Aref Investment Company Putting Final Touches on Restructuring Plan Lauds KFH's Help

AlWatan quotes Ibrahim AlKhazzam, Managing Director, of AIG that they are putting the final touches on their restructuring plan.  As envisioned AIG will make its first principal repayment 18 months from signing to give the company sufficient time to recover and implement its restructuring.  The plan is to restructure both liabilities and assets (AIG is a significant creditor as well as a debtor).

He noted that liabilities were only 1.9x equity - what he described as a low ratio.  Asset values were increasing.  He cited a particularly bright future for Aref Energy - with more than KD30 million in cash and no debts - ready to participate in the Government's Five Year Development Plan.

He expects to finish the restructuring in two months - noting that international consulting firms were helping in the process.

As I noted in an earlier post, KFH owns 53% of AIG and to the extent that it puts its financial and market muscle behind AIG, the company should be able to move forward.

Mr. AlKhazzam outlines in this article just how much KFH has done.  

First, there was the KD132 million loan extended so that AIG could pay off foreign creditors and investment funds - greatly reducing the complexity of negotiations by eliminating a potentially troublesome set of creditors.  And as well demonstrating a very strong vote of confidence by KFH.

What was news to me was that KFH has been not only supporting AIG but its associated companies.  Specifically named were Munshaat Real Estate Projects (25% ownership by AIG.  KSE Stock #433), Aref Energy Holding (72%, KSE #627), Sukuk Holding (49%, KSE #239).  He mentioned that KFH's 100% subsidiary Liquidity Management House was helping AIG negotiate with lenders.

Boubyan Bank to Reopen Rights Offering

AlWatan reports that BB's shareholders will be asked to approve the reopening of its partially successful Rights Offering for the roughly 15% shares that weren't placed earlier.  This at an ordinary general shareholders meeting 29 April.  The subscription period will be 2 May through 9 May for shareholders of record as of 12 January 2010.

Earlier post here.

Commercial Bank of Kuwait Weekly Board Meetings -- Priority Negotiations with Distressed Clients

AlWatan reports on the dynamic goings on of Commercial Bank of Kuwait's new board.  Almost weekly meetings to discuss and implement strategy.  A new temporary CEO, Luay Fadhil Muqamis, has been appointed.  Priority given to negotiations with distressed clients (unable to pay).

After reading this, it seemed to me as though the Chief Editor of AlWatan has a friend inside CBK. Or some other close relationship.

The Investment Dar Clears Another Hurdle in Its Restructuring

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

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

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

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

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

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

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

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

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

Aref Investment Company KD127 Million in 2009 Losses Restructuring Ahead

AlQabas reports that reported Fiscal Year 2009 losses of some KD127 million (which is roughly KD20 million more than Aref's paid in capital).

The latest financials on the KSE are 30 September 2009.  At that point it had KD57 million in losses for the year.  Adding another KD70 million takes shareholders' equity to roughly KD175 million as opposed to KD304 million at fiscal year end 2008.  There are sufficient reserves to offset the losses and thus eliminate the legal problem of retained losses exceeding a substantial amount of paid in capital.  The possibility of a capital increase is also mentioned.

More troublesome for the company is the fact that current assets are only KD41.7 million versus current liabilities of KD347.6 million.

Current management is said to be working hard to clean the books. To draw a line between the old board and the new so that responsibility can be established.

KFH is credited with helping solve the problem of foreign debts by lending KD130 million.  Local debts (before the KFH loan) were reported at some KD73 million.  It should be noted that KFH owns some 53% of Aref. 

With KFH behind it and presuming that KFH is committed to using its financial resources to help, Aref should be able to work its way through the restructuring process.

White Knight for Shabka Holding: The Saudi Investor

If you don't recall the rather sad story of Shabka Holding, here's the earlier link.

Earlier this week, Shabkha held its annual general shareholders meeting.  There were reports in several Kuwaiti papers.  Let's go to the largest circulation paper in Kuwait (and a princely one at that) for the details. 

The meeting proceeded with 63% of shareholders present.  Not a hard trick since Nayef Abdul Aziz Abdullah Al-Enezi, Chairman and Managing Director, holds 40.65% and Dr. Badr Abid AlThafiri, CEO holds 12%.  Both bought sometime in early 2009 if I'm not mistaken.

To get an idea of the problems that Shabka faces, let's review some details provided by AlThafiri who spoke to reporters at the meeting. 

There is an ongoing dispute with International Leasing and Investment.  Shabka has asked the Islamic Development Bank (Jeddah) which holds shares in both Shabka and International Leasing (roughly 28% in the latter!) to mediate.  

The dispute relates to related party transactions in the amount of KD22 million which are in the form of "wakala investments".  In addition to a contract to buy 7% of the shares of Athman  (Athman Investments in which I believe International Leasing was and may still be a shareholder) which led to additional losses of KD19 million.  

As a side note, you'll recall that in late March AlEnezi accused International Leasing of selling assets to Shabka at above market prices.  The sales he asserted were not ratified by the shareholders annual general meeting but approved at the board level (which IL controlled).  His assertion is that if these contracts were unwound, Shabka's losses would be KD5 million less than current.  

Back to the article, he says that current losses are some 68% of total capital as of year end 2009 and that this is an improvement from 233% as of year end 2008.  Shabka's 2009 financials aren't posted on the KSE yet.  Its 31 December 2008 financials show negative equity of KD7 million - the 233%. That would make the losses roughly KD10 million at 2009 year end.

Back to the article, during 2008, the previous shareholders increased the capital in the company from KD5 million to KD15 million (this refers to the legal capital - par value times the number of shares outstanding).  Since the shares were offered at KD0.250 per share (a KD0.150 premium per share), the gross amount of the capital increase would appear to be some KD25 million - though surprisingly elsewhere in the article AlThafiri says the the share premium account only holds KD9.93 million - leaving roughly KD5 million not accounted for.  Since Shabka has not yet published its 2008 financial report, one cannot come to a firm conclusion with what happened.  In any case, AlThafiri says that once the new board took over, they discovered the firm's assets were KD400,000.  He attributes the difference to use by some members of the previous board to acquire control over Abraj.  (AA:  This could be AlAbraj Holdings, which by the way owns 39.3% of International Leasing.)  And that there was only KD7 in Shabka's accounts.  That's not a typo.  Seven dinars.

To deal with its problems, the shareholders agreed at the AGM to:

1. Use the KD9.93 in the Share Premium account to cover some of the losses. This and other amounts appear sufficient to cover the 2009 losses.
2. Increase paid in capital from KD15 million to KD50 million.  No discussion of the price of the offer.  Shabka's shares have a nominal value of KD0.100.
3. An unnamed Saudi investor is willing to step up for 70% of the capital. 

Two puzzling things from that latter point:

1. Who the investor is?
2. Why he is stepping up?  It's not as though Shabka has a lot to offer, except for its license.

One final point, as disclosed in its 30 June 2008 interim financials, IL bought 70% of Shabka during the first six months of 2008 for some KD32.4 million. During that same period it sold 15.1% of the company for KD23.2 million.  You can do the math.  A good return.  And I suppose a "wise" investment for someone.  And also as disclosed, was in the stages of selling the rest of its investment. Shabka traded as high as KD0.590 in the second half of 2008.  Its last trade was at KD0.044 on 31 March 2009 before it was suspended by the KSE for failure to provide financials.

New Graft Case at Nakheel

As reported by the Khaleej Times.  Some rather expensive non existent pens.

Mubadala US$2.5 Billion Refinancing

As announced yesterday, Mubadala successfully refinanced its US$2 billion loan.  Some additional details today courtesy of Gulf News.

While the margin increased from 17.5 basis points to 75, this is still a comfortable margin especially given current market conditions.  And as well the downgrade by Moodys in March to Aa3.

The facility was also well received.  US$4 billion in demand.  And it was up-sized (I just had to use that word) by US$500 million to provide a back-stop for refinancing under Mubadala's ECP program.

Dubai World Rescheduling - Nakheel Trade Creditors Offered 10% on Settlement Bonds

There's been some commentary on the princely interest rate that Nakheel was reported to be offering its trade creditors - 10% - compared to the much smaller 1% to financial creditors.

This article from Maktoob Business outlines the rationale. 

It's all a matter of devoting resources to those parties that benefit the company and the national economy the most.

Simply put there is more bang for the buck locally in paying our trade creditors.

Something discussed in an earlier post here.

Oula Fuel

 

Following up on my earlier post, I noticed that today there was an announcement on the Kuwait Stock Exchange that the Chairman and Managing Director of Oula, Mr.Ahmad Abdul Aziz Al Ghannam, had resigned.

[9:13:10]  ِ.استقالة عضو في مجلس ادارة شركة الاولى للتسويق المحلي للوقود
يعلن سوق الكويت للأوراق المالية بأن شركة الاولى للتسويق
المحلي للوقود افادته بأن مجلس ادارة الشركة وافق على استقالة ‏
كل من السادة شركة عبدالعزيز احمد الغنام واخوانه وممثلها
السيد / احمد عبدالعزيز الغنام رئيس مجلس الادارة والعضو المنتدب ‏
من عضوية مجلس ادارة الشركة.

International Investment Group Issues Clarification - It's Business As Usual

Today IIG issued a press release on the Bahrain Stock Exchange (Arabic) and NasdaqDubai (English).

The press release notes that in addition to engaging KPMG Advisory WLL IIG has hired the Law Office of AlWaqayan, AlAwadhi and AlSaif (local Kuwaiti law firm) and DLA Piper (international law firm).  It is also looking to set up a committee (the NasdaqDubai press release uses the more elegant word "forum") to negotiate with creditors.   

As noted before, an interim report from KPMG is expected at the end of May with the "final" at the end of June.  As per my earlier post, this appears to be a rather preliminary report.

Now creditors would be naturally concerned when their obligor misses  the payment of what some might characterize as  a relatively trivial sum of US$3.4 million for interest. 

Notwithstanding the above announcement IIG wishes to confirm that IIG's and its associated businesses continue to trade on a normal basis and the day to day operations of such businesses have not been effected by the above event.

While an interesting definition of what is "normal", this belated entry into our competition is clearly not strong enough to cause our distinguished panel of judge (AA) to reverse the earlier award to Dr. Adnan Musallam and TID.   Though I suspect there will be additional opportunities for further entries as time passes.

DIFC Court to Hear Case by Amwal AlKhaleej Against Abdullah Brothers

The National reports that the DIFC Court has rejected a motion by counsel for the Abdullah Brothers to the DIFC Court to dismiss the case for lack of jurisdiction.

Earlier post here.

Agility Wins Kuwaiti Court Case

Agility announced on the KSE today that the Kuwaiti Cassation Court (the highest court in the land) had ruled in its favor in the case brought against it by Kamal Sultan.  KS was asserting a right in the contracts signed between Agility and the US Defense Department.  This is a final judgment against which there is no appeal.

Agility may have preferred a victory in another venue, but this is a victory nonetheless.

English language press release here (from Dubai Financial Market).

Press release from KSE below.

[8:44:28]  ِ.ايضاح من(اجيليتي) بخصوص صدور حكم لصالحها ضد "شركة كمال السلطان"‏
يعلن سوق الكويت للاوراق المالية بان شركة المخازن العمومية (اجيليتي) ‏
افادت بان محكمة التمييز قضت برفع الطعن بالتمييز رقم 1234/2008‏
المرفوع من شركة كمال مصطفى السلطان ضد شركة المخازن العموميةواخرين بجلسة
ِ20-04-2010وبذلك يكون النزاع القائم بشان الادعاءبوجود عقد محاصة بين شركة
كمال مصطفىالسلطان وشركة (اجيليتي) وادعاء شركة كمال مصطفى السلطان بان لها ‏
حقوق مالية مرتبطة بهذا العقد قد انتهت بصورة قطعية ونهائية.‏
وقد انتهت عدالة المحكمة برفض الطعن وبتاييد احكام القضاء التي قطعت بان ‏
هذه الشركة لا وجود لها فى الواقع ،وانه قد تم التقايل عنها وان شركة كمال ‏
السلطان لم تنفذ اى من التزاماتها الخاصة بالشراكة على النحو الموضح تفصيلا ‏
بالاحكام القضائية المؤيدة بالحكم اعلاه ،وبذلك تكون القضايا المرفوعة من ‏
شركة كمال السلطان ضد شركة المخازن العمومية قد انتهت بحكم نهائي وبات وجائز
لحجية وقوة الامر المقضي فيه بما يمنع اعادة طرح الموضوع على القضاء مجددا .‏

2-3

Isn't Wiggum a character on The Simpsons?

Neat Ad

Nothing whatever to do with the GCC or the financial markets, at all.

The Long Wait is Over - Finally

From Ithmaar's press release on the BSE this morning.

“The CBB’s formal approval allowed Ithmaar to immediately implement its highly anticipated plans for a comprehensive reorganization with its wholly-owned subsidiary, Shamil Bank,” said HRH Prince Amr. “The reorganization involved both banks pooling their resources together to create a single, more efficient and significantly stronger retail- focused bank with an Islamic license under the Ithmaar brand. Although the Shamil Bank brand now no longer exists, the reorganization is entirely seamless and there is no change, whatsoever, in customer, depositor or investor accounts or relationships,” he said.

The unbearable suspense ends with one quick stroke, a seamless stroke at that.

Kuwaiti Banks to Sue Saad and AlGosaibi This May

Following up on an earlier story, AlQabas reports that the lawyers for four local banks (named earlier as Kuwait Finance House. Commercial Bank of Kuwait, Gulf Bank and Burgan Bank) are putting the finishing touches on the "files" (cases) which will be filed in London and Riyadh.  Apparently, some of the loans (which are described as being no less than US$1.5 billion) are subject to Saudi law!

According to the article, the motive for pursuing the cases in Court is that negotiations weren't fruitful.

The article also mentions the ongoing suit by AlAhli Bank of Kuwait against Saad in the New York Supreme Court.

AlKhorafi Group Moves on Oula Fuel and Gulf Bank

AlQabas reports that the AlKhorafi Group has increased its stake in two Kuwait companies.

1. Oula Fuel (KSE Symbol 645):  A 40 unit gas and service station chain.  Shares were bought from National Investment Company by companies owned by Mahmoud Haidar (Emerald Group) in the amount of 38.2 million shares at KD0.420 per share (roughly KD16 million).  But shares were for the AlKharafi Group and other allied investors.
2. Gulf Bank (KSE Symbol 102):  A major commercial bank in Kuwait.  Major owners are the AlGhanem Family, Behbehani, KIA and now shown on the KSE website "Emerald and others".  Reportedly, AlKharafi has been buying shares in the KSE and is one of the major shareholders.  

AlQ reports that directors at both Oula and Gulf are expected to resign shortly so that AlK and his co-investors can appoint their own candidates to the Boards.

Kuwait Court Delays Action in Boubyan Bank Case Against AlAbraj Holding

AlQabas reports that legal sources informed it that the Court decided on 20 April to postpone action in Boubyan's bankruptcy case against AlAbraj until 6 June.  This appears in part to be to allow the addition of a fifth defendant, an unnamed local bank, in the case.  The article also notes that Boubyan had filed a motion to compel other Kuwaiti banks to disclose any AlAbraj assets they held.  No doubt in an attempt to block these and eventually realize them.

Boubyan's attorney reportedly asked the Court to set the future hearing as soon as possible given the long and persistent delays so far. (Welcome to the GCC court system!).  On a closing note, AlQ comments that Boubyan's (separate) case against the Board of Directors for temporary compensation is scheduled for a hearing on 27 April.

Idiocy Knows No Borders: The Great Microchip Danger

At times of national danger, it's particularly comforting to know that there are those out there ever vigilant to manifest threats to our way of life and wise enough to develop workable solutions.

The Georgia Legislature has stepped up to take decisive action to criminalize the involuntary implanting of microchips in its citizens.

And from the testimony of the lady in the article apparently not a moment too soon.

Three troubling thoughts though:

1. If evildoers out there (if I may be allowed to coin a term) decide to plant a microchip in the unsuspecting citizen, is a misdemeanor penalty likely to deter them?
2. If fact since the crime is involuntary implantation, won't that just lead them (and if you have to ask who "they" are, well you may already have been implanted) to refine their mind control techniques?
3. The two main sponsors of the bill are Majority Leader "Chip" Rogers and "Chip" Pearson.  And that is perhaps the most troubling fact of all.  And may be the only fact in relation to this bill.