Bank (an associated company) as settlement of a finance receivable of KD21,237,253. The market value of the shares was KD12,256,833. 

Somehow TID determined that it should recognize KD10,706,237 in goodwill on the transaction. 

And somehow TID's auditors signed off on this. When AA learned his accounting, a transaction was valued by the "boot" received. When there was a market price, that was the "boot" (value). So it's unclear what the basis was for recognizing this rather substantial amount of goodwill.  I guess it's a stark lesson of the need to stay current.  Back to the books for AA!

Investment Properties

Note 10 Page 22. TID advises the subsequent to 31 December 2008, it settled an outstanding Murabaha of KD16,763,386 by transferring property worth KD15,797,730. As a result it recognized a profit of KD965,656 on the transaction! The identity of the "wise" lender in this exchange was not disclosed. Perhaps, the "discount" was the price of an early exit and an excuse from the restructuring. It's unclear how the property was valued.

Investments in Associates

Note 12 Pages 23 -26.

Stehwaz Holding and Rehal Logistics

Page 23. During the year, TID reclassified investments in Rehal Logistics and Stehwaz Holding from investments available for sale to investments in associates where it could use the equity method of accounting instead of the previously used fair value (market price in this case). This reclassification magically created provision goodwill of some KD73.5 million which TID notes it wrote down to KD23.0 million. You may recall from an earlier post of mine that 47 shareholders in Stehwaz had raised some serious charges against TID and the management/board of Stehwaz.  Related to, if I remember  correctly, allegations of manipulation of fair values.  Allegations I'd hasten to note are not judicially proven. Also if I haven't mentioned it before Mr. AlRabah - the peripatetic director at Commercial Bank of Kuwait elected in what was portrayed at the time as a successful campaign to enhance corporate governance was Chairman at Stehwaz during this period.

Boubyan Bank Shares

Page 24. The Note also contains TID's side of the Boubyan Bank share dispute with Commercial Bank of Kuwait. 

Let's let TID speak for itself here.

"The Group's investment in Boubyan Bank (KSC) was transferred to a local bank under a repurchase agreement as part of an agreement with that bank to act as an advisor for restructuring of the Group's debts. The Group revoked the repo agreement when the local bank terminates the advisory agreement. However, the bank did not transfer title of these shares back to the Group but set off its value of KD94,103,965 against amounts due from the Parent Company of KD74,616,098 which is included in Murabaha and Wakala Payables as of 31 December 2008. The Group is pursuing legal action for recovering ownership of these equity shares. The Group carries the investment at its adjusted acquisition cost under equity method of accounting. The fair value of this investment as of 31 December 2008 was KD88,311,406. Subsequently, the Group ceased to have significant influence over Boubyan Bank since it is no longer represented on its Board of Directors when it was reconstituted in April 2009, and has reclassified it as investment available for sale from that date. On 16 June 2009 the court issued a verdict to suspend dealing on those shares temporarily, pending a ruling on the dispute."

This particular disclosure is intriguing, though its wording is obscure. My understanding was that that repo was a new transaction. In 4Q08 CBK bought the shares and gave TID some US$250 million. TID was supposed to buy the shares back in early 2009. On that basis, it's unclear to me how this transaction is related to the restructuring assignment. TID could retrieve the shares (at least theoretically) by giving CBK the cash on maturity. It did not. To be fair, it could not due to lack of funds. 

One other potential reading of this paragraph is that TID gave the shares to CBK in a non cash transaction. That is, it made CBK a secured creditor so it would lead the restructuring. That would seem to be what I'd call a preference (though careful readers aware from my above comment that I lack familiarity with the intricacies of Kuwaiti accounting standards may have drawn a similar conclusion about my knowledge of Kuwaiti laws).   Since this has not mentioned in anything I've seen, I am discounting this second explanation and not as TID did using a 3% perpetual growth rate in my valuation.

Taking the relative share prices of BB at 31 December 2008 of KD0.400 per share and the current price of KD0.540, the shares should be worth roughly KD127 million. If we assume CBK and TID settle for CBK's principal plus additional interest since the setoff, TID should get roughly KD49 million or so in return.

Prodrive

Page 24. During 2008, TID exercised an option to acquire 40% of Prodrive for KD11.2 million of which KD7.1 million is payable and the remaining KD4.1 million is a liability. TID has provisionally recognized some KD8.7 million in goodwill on the transaction. It's unclear what the timing is for TID's payment of these amounts is. Presumably, failure to pay might affect its ownership rights or the acquisition price.

Various "Investment Properties"

Page 25. Again another quote from TID. 

"The underlying assets of certain associates carried at KD237,502,699 in these consolidated financial statements are investment properties in Bahrain and Dubai carried at fair value. The Group's share in associates' results, includes gains on revaluation of these investment properties of KD60,657,096 based on the average of the range of values of independent valuation experts. Subsequent to the balance sheet date, these associates have reported a significant decline in the carrying value of these investment properties. Consequently, the carrying value of the investment in these associates has declined by KD60,622,492 as of 30 September 2009. The associates have not yet determined the impact of change in market values after that date and up to the date of these financial statements."

Impairment Testing

TID has recognized some KD61,560,335 for impairment in associates. It is unclear to me if this amount includes the KD60.6 million related to Various Investment Properties referred to above. Or whether it is before this number? Meaning that additional fair value decreases may be required.

Murabaha and Wakala Payables

Note 16 Page 28-29. This note is interesting for what it tells us about The Investment Dar Bank Bahrain (in which TID has roughly 79% shareholding and so therefore effective control). It seems TIDBB placed some KD253 million with TID on an unsecured basis. This seems a rather large amount / risk concentration by TIDBB with TID. 

Earlier press reports suggest to me (but don't prove) that some of these funds may have been customer investment accounts – in effect Islamic "trust" accounts either RIA (Restricted Investment Accounts where the client designates the investment) or URIA (Unrestricted Investment Account the client does not).

If I'm not mistaken the Central Bank of Bahrain amended one of its regulations for Islamic Banks to limit exposure to a single counterparty of the Islamic Banks own funds, RIA and URIA to 35% of regulatory capital. Often (but not always) when a Central Bank amends a regulation it is dealing with a problem that has occurred. No way to know for sure here. Post hoc does not necessarily mean propter hoc.

Final Comments

After reading TID's 2008 financials, I have some questions about he valuation of  some assets. As later financials are released, this topic will hopefully become clearer.

Global Investment House –Commentary on 2009 Financials & Rescheduling

Earlier yesterday when I saw that GIH had posted summary 1Q10 financials, I decided to do a quick comment while waiting for the full report. 

That reminded me that I had not taken a close look at their audited 2009 annual report. So as a way of preparing to comment on 1Q10 I did. 

Now instead of commenting on 1Q10, I've decided it's preferable to first make some comments about 2009 FYE as a way of providing a basis for later comments. And, as you quickly see, spouting off on a topic or two along the way.

Cash and Banks  - Less Than Appears

Note 12 Page 48: At year end, Cash and Banks was a robust KD101.2 million. A closer look at Note 12 discloses that KD55.1 million was cash at subsidiaries. That is, this cash is in separate legal entities (at least KD28 million at Al Thouraia) and not necessarily at the disposal of GIH. 

AlThouraia -A Strange Saga

Note 24 Page 57: It seems that a KD43.3 million deposit that AlThouraia Properties placed with a local bank was offset by that bank against a loan made by that bank to the Parent, GIH. It's unclear to me what the legal basis for this offset is. Did AlThouraia guarantee the loan made by the bank to GIH? If not, how does the bank cross legal entity lines? 

Particularly, when GIH only owns about 83.36% of AlThouraia, what is the basis for stiffing the minority shareholders on the offset? By the way GIH "recognized" the offset in its financials.   No skin off its nose as they say.

Note 25 Page 57: This discusses the acquisition of Al Thouraia through an asset swap – non cash. The assets are described on Page 58. In effect through this transaction, GIH acquired control of this company, added KD28 million or so to its cash balance, and removed KD83 million in borrowings (from Al Thouraia) from its balance sheet on consolidation. Note GIH does not necessarily have control over the new cash. And it's likely that the KD83 million in debt remains a legal obligation of GIH so that impacts GIH's (the Parent's) cash position contrary to the impression from the consolidated numbers.  It's not only down KD28 million but another KD83 million.  This transaction may also be a very convenient way of dealing with a troublesome issue as discussed below - Saudi Mazaya.

Page 58 reveals that Al Thouraia Project Management Company was established in 2008. Having raised a large amount of capital for no doubt worthy investments, it decided to place most of it with a single financial institution – which technically was not a bank but a entity with an investment firm license. Now why would Al Thouraia's highly responsible board do something like that?   Of course, some out there asked similar impertinent questions about the placements by Global MENA Financial Assets with GIH.

Well, it knew the credit of GIH intimately as this press release shows. And as we learn there: 

"Global announced the launch of Al-Thouraia Project Management Company's capital increase to KD180 million.  Al-Thouraia shall be utilized as a Special Purpose Vehicle (SPV) to invest its whole capital in Mazaya Saudi for Commercial Investment Company "Mazaya Saudi", which has been incorporated in the Kingdom of Saudi Arabia, and will be managed by Mazaya Holding Company "Mazaya". Global Acts as Lead Manager Al-Thouraia Project Management Company." 

If you've been reading the readers' comments to this blog (where you will often find more informed comment than in the main articles), you have seen The Rageful Cynic's link to a post on the saga of Saudi Mazaya.

Debt Rescheduling - "The Most Short-Sighted Unrealistic Deal of 2009"

Note 29 Page 61-62 details the debt rescheduling.  To put my comments in context, note that this US$1.7 billion equivalent deal is secured by US$1.4 billion in principal investments and US$0.3 billion in real estate.  All conveniently hived off into separate companies so that that the lenders should have an easier time of taking ownership.  They merely have to take the equity in the holding companies.  No need to re-register a plethora of individual assets in their own name.

This transaction, as GIH constantly reminds us, won the "Most Innovative Deal" by Euromoney for the Islamic tranche. And you can read more praise on pages 20 and 21 of GIH's 2009 annual report.  Earlier GIH also issued a brochure full of self praise.

After looking through the terms of the deal, I'd like to belatedly award the entire transaction "The Most Short Sighted Unrealistic Deal of 2009". 

A charitable soul would be likely to give GIH's management the benefit of the doubt – that they were coerced into signing this deal.   In evaluating this it would be useful to know just how hard they fought these terms, if at all.

I'm at a loss to find even a single kind word to say about financial institutions that would impose such a deal on a borrower. Banks are not to be faulted for trying to get back the amounts they loaned. But the terms of a rescheduling should be designed to minimize the damage to the borrower.  Milk the cow don't kill it.  

This deal, as you'll see from the details below, does not do this but sets a thoroughly unrealistic repayment schedule and then couples it with interest rate step ups and other onerous clauses. 

Repayment Schedule:

1. Year 1: 10% 
2. Year 2: 20%. 
3. Year 3: 70%. 15% in the first six months, 20% in the next six months and 35% at year end. 

Did anyone in their right mind think this was achievable without causing great damage?  That markets would recover that fast?  Did anyone notice that GIH has almost KD41 million in bonds maturing during Year 3 on top of this debt service? Even if markets have recovered a sale of that size - a literal fire sale - is likely to burn a lot of value up.

Interest Rate: 

1. Year 1: 1.5% plus Libor, EIBOR or Central Bank of Kuwait discount rate). 
2. Year 2: An additional 1% on the margin, taking it to 2.5%. 
3. Year 3: An additional 1 % on the margin, resulting in 3.5%. 

The interest rate step-up is designed to put pressure on GIH to meet the unrealistic repayment schedule. It's hard to see the rational rationale for this.  If the term were longer, say 7 to 10 years, this might make sense (though with the step ups a little more spread out).  But with the short tenor, it doesn't make a lot of sense. How many whips do you need to apply to the horse?   And, if GIH can't sell its assets, another 1% is not going to suddenly cause them to do so.

Fees: 

1. A 1% flat fee on the amount of the rescheduling.
2. Plus 0.25% of the amount rescheduled starting on 15 December 2008 to the date of signing. Both amounts to be capitalized. 
3. Then 24 months after signing another 1% flat fee on the amounts outstanding. Also to be capitalized.   A third whip?  Same comment as above.  If GIH is in a tough spot, an extra 1% on the debt isn't going to move them one way or the other.

Covenants:  

GIH commits to maintain: 

1. Asset value to debt outstanding of .75x. 
2. From 30 June 2010 a minimum Capital Adequacy Ratio of 5% increasing to 7% from 1 July 2011 through final repayment 9 December 2012. 
3. If GIH fails to repay 40% of the original facility amount by the second anniversary, the banks have the right to convert the shortfall into GIH shares. 
4. Finally, the proceeds of any new equity raised must be used to prepay the rescheduled debt. Funny I must have missed that point in previous discussions about GIH's approval of its Rights Offering. Did anyone (including GIH's wise creditors) think that potential shareholders are going to be excited about buying new equity in a firm that can't pay dividends and where the proceeds of the offering will not be used to build the business but to pay back apparently rather greedy lenders? Might it not have been a better idea to let GIH raise capital without requiring that it be used for debt prepayments? On the theory that additional capital would build the business capacity which would strengthen the banks' position.  And of course once the cash was in the till, it could be used for cash shortfalls on debt repayments?  Looks like a case of "wise" bankers shooting themselves in the foot.  One wouldn't use the expression "shoot themselves in the head" here as it's pretty clear there would be more damage caused by a bullet in the foot than one in the head to this wise collection of lenders.

No wonder the lenders were besides themselves with effusive praise for GIH and its management. It seems that GIH gave them everything they asked for. Or perhaps just about everything.  Whether this is all achievable or makes the best sense for the banks is debatable.

The only thing I can think of that would justify such terms would be a profound lack of faith in management - probably based on an adverse assessment of fundamental ethics.  That clearly can't be the case here.  Can it?

Competition: Revise That Corporate Slogan

Taking a cue from a post from Farmer Joe, Suq Al Mal launches its First Annual "Revise That Corporate Slogan" Competition.

Entrants may submit their entries by posting a comment.

And may, if they wish, suggest other firms whose slogans may need updating or revision.

Here are our two initial candidates: 

1. Dubai Holdings - For the good of tomorrow.
2. Dubai World - The Sun Never Sets on Dubai World

 

Gulf Investment House to Settle Remaining KD13 Million in Foreign Debt

AlWatan quotes Badr Abdullah Al-Ali, CEO, saying that GIH is in negotiations with five Gulf financial institutions to settle its remaining KD13 million in foreign debt.  The goal is apparently to finalize the process by this coming November.

You'll recall Badr appeared earlier in this blog as one of the members of The Investment Dar's Creditors' Committee.

In 2009 GIH reported a KD20 million loss.

For 1Q10, the loss was down to KD1.2 million.  At 31 March total borrowings were some KD57.8 million of which KD33.5 million was from related parties.   By looking at the 2009 related party note it appears that the then KD23 million in murabaha from related parties were from major shareholders. It's probably a safe bet that this is the case at 31 March 2010.  If I'm not mistaken (not a certainty as close readers of this blog know!), KFH owns 20% of GIH.  I tried to check but the KSE website is balking when I try to open the "Investment" Firms sector webpage.  It pays to keep one's eye on the ball.  According to the KSE, KFH owns 30.72% of GIH.

By settling this KD 13 million, GIH would have about KD9.3 million of non related party debt remaining.  However, it's not clear if it has settled any debt since 31 March.  In which case this proposed repayment may result in it becoming debt free.  In any case even after the proposed payment, KD9.3 million remaining its non related party debt burden would be quite manageable.

Dr. AlHashel to the New Capital Markets Authority. Sh. Mishal to the Central Bank?

Both AlQabas and AlWatan report that Central Bank of Kuwait Deputy Governor, Dr. Mohammed Y. AlHashel has agreed to take up the post of the head of the newly formed CMA.

AlQabas reports that Shaykh Mishal AlJabir AlAhmad Al Sabah has been chosen to replace him as Deputy Governor at the Central Bank.  Shaykh Mishal is currently Assistant Undersecretary at the Ministry of Commerce and Industry where he is also head of the Office of Investment of Foreign Capital.

Dr. Mohammed is described as both an academic and a banker.  More importantly he is seen as active and decisive - two things that are required for the position.

The Power of One's Personality

I missed this news item but as luck would have it I chanced upon it today. Just what Myers-Briggs type would that be?

Manama: A Kuwaiti man was briefly detained after the police arrested him for using his flasher-equipped car to join the security motorcade of Saudi Prince Khalid Bin Soltan, the deputy defence minister, during his visit to Kuwait last week.

The intruder was reportedly able to move with the security cars to all the places visited by Prince Khalid after the protection officers thought that his car belonged to the state security or was part of the prince's entourage, Kuwaiti daily Al Rai reported on Sunday.

However, the Kuwaiti officers started having doubts when they noticed that the car invariably parked at a distance from the other cars whenever the motorcade reached a place to be visited by the prince.

An officer eventually approached the driver and asked about his employer and was shocked to learn that he was not connected with the motorcade or was a member of the prince's entourage during the visit.

According to the paper, the man said that he worked at the education ministry and that his decision to join the motorcade was a personal initiative prompted by his love for action movies.

The man was detained by the state security, but was later released after the intervention of a "powerful personality", the paper said.

National Bank of Kuwait - Boubyan Bank Share Purchase Authorization

NBK announced on the KSE today that the authorization it received from the Central Bank of Kuwait to purchase up to 60% of the shares in Boubyan Bank expires 22 June 2010 not 20 May 2010 as previously reported.

This  gives a little more breathing room to Commercial Bank and the Investment Dar to work out a deal so they can sell to NBK.

[11:23:20]  ِ.ايضاح من (وطني) بخصوص المهله المحدده لتملك حصة في (بوبيان)‏
يعلن سوق الكويت للأوراق الماليه ، عطفا على اعلانه السابق بتاريخ ‏
ِ28-03-2010 و الخاص بموافقة بنك الكويت المركزي ‏على رغبة بنك الكويت
الوطني بشراء حصه بحد أقصى 60% من رأسمال بنك بوبيان لمدة ثلاثة
أشهر ، يفيد البنك بأن المهله الممنوحه من بنك الكويت المركزي تنتهي في ‏
ِ22-06-2010 و ليس كما ذكر سابقا بأنها تنتهي في 20-05-2010 .‏

Kuwait Stock Exchange Suspends Trading in 8 Additional Companies

If you've read other press accounts, you may be wondering why I am saying the KSE has suspended 8 companies when others say 22.  That's because 14 of the number have been suspended for some time now due to failure to provide earlier financial statements.  And those companies are indicated by ( موقوفة ) after their names in the official KSE announcement below.

The new companies include:

1. Global Investment House
2. The International Investor
3. Industrial and Financial Investments
4. KMEFIC
5. Aref Investment Group
6. Kuwait Finance and Investment Company (KFIC)
7. AlQurain Holding
8. Wethaq Takaful Insurance Company (Wethaq)

Seven of the above companies are from the investment company sector at the KSE.  Wethaq is from the insurance company sector.

What's surprising in the above list is the presence of GIH and KMEFIC.  KMEFIC is owned by the AlAhli United Bank Group.  Presumably, a lot of these companies will clear their financials in fairly short order.

[8:58:29]  ِ.وقف التداول باسهم شركات اعتبارا من اليوم ‏
يعلن سوق الكويت للاوراق المالية بانه تم وقف التداول باسهم (22) شركة ‏
وهى الشركات التالية:‏
الشركة الاهلية القابضة (اهلية) (موقوفة) ‏
شركة المستثمر الدولي (مستثمر د) ‏
شركة بيت الاوراق المالية (البيت) (موقوفة) ‏
شركة الاستثمارات الصناعية (ا صناعية) ‏
شركة الكويت والشرق الاوسط للاستثمار (كميفك) ‏
شركة المجموعة الدولية للاستثمار (المجموعة د) (موقوفة) ‏
شركة مجموعة عارف الاستثمارية (عارف) ‏
شركة الدار للاستثمار (الدار) (موقوفة) ‏
شركة اعيان للاجارة والاستثمار (اعيان) (موقوفة) ‏
شركة بيت الاستثمار العالمي (جلوبل) ‏
الشركة الخليجية الدولية للاستثمار (غلف انفست) (موقوفة) ‏
الشركة الكويتية للتمويل والاستثمار (كفيك) ‏
الشركة الدولية للاجارة والاستثمار (د للاجارة) (موقوفة)‏
شركة القرين القابضة (قرين قابضة) ‏
شركة وثاق للتامين التكافلي (وثاق) ‏
شركة لؤلؤة الكويت العقارية (لؤلؤة) (موقوفة)‏
شركة مجموعة المستثمرون القابضة (المستثمرون)(موقوفة) ‏
شركة المشروعات الكبرى العقارية (جراند)(موقوفة) ‏
شركة الصفاة العالمية القابضة (صفاة عالمي) (موقوفة)‏
شركة فيلا مودا لايف ستايل(فيلا مودا) (موقوفة)‏
شركة الشبكة القابضة (الشبكة )(موقوفة)‏
الشركة الكويتية للخدمات الطبية(عيادة ك) ‏
اعتبارا من اليوم الاحد الموافق 16-05-2010 ،وذلك لعدم تقديم البيانات ‏
المالية المرحلية للفترة المنتهية فى 31-03-2010 ،فى الموعد المحدد .‏

Dubai Holdings Commercial Operations Group - Still No Financials

Well, "bukra" is in the official slogan of the Holding Company so this isn't a surprise I suppose.

DHCOG announced today on the Nasdaq that it still didn't have its financials finalized.

"Dubai Holding Commercial Operations Group LLC (“DHCOG”) has further extended the publication date of its 2009 consolidated financial statements, due to the complexities of consolidating the financial results of its various operating businesses across multiple geographies. In accordance with the rules and regulations set forth by the listing authority at Nasdaq Dubai, the voluntary suspension of listing on the exchange of DHCOG’s Medium Term Notes remains in force until DHCOG issues its Audited 2009  Financial Statements and Annual Report on or before May 31, 2010".

Remind me, did DHCOG buy a lot of new foreign subsidiaries in 2009?

AlGosaibi v Maan AlSanea - AlGosaibi Attempts to Enlist Kuwaiti Banks Against Saad

AlQabas reports that AlGosaibi and its counsel (Saudi and American lawyers) met with Kuwaiti banks exposed to both AlGosaibi and the Saad Group to request that they unite their legal actions against Saad by forming an alliance whose goal would be the combining of their individual legal documents and other evidence, including any forged documents or documents suspected of being forged to strengthen the legal position of all creditors in recovering their money through the legal process.

At the beginning of the meeting the Kuwait banks reportedly indicated their intention not to co-operate with one party of the debtors.  

The representatives of AlGosaibi responded by:

1. Assuring of the start of a "new page" of co-operation between AlG and its creditors.  You'll recall earlier that AlQabas had carried a report that Kuwaiti creditors were frustrated with AlG's responses to their attempts at contact and negotiation.
2. That the Kuwaiti banks should have a permanent representative in the creditors committee in Riyadh and Dubai so that they would learn "in near proximity" (first hand) what was happening.
3. That 70% of the AlGosaibi Group's wealth had been designated to pay its debts.

The banks responded to the last point by noting they were not going to entertain any discounts on the debt from any party (either AlG or Saad).  And that they were on the verge of taking legal steps against Saad.  This is described in the last paragraph of the article as the filing of cases in Saudi by some and by others in the USA.

The article then notes that the Central Bank of Kuwait has instructed Kuwaiti financial institutions to provision 100% for AlG and Saad exposure by 31 December 2010.  Three banks have almost already achieved that level.  It being understood that some banks had relatively small exposures.  As for those with larger exposures it's expected that they will require until the end of the year.

Assuming the article is correct, what's interesting about this is the apparent attempt by AlGosaibi to enlist creditors in its campaign against Maan AlSanea and the Saad Group.  As you'll recall, AlG has accused Mr. AlSanea of forging certain documents to obtain loans in AlG's name but then using the funds for his own purposes.  And, as you'll recall, Mr. AlSanea vigorously denies these accusations.

AlG appears to be trying to bolster its accusations of wrongdoing by Mr. AlSanea  by enlisting third parties to join in its campaign.  By portraying itself as the innocent victim of wrongdoing,  AlG may hope to  deflect creditor anger and pressure (from itself) to Mr. AlSanea.  A tactic, that if successful, might also set the stage for a later justification for a discount on the debt.

Mashreqbank v AlGosaibi - Mashreqbank's Consolidation Motion Accepted

The NY Supreme Court accepted Mashreq's motion to consolidate its two cases against AlGosaibi (the partnership) and the individual AlGosaibi heirs.  Decision was made on 10 May and posted on the NY Supreme Court's website today as Document #128.  If you'll look at earlier posts, there are details on how to access the NYSC's website.

As you'll recall, having the two cases separate had posed a legal problem for Mashreq as outlined in this earlier post.  The cases in question are 601650/2009 (against the partnership) and 602717/2009 (against the individual heirs/partners).