Gulf Finance House, a Bahrain- based investment bank, sees no obstacles to repaying $300m of rescheduled debt starting from 2012 following its recapitalization plan, its chief executive officer said.
“There’s no doubt we are tight on cash because we are selling assets, but part of the recapitalisation is to raise new cash which is no different to what is happening to every major bank around the world,” Ted Pretty said in a telephone interview from Manama on Monday. “The idea is you don’t want all your debt maturing at the same time.”
Gulf Finance House is restructuring after the global financial crisis froze debt markets, hurting companies and investors in the region. The company said Oct. 27 its third- quarter loss widened to $115.1m, from $29.3m a year earlier as it set aside money to cover bad loans.
Shareholders have approved a 1-for-4 reverse stock split, a reduction in paid up capital and the issuance of an equity- linked convertible murabaha of as much as $500m.
“You’ve done the hard work, you’ve cleaned up your balance sheet, cut your costs, rescheduled your debt, you’ve now got a new strategy in how you’re going to rebuild your business model- the fifth thing you need to do is basically recapitalise,”Pretty said.
“You need the cash to go and invest in these new projects.”
Gulf Finance said in August it reached an agreement with a group of banks led by WestLB AG for a two-year $100m Islamic murabaha loan with a one-year extension option. It helped to restructure an old facility of the same amount.
“As long as we can raise capital, we can pursue the growth plan,” Pretty said, adding that pursuing Islamic finance opportunities in Syria, Turkey, Jordan and Lebanon is a priority. “We don’t see expansion in the GCC itself,” Pretty said, calling the Gulf Cooperation Council “overbanked.”
Conditions are “too tough” to consider a bond issuance before 2012, he said, adding that his bank estimates about $100 billion in corporate debt in the GCC needs to be refinanced by 2012.
“Our guarantee is to pay our sukuk down to 2012 from asset sales,” he said. “That gives us plenty of time for asset prices to recover, then we’ll wait and see what happens after that.”