February 2, 2010 / 1:09 PM / 8 years ago

UPDATE 4-Bahrain's GFH seeks deferred loan payment

* Bank says to seek partial deferral of loan due next week

* Also looking to raise cash from private investors -sources

* Analysts say bank needs to sell down assets

* Shares down 4.7 pct in Kuwait, suspended in Bahrain

(Recasts with confirmation by bank it is seeking deferred payment)

By Martin de Sa’Pinto and Frederik Richter

ZURICH/MANAMA, Feb 2 (Reuters) - Gulf Finance House (GFH) GFHB.BH said on Tuesday it is seeking to defer payment of a third of a $300 million loan due next week as credit rating agency Standard & Poor’s slapped it with its third downgrade in 10 weeks.

“Gulf Finance House ... confirms that it has been in discussions with members of the WestLB syndicate to extend only $100 million of its $300 million facility for a period of six months,” it said in a statement, adding it proposes to pay $200 million on Feb. 10 when the loan comes due.

Sources familiar with the bank had told Reuters earlier it had also approached private investors in recent days to raise loans, pledging real estate and other assets as collateral, in case negotiations with lenders fail.

S&P lowered its ratings on GFH by several notches to CC/C from B+ saying the Islamic investment company’s liquidity position was “under immediate and severe stress”.

It said its outlook for the bank was negative “because it faces challenges to meet debt repayments coming due in the very near term”.

S&P also downgraded the bank in late November and mid-January.

Bahrain’s bourse suspended GFH’s shares as it awaited more information from the firm, while on the Kuwaiti bourse, where trade continued, its shares (GFHK.KW) fell 4.7 percent.

“This is a negative surprise for both us and creditors, given expectations that the company would use proceeds from recent capital raising and asset sales to repay the upcoming loan,” said Karthik Sankaran, an analyst at Merrill Lynch.

GFH raised $300 million in fresh capital in a rights issue in October and placed a $100 million convertible murabaha, an Islamic financing instrument, with Deutsche Bank AG (DBKGn.DE) in November.


Like other Bahraini off-shore investment houses, GFH has been badly hit by the end to the real estate boom in the region, led by the bubble bursting in Dubai late in 2008.

    Bahrain’s off-shore investment houses depend on arranging financing for real estate projects and private equity deals.

    Kuwaiti investment houses were the region’s first victims of the global financial crisis, defaulting on some of their debt late in 2008, but elsewhere the full impact has only slowly emerged in a region with little corporate transparency.

    Most recently, indebted state-owned conglomerate Dubai World [DBWLD.UL] has worried banks in the region as it seeks to reschedule some $22 billion in debt.

    GFH’s acting Chief Executive Ted Pretty, who took over in December after the surprise resignation of Ahmed Fahour, had told Reuters in an earlier interview over the weekend that a $50 million tranche of a separate sukuk, or Islamic bond, expiring in July 2012 was “in negotiation”.

    “We are well advanced on building our 2010 revenue pipeline, have initiated a tough cost reduction program and commenced asset sale negotiations,” Pretty said in the statement on Tuesday.

    Analysts said the bank likely needed to sell assets to raise any needed funds.

    “Everyone knows they have to raise cash, the question is what price can they get from their assets,” said a source familiar with GFH.

    GFH held more than $500 million in investments at the end of the third quarter, including, according to analysts, its 37 percent stake in Bahraini retail bank Khaleeji Commercial Bank KHCB.BH.

    “Khaleeji Commercial is their prime asset, the only one that is still profitable,” said a Dubai-based banking analyst who declined to be named. (Editing by Sitaraman Shankar and David Holmes)

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