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Gulf Bank in $1.4 billion capital hike after shock loss
KUWAIT (Reuters) - Kuwait's Gulf Bank announced a 375 million dinar ($1.4 billion) emergency rights issue and a boardroom sweep on Monday following the revelation last month it had lost a similar amount through currency trades gone awry.
The hike is the biggest emergency recapitalization move to date in the Gulf after the credit crisis, while the resignation of the company's entire board marks a dramatic departure from the cozy business relationships typical of the region.
Gulf Bank, Kuwait's fourth-largest lender by market value, had to be rescued by the central bank last month after suffering currency derivatives losses that it quantified for the first time on Monday at 375 million dinars.
The country's top sovereign wealth fund, the Kuwait Investment Authority (KIA), will buy any shares from the issue left unsubscribed by shareholders, the bank said in a statement, after receiving a report from an external auditor.
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KIA's support role comes as other sovereign funds like the Qatar Investment Authority (QIA) run to the rescue of local companies in distress, and likely sets an example for other Gulf sovereigns facing capital-depleted banks and real estate firms.
Qatar's Doha Bank, for example, seeks to place a 20 percent stake with the QIA, which in October launched a $5.3 billion plan to buy shares of listed banks to shore up investor confidence.
Sovereign wealth funds have been conscripted to prop up ailing local companies as the credit crisis ravages Gulf finances, a new role for agencies like the KIA, which were originally charged with purchasing foreign assets to diversify the oil-exporting countries' income streams.
Earlier in November, ratings agency Fitch cut Gulf Bank's rating to "F" from "D" and said it would have defaulted had it not received emergency support.
The bank said its board of directors would resign after finalizing the capital increase, and a new board would be elected.
(Reporting by Rania El Gamal; Writing by Thomas Atkins; Editing by David Holmes)
