Markaz Kuwait: Massive Losses in Kuwait Investment Firm Sector

The fine folks at Markaz have issued a report on the Central Bank of Kuwait's proposed new regulations for the Kuwaiti "Investment" Firm Sector.

Markaz is generally supportive of the CBK's actions.

The "headline" story here (and sadly not a surprising one) can be summed up in this quote:

The sector lost over USD 2 bn in 2009 following a monstrous loss of upwards of USD 3 bn in 2008, and continues to post an aggregate loss of over USD 100 mn in 1Q10 (an annual run rate of USD 400 mn). The losses are tied to impaired assets which companies have been writing-off in an attempt to restore some health to their balance sheets. Liquidity and over-leverage have also been an issue for the sector, whose assets are often comprised of difficult to value and illiquid investments which are then pledged as collateral against further borrowings. These issues were not bothersome during the boom periods; however, when the global financial crisis hit, it exposed the sector’s vulnerabilities resulting in a massive destruction of wealth.

The report has three main parts:

1. A discussion of the ratios.  This is well worth a close read.
2. The CBK's analysis of compliance. (Discussed below)
3. Markaz's own analysis from a sample of 32 companies.

I'll let you read Markaz's discussion of the ratios - not much for me to add.

As to the CBK's analysis,  of the 100 firms in the sector:

1. 94 meet at least one of the new criteria.
2. 82 at least two of the new criteria.
3. 49 all three of the criteria.

Markaz has done a bit of data gathering and number crunching to come up with a ratio compliance test for 32 firms in the sector for the first two new ratios:  total leverage and liquidity (the latter what Markaz calls the "Acid Ratio").  It's not possible to calculate the third ratio (foreign debt exposure) given the woefully inadequate disclosure of foreign borrowings.

The detailed results of Markaz's analysis are in Appendix 2.  On an aggregate basis, of the 32 firms in their sample.

1. 75% met the Leverage Ratio.
2. 44% the Acid Test (Liquidity Ratio)
3. 34% both ratios.

One point I would like to highlight is their focus on fair value reserves.

The problem arises in the valuation method used in this segment which can be vague at best and completely misrepresentative of “actual” value in the worst case. By misrepresenting the fair value of Assets Available for Sale, a company can inflate its Fair Value Reserve (and therefore Equity figure) by booking Unrealized Gains, which would produce a lower leverage ratio." 

Earlier post on this topic here.

Jones Lang LaSalle: "Dubai Real Estate Slowdown to Continue"

You've probably seen reports quoting Jones Lang LaSalle's prediction that half of Dubai's commercial office space will be vacant in 2011 and that the residential property market will also be under stress until then as well.

Well, here's the original JLL report that is the basis for those news items.  Besides containing more information, the JLL report also provides some nuances.

Commercial Office Real Estate

1. While there is a substantial vacancy rate in commercial office space currently at 38%,  only 12% of single ownership stock in the Central Business District ("CBD") is vacant.
2. JLL sees very little demand for "strata titled" space.
3. There is in some respects a shortage of good quality supply (location, specification, legal title) as evidenced by the lower vacancy rate in the CBD.

Residential Space

1. Rents for  higher end apartments (Burj Khalifa) continue to decrease significantly.
2. Higher end villas are hit even harder.

Retail Market Space

1. Estimated Rental Values down 39% from 2Q09 to 2Q10.
2. Retail sales growth expected to come from department stores and mid market value chains rather than luxury goods.
3. No significant new supply until 2013 (Mall of Arabia in Dubailand).

Hotels

1. Beach hotels have higher Average Daily Rates than business hotels - AED1,386 versus AED660.
2. New hotels are expected to intensify competition and lead to a decline in ADRs not a decline in occupancy percentages.

There's a lot more in the report and you can "mine" it according to your own interests.

Central Bank of UAE Preparing Provisioning Guidelines for UAE Banks for Dubai World Exposure

Quoting Reuters, Emirates Business 24-7 says that the CBUAE has advised banks not to take specific provisions against their Dubai World exposure pending the CB's release of guidelines on provisioning.

As discussed in February, the CBUAE is in the process of revising its general guidelines for loan classification and provisioning.   

No doubt they will want to do a bit of "fine tuning" regarding guidance for Dubai World.

British Architectural Firm Sues Dubai Properties for AED27 Million (US$7.3 Million)

Bradley Hope over at The National reports that Hopkins Architects, a major UK architectural and engineering company, is suing Dubai Properties in the DIFC Court  (Court Case CFI 034/2009) for AED27 million (US$7.3 million) for what it claims are unpaid fees and costs it has incurred in connection with Central Park 08, a set of twin 50 storey towers next to the DIFC.

As per the DIFC Courts website, Dubai Properties has until 12 July 2010 to present its defense.

This amount is rather small beer in financial terms.  And failure to pay reflects either a very serious commercial dispute.  Or a rather severe cash crunch at Dubai Properties.

The article leaves the impression that HA stopped work because of non payment and then DP sought to cancel the contract.  Assuming this is correct, it would seem then that DP would owe HA for work to date less any deductions for any damages it can claim against HA.  From the article it sounds as though DP is not raising any counterclaim against HA, though it may still be early in the legal game.

In any case, I am taking comfort as I suppose we all should by the recent words of a high placed guy in the Emirate who should know the score.  While this quote refers to Dubai World, I'm sure that it probably equally applies to Dubai Holdings.

"I'm not worried about the company, the company has got the wealth. So they have something, and they will come back very very quickly."

Though I'll confess I'm not so confident about HA collecting its receivable.

AlGosaibi Offers Creditors 20% on the Dollar Plus Proceeds of Lawsuits Against Maan AlSanea

Quoting informed sources, Frank Kane at The National reports that AHAB has offered creditors a cash payment of US$1.8 billion on US$9 billion of liabilities plus up to US$4 billion hoped to result from AHAB lawsuits against Mr. AlSanea.   

As Mr. Kane notes and as I have as well before, Mr. AlSanea continues to deny AHAB's allegations against him.

The al Gosaibi family of Saudi Arabia is prepared to sell much of its 70-year-old business empire to help pay its creditors, informed sources say.

The proposed net payment is a minimum of 20% (US$1.8 billion) with a maximum of 64.4% (US$5.8 billion).

As the article points out, the net value of Mr. AlSanea's assets is not known. 

Assuming for a moment that AHAB would be successful in its lawsuits, I believe it would become another of Mr. AlSanea's unsecured creditors.   And would therefore be entitled to a proportionate share of the "estate".  As well, the resolution of the lawsuits is probably something that will require a very long time to settle.  In objecting to a potential suit against itself by Trowers and Hamlins,  AHAB is reported to have said that "litigating the intercompany positions will take years if not decades and that such litigation only depletes resources that will be needed to effect a workable commercial settlement".   One may perhaps safely presume that the same would apply to AHAB lawsuits against Mr. AlSanea.  

Putting aside the depleted resources argument, one might argue that the present value of the proposed settlement is therefore less, much less, than 64% or 20% for that matter (which will depend on sales of AHAB assets). 

DIC Cashes Out of Merlin (Madame Tussaud's)

Asa Fitch over at The National reports that DIC has sold its remaining 6% stake in Merlin to CVC.  No doubt an element of cash need drove the sale, though DIC received the lion's share of its return in 2007 when it received GBP 1 billion in cash plus 17% of Merlin.  This is compared to the purchase price of GBP800 million in 2005.  

The additional amount for the sale to CVC is icing on the cake.

According to CVC's press release on the sale, the ownership of the Company is now KIRKBI 36%,  Blackstone 34%, CVC 28%, management 2%.

With no single investor holding majority control, managing the Company will be a bit trickier than if there were a dominant shareholder.   

On the other hand, a distinct benefit is that cash calls for new equity (if any is required) will not fall disproportionately on any one shareholder.  

The Company needs cash to fund its "ambitious growth programme" as the CVC press release states.  And there is the unfortunate bunching of loan maturities - the extension of which is being negotiated currently.  Both potential cash demands.

Additional debt financing is unlikely.

The CVC press release also states that "Merlin does not intend to increase its financial leverage."   I suspect that the decision reflects more than sober financial self-discipline. Bankers are now less willing to lever up the company than they were during the  "Bonny" days when Charterhouse owned Madame Tussaud's.  Then loans were abundant.  And with easy terms - long dated bullet loans.    

That leaves additional equity.

Last October, the Financial Times reported that Merlin would IPO in 2Q10 with the transaction mooted at some GBP2 billion.  The sale to CVC suggests that the IPO route is not as likely as there is little reason for Blackstone to reduce its position in a trade sale if an attractive IPO is imminent. 

The remaining source is private equity - and perhaps a rationale for several rather than one dominant shareholder.

The Investment Dar - No Agreement on Draft Budget Expenses

Citing informed sources, AlQabas reports that the meeting earlier this week between the Creditors Co-ordinating Committee and the Company did not resolve the differences over the level of operating expenses in the proposed five-year budget (which is required under the restructuring).

At the end of the meeting, the CCC came up with some modifications to the Company's budget which were devised by the Chief Restructuring Officer - who was appointed by both sides as a "neutral" party to review the proposed five year projected financials/budget.

The Company is expected to reply within the coming week.  If it agrees, then the revised budget will be submitted to the Central Bank for its review.  If not, the dispute will remain open (unresolved).

As noted in the previous article, the creditors' position is that expenses should be in harmony with the new situation the Company finds itself in.  Meaning probably fairly dramatic cuts in operating expenses.

The central question is just how deep the cuts are and whether they are really required.  Or if they are a bit of overkill by overzealous bankers.  Without details, there's no sound basis for judging one way or the other.

NY Court Compels Release of AlGosaibi Bank Account Details

As per the Gulf Daily News,  Trowers and Hamlins won an important legal victory in US Bankruptcy Court.  The Court ruled that AHAB's New York bankers must disclose details of a key AHAB account.   One to which reportedly a large amount of funds were transferred.  As the article notes, Trowers and Hamlins have been requesting information on this account since last August.  

Trowers & Hamlins partner Abdullah Mutawi, who is leading the asset realisation strategy, said it was a significant development.

"This is the first time AHAB has been compelled to reveal details of any of its bank accounts," he said.

"It is particularly significant because AHAB has repeatedly refused to hand over important information relating to the operation of the account.

"The account is important because a substantial portion of TIBC's funds were remitted to it and the information should help reveal the ultimate destination of those funds."

As I noted in yesterday's post about First Gulf Bank's lawsuit against AHAB,  there seems to have been a change in the dynamic of this story.  The focus is now on AHAB's behavior - both in terms of responsiveness to requests from creditors as well as its role in the collapse.

I suspect this is going to get increasingly messy.  At the end few reputations may be left undamaged.

Dubai: Self Made Challenge

HH Shaykh Mohammed Bin Rashid AlMaktoum set the record straight in an interview with CNN.  Or more precisely will do so next week when the interview airs.

Like Global Investment House in Kuwait, Gulf Finance House in Bahrain and several other careful students of the market, he's identified the sole cause of current problems - the global financial crisis.  As we always note here at Suq Al Mal out of an abundance of caution to prevent anyone from drawing the wrong conclusion, that's global with a lower case "g".

"The recession is a global phenomenon and I do not think that we in Dubai fear it, but instead we consider it a challenge."

It's often said that true progress and development comes by challenging oneself.  Sadly, other members of the GCC, like Qatar, apparently don't feel up to challenging themselves in quite the way that Dubai is challenging itself.

While in reference to Dubai World, he adds: "I'm not worried about the company, the company has got the wealth. So they have something, and they will come back very very quickly."

Some Kuwaiti Banks Overreaching in Collateral Demands

AlQabas quotes unnamed financial sources that some banks have been taking excessive collateral in restructuring debts for their subsidiaries and affiliates - reaching 400% coverage in some cases.  The issue is that such coverage levels effectively place other creditors - banks, investors in murabaha transactions, etc - in a much weaker position.

The financial sources expect that disadvantaged creditors will raise formal complaints with the Central Bank of Kuwait.  The article notes that the traditional collateral level is between 150% and 200%.

A final comment is that some restructurings are being delayed as creditors cannot agree - given some creditors' demands for a higher ratio of coverage or specific assets for themselves.

While nothing concrete was said, I wonder if this relates to "Islamic" banks.  

Perhaps one of my better informed readers will care to comment.

First Gulf Bank Sues AlGosaibi for AED58.7 Million

First Gulf Bank has launched a suit in the Abu Dhabi Court of First Instance against AlGosaibi's local company and AHAB itself.

Both parties are being quiet about the details of the case.

FGB reportedly has a US$55 million in exposure to both AlGosaibi and Saad.

From recent press announcements it appears that the legal tide has turned - and that the current focus is now on AlGosaibi.

AT Kearney: Reinventing Investment Banking in the GCC

An interesting report from ATK on the GCC investment banking sector.

The key issues that GCC investment banks face are:

1. Competition from more established firms - who are opening offices in the region.
2. Local investment firm's business models which focus heavily on private equity investments.  That in part reflects the state of local capital markets.
3. A debt capital shortage which constrains the ability to build asset intensive businesses.

To that I'd add:

1. A reluctance by clients to pay for advisory services unrelated to fund raising.
2. Relatively modest volumes.  This in part explains the focus on proprietary investments where the gross margins are higher than on capital markets and advisory business. 
3. Market deficiencies.  An absence of sophisticated institutional investors.  Local equity markets are largely driven by irrational exuberance and pessimism of retail investors.    Constrained free float on many major firms.
4. In general weaknesses in corporate governance and disclosure.   
5. Lack of skills and shortcomings in professionalism/ethics.

Central Bank Regulation - John Lipsky

John Lipsky, First Deputy Managing Director at the IMF, delivered a speech on deficiencies in central bank regulation prior to the recent crisis plus some prescriptions for correcting shortcomings in Moscow last Friday. "The Road Ahead for Central Banks: Meeting New Challenges to Financial Stability".

He identifies a central failing which might be described as simple minded credulity.

Prior to the crisis, for instance, supervisors relied excessively on financial firms’ own risk analysis and internal controls. In broad terms, they relied heavily on the self-disciplining qualities of markets. In other words, supervisors were insufficiently intrusive and skeptical.

What could possibly go wrong with allowing firms to police themselves?  Not just allowing them to judge when they had "broken" a prudential limit, but allowing them to measure whether they had broken it or not.  And, we hear yet again about the self disciplining qualities of markets - which is the regulators' equivalent of the implicit guarantee. 

In fact if you read the speech carefully, you'll see that this failing is the root cause of most of the other shortcomings he identifies. 

AlGosaibi v Maan AlSanea - Trowers and Hamlins Statement

One of my new and frequent commentators mused whether the fact that Trowers and Hamlins had launched a lawsuit against AHAB represented any sort of determination by T&H about the guilt or innocence of the parties involved in the case.

I had speculated that T&H was merely doing its job - going after the registered debtors of TIBC and pursuing collection of funds without making any such judgments.

That left us in a stand-off of opinions.

So, I posed a question to T&H through Hill and Knowlton.  Today I received the following response which I quote verbatim.

A Trowers and Hamlins spokesperson said: “Our investigations to date and other extrinsic evidence provided by third parties - which we are still considering - would suggest that there were irregularities in the manner in which the business of TIBC and other institutions connected with the AHAB / Saad situation was conducted.  However, investigation of fraud or other criminal activities and/or other material non-compliance by officers or other stakeholders of TIBC with the law or regulatory requirements essentially remains the remit of the public prosecutor and the CBB respectively and it is therefore not appropriate for us to comment or speculate further.”

As you'd expect a law firm to do, this statement is carefully crafted to avoid creating any unwanted legal problems for T&H.

There are several points I think are worthy of comment:

1. That at this point what T&H has seen suggests - though not conclusively - that there were "irregularities in the manner in which the business of TIBC and other institutions connected with AHAB / Saad situation was conducted".
2. That investigation of fraud, criminal activities or material non compliance with regulations is not T&H's responsibility but that of the "Relevant Authorities" in the Kingdom of Bahrain.
3. Accordingly, T&H will not comment on such matters.
   

Damas - Enforceable Undertaking Latest Developments

A rather enigmatic press release from Damas on Nasdaq Dubai this morning.

Three points of note:

1. Damas International Limited ("DIL") is negotiating a Cascade Agreement with Damas Investments Limited and Damas Real Estate Limited, the Abdullah Brothers who own both companies, and their respective creditors.  "The purpose of the Cascade Agreement will be to effect an orderly realisation of the assets of the Abdullah Brothers Group. DIL and its board will at all times continue to act in accordance with their legal duties."
2. "DIL notes that its undertaking to recover amounts owing from the Abdullah Brothers at paragraph 17.37 of the DIL Enforceable Undertaking is expressed to be subject to any stand-still, restructuring, security, cascade or similar agreement with the Abdullah Brothers Group and their creditors, including DIL. DIL further notes that in the enforceable undertaking given by the Abdullah Brothers dated 21 March 2010 (the "Abdullah Brothers Enforceable Undertaking") the obligation to repay the Drawings Amount (as defined therein) to DIL at paragraph 15.11 is expressed to be on terms and conditions either already agreed or to be agreed with DIL. Further, the obligations of the Abdullah Brothers to use the net proceeds of realisation of assets to repay the Drawings Amount at paragraph 15.12.1 of the Abdullah Brothers Enforceable Undertaking is expressed to be subject to the terms of any settlement, stand-still, restructuring, security, cascade or similar agreement with creditors (including DIL)."

It sounds as though Damas is in the process of revising the original repayment schedule agreed with the Abdullah Brothers.  No doubt legally required in terms of the rights of all creditors.  What it probably means for DIL is a longer payback period.  And depending on the assets, perhaps less than 100% payout.  From what I've read it seems likely that many of the investments may be problematic to sell at original cost.

The International Banking Corporation - Trowers and Hamlins Sues AlGosaibi

Not a good week for the AlGosaibis.

Trowers and Hamlins, the Central Bank of Bahrain Administrator for TIBC, announced through its public relations firm, Hill and Knowlton, that on 16 June, it had "filed a US$720 million foreign exchange claim against Ahmad Hamad Algosaibi & Brothers (AHAB) at the Saudi Arabian Monetary Agency (SAMA) Committee in the Kingdom of Saudi Arabia, following referral of the claim by the Council of Ministers."

There are a couple of telling points in the press release.  The first is the comment that the claim was filed "following referral of the claim by the Council of Ministers".

The second is a quote from Abdullah Mutawi, the T&H Partner handling this case:

“The claim we have launched with the SAMA’s Committee follows unsatisfactory responses from AHAB and their representatives to questions relating to the assets of TIBC that we have repeatedly asked them."  

You'll recall (and if you don't here's the link) that earlier there were complaints from some of the Kuwaiti banks that AHAB (as well as Saad) were not responding to requests for information or to hold meetings.   T&H notes in the press release that it has has "filed an application in the Courts of New York under Chapter 15 of the US Bankruptcy Code for an Order pursuant to Bankruptcy Rule 2004 authorising discovery.  The application seeks to obtain an Order from the Court compelling the disclosure of key financial information which the Administrator has been requesting from AHAB since August 2009 and which has not been forthcoming."  

The third is that AHAB is the "single biggest debtor owing US$3.2 billion."

In its press release T&H notes 

In addition the Administrator recently filed cases with the Negotiable Instruments Committee (NIC) in Saudi Arabia against Saad Trading (US$ 117 million), which is part of the Saad Group, as well as Abdulaziz Al Sanea (US$54 million) for defaults on loans advanced by TIBC.   Hearing dates have been set for early 2011 in relation to those cases and the administrators are currently working to expedite these hearings.

And that it will be pursuing other cases in an attempt to recover monies owed TIBC.

Finally, there is a quote from an unnamed representative of the Central Bank of Bahrain

“We are pleased that litigation has been launched less than 12 months after the CBB placed TIBC into Administration. This is a positive step forward in what is clearly a very complex case and reflects the CBB’s commitment to maintaining a well regulated and stable investment environment in Bahrain.”

Frank Kane over at The National has some additional information.

Two quotes. 

The first.

“Trowers and Hamlins’ rhetoric simply ignores [the Al Gosaibi group’s] multiple offers to enter into a co-operative information sharing agreement …”said Jim Courtovich, the spokesman for Al Gosaibi, said in a statement to The National.

The second.

In a letter to Mr Mutawi dated May 26 obtained by The National, a lawyer for Al Gosaibi said the group was advised not to hand over documents to Trowers and Hamlins because the firm was planning to use them as evidence in cases against Al Gosaibi.
“We could not responsibly advise our clients to proceed in this manner,” the letter, from Eric Lewis at the firm of Baach Robinson and Lewis, said.

In the letter, Mr Lewis also advised Trowers to join Al Gosaibi in the fight against Mr al Sanea, asserting that filing lawsuits against the group would be unproductive for creditors to TIBC.

As always, it's a good way to end a post on this topic to note that Mr. AlSanea vigorously denies the AlGosaibi allegations against him.

KFIC - Annual General Shareholder Meeting Approves Capital Reorganization and RIghts Offering

KFIC published the results of its shareholders OGM held 16 May.

1. Agreement not to distribute dividends for Fiscal 2009.
2. Recapitalization by extinguishing 2009 losses of KD25,314,775 by utilizing General Reserves of KD6,371,986, Legal Reserves of KD8,948,771, and Capital in Excess of Par KD2,210,849.  The difference will be made up by reducing Paid in Capital from KD41,930,970 to 34,147,801.
3. An increase in capital of KD20,000,000 by issuing 200,000.000 shares at KD0.100 per share by way of a priority rights issue.   This allows existing shareholders the absolute right to buy enough shares in the Rights Offering to maintain their respective percentage ownership of the Company.
4. Election of a new board for a three year term.

The board is composed of: 

1. Saleh Yacoub Yousef Al-Humaidi
2. Riham Fuad Mohammad Al-Ghanim
3. Mahmoud Fouad Mohammad Al-Ghanim
4. Tariq Mishari AlBahar
5. Mahmoud Emam Yaseen Owais
6. Abdulmohsen Yagoub Yousef Al-Humaidi
7. Fadwa Yacoub Yousef Al-Humaidi

This is pretty much the old Board except that Tariq appears to have replaced Wael Jassim Al-Sagar.

للشركة الكويتية للتمويل والاستثمار ( كفيك) قد انعقدت يوم الاربعاء ‏
الموافق 16-6-2010 واقرت الجمعيه العمومية بما يلي :‏
ِ1- عدم توزيع ارباح عن السنه المالية المنتهية في 31-12-2009 ‏
ِ2- الموافقة علي اطفاء الخسائر المرحله للعام 2009 بمبلغ 25.314.775 د.ك ‏
وذلك باطفاء رصيد الاحتياطي العام بمبلغ 6.371.986 د.ك والاحتياطي القانوني
بمبلغ 8.948.771 د.ك وعلاوة الاصدار بمبلغ 2.210.849 د. ك وتخفيض راس
المال من 41.930.970 د.ك الي 34.147.801 د.ك بمقدار الخسائر المتراكمة بعد
اطفائها من الاحتياطيات وعلاوة الاصدار والبالغه مبلغ وقدره 7.783.169 د.ك ‏
ِ3- الموافقة علي زيادة رأ س  مال الشركة من 34.147.801 د.ك الي ‏
ِ54.147.801 د.ك وذلك عن طريق طرح عدد 200.000.000 سهم للاكتتاب بقيمة
اسميه قدرها 100 فلس كويتى نقدا ودفعه واحدة وذلك للمساهمين المقيدين بسجلات
الشركة في نهاية اليوم السابق لبدء الاكتتاب في زيادة رأس المال ويكون لكل ‏
مساهم الاولويه بالاكتتاب بحصة من الاسهم الجديدة ومتناسبة مع عدد اسمهه .‏
ِ4- كما تم انتخاب اعضاء مجلس ادارة جدد للثلاث سنوات القادمة كما يلي :‏
السيد - صالح يعقوب يوسف الحميضي ‏
السيدة - رهام قؤاد محمد الغانم
السيد - محمود فؤاد محمد الغانم
السيد - طارق مشاري البحر
السيد - محمود امام ياسين عويس
السيد - عبد المحسن يعقوب يوسف الحميضي ‏
السيدة - فدوي يعقوب يوسف الحميضي ‏
وعليه سيتم تداول سهم الشركة بعد تخفيض رأس المال اعتبارا من اليوم الخميس ‏
الموافق 17-6-2010 ‏

The Investment Dar - TID and Creditors Debate Expense Controls

AlQabas reports that the Creditors' Co-Ordinating Committee and TID will meet in Dubai on 23 June to discuss the CCC's request that TID reduce operating expenses.   As per the article the creditors want at least a 40% reduction in expenses during the first three years of the rescheduling.   The Five Year Budget and projected financials the Company presented propose expense levels much higher than that.  

TID's argument is that it needs to maintain a certain level of expenses to manage its affairs and fulfill all the requirements of the restructuring -- and from the reports of terms of the restructuring I've seen there are many.   

The creditors for their part claim that the expenses remain elevated and are not consistent with the situation of the Company and general economic conditions and that the Company does not need the number of staff.

As I've written before, there is a natural tension in restructurings between the debtor and the creditor over expenses.  And often the creditors insist on draconian cuts which do not materially improve their repayment prospects but which often dramatically harm the Company's ability to function as a going concern.

Without details it's hard to say.  But I think you can see which side of the debate I'm leaning towards from my comments.  That's of course not to say that there shouldn't be some expense control.  But that it should be focused and relevant. 

Etisalat AED37 Million Bonuses Flap

The UAE State Audit Institution ("SAI") has raised questions about AED37 million in bonuses that the Board granted itself and its Chairman for 2009.

The SAI believes the bonuses should have been approved by shareholders at an Annual General Meeting.  The Company says that the majority shareholder (the government with 60%) has approved these in the past and that its Memorandum and Articles of Association do not required ADM approval.

"They have the right to say whatever they want. We cannot ask them not to write it, but we have our own view that we have the right to voice," Mohammad Hassan Omran, etisalat Chairman, told Emirates Business. "Definitely we are working with them in order to develop the way reporting and auditing should be done."

I thought it was pretty much standard corporate law requirement in the GCC states that shareholders approve such payments.

Gulf Finance House - Badr Al Subaiee Resigns from Board

GFH announced on the BSE today that Bader Al Subaiee (Chairman and MD at KIC) had resigned from its Board. 

And that it will be discussed at the upcoming shareholders' general meeting.

I haven't seen anything in the press on this and wonder if it's related to GFH's ongoing problems or is a personal matter.