UPDATE 3-Kuwait's Global Investment defaults as crisis bites

(Adds more details, background)

By Ulf Laessing

KUWAIT, Jan 8 (Reuters) - Global Investment House (GLOB.KW), Kuwait's biggest investment bank, defaulted on most of its debt, in the first of several expected casualties among financial firms in the wealthy oil producer due to the credit crunch.

The news is a blow to Kuwait's efforts to restore confidence among investors after it recently rescued its fourth-largest lender, Gulf Bank (GBKK.KW), which was hit by huge derivative losses, and guaranteed deposits at all banks.

Analysts expect no general government bailout for the investment firms, which make up more than half of the country's listed firms and offer typical investment banking services, after the central bank governor said earlier this week some of them were in trouble due to the global credit crunch.

Some local banks have been heavily lending to such investments firms in the past, analysts say.

"The company is in default on the majority of its financial indebtedness," Global said in a statement to the London Stock Exchange, where it has a listing for Global Depository Receipts (GDR).

Global shares fell 7 percent, dragging down the Kuwait stock market, which dived 38 percent in 2008.

The bank said, without elaborating, that it would continue to service all its interest and coupon payments "on a timely basis". It has appointed HSBC (HSBA.L) and Kuwait's CBK Capital (CBKK.KW) to hold talks with creditors.

At end-September, Global had short-term borrowings of 389.8 million dinars ($1.38 billion), according to its website. Total liabilities stood at 806.7 million dinars. A Global spokesman declined to give a more recent figure.

A second company source said the firm hoped to sign a 90-day standstill agreement with all creditors within two days to reschedule debt. Global, which is heavily invested through mutual funds in many international markets, said last month it needed loans worth $1 billion to replace foreign debt. [ID:nL4451758]

Naser al-Nafisi, General Manager at the Al-Joman Center for Economic Consultancy, which put the total debt for all Kuwaiti investment firms at about 8 billion dinars in December, expected up to 30 listed Kuwaiti companies to go bankrupt due to the crisis.

"We've criticised companies like Global for expanding too fast for a long time when they were booming. They use too much short-term debt. A growth of 10-15 percent (annually) is acceptable, but not 50 percent," he said.

A source at a major bank told Reuters that Global, which operates officially as an investment firm, had been unable to get new loans from local banks. "There are no talks with local banks anymore."

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