Saturday, December 5, 2009

Global Investment House - Significant Restructuring Progress: The Best of Times



AlQabas Newspaper Kuwait Copyright

6 December AlQabas carries an account of a Euromoney interview with Ms. Maha AlGhunaim, Chairwoman of the Board of GIH.  She's got a good reason to smile.

Main points from the article and some commentary.
  1. Holders of all three bonds have agreed with the company.  AA: Not surprising since they are not being asked to reschedule their bonds (payments will be made according to the original maturities), they have been given collateral (apparently for 100% of the value of the bonds) and GIH has agreed to abide by certain unnamed conditions.
  2. 51 of 53 lenders have agreed to the proposed restructuring.  Again no haircuts and it appears no prolonged retiming of payments.  At least that's how I'm reading "fatra muhala".  Also collateral will be offered.  AA:  Very good progress.  It seems there would have to be some retiming of payments one way or another.  Either extend the tenor of the facilities.  Or change the amortization schedule by reducing the early year payments and pushing larger amounts to later years.   We'll have to see when the details emerge. 
  3. Ms. Ghunaim said that GIH is hoping to persuade the remaining two lenders and sign a restructuring agreement before the end of the year.  AA:  This should be doable unless the two lenders are particularly obstructionist.
  4. Some details on the US$ 2 billion in "suspended" debt.  15% by amount is "Islamic".  GIH has been paying interest throughout the period.  AA:  Something usually highly appreciated by lenders.
  5. There is some analysis of expenses.  Personnel expenses in 2009 are 49% of what they were in 2008.  Other expenses are higher (percentage change unspecified).  This is attributed to the costs of the restructuring.  AA:  Lawyers, advisors and other professional service providers enjoy a bountiful feast on such occasions. 
  6. The article ends with some commentary on how this experience has made GIH a better firm and a gratuitous slap at other Kuwaiti investment companies.   AA:  Adversity is no doubt a great teacher as long as one remembers the lessons after the time of trials has ended.  However, as a personal observation, I would suggest a bit of humility.  As life has shown in this case, and others the high flying often fall to earth.  Refraining from denigrating the competition is a wise course.  Future performance will tell who's doing a good job (as well perhaps who's been lucky).  Often the two are confused not only in the minds of those directly involved but as well as the minds of spectators. 

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