Gulf Holding says no cash crunch at Villamar sukuk

Gulf Holding Co sought on Friday to quash concerns of a possible liquidity crunch for the Villamar sukuk, or Islamic bond, saying it could both pay its next coupon and complete construction projects.

The Gulf Holding statement came after its Residential South Real Estate unit, which issued the Villamar sukuk, said on Thursday cash reserves fell to 5.45 million Bahraini dinars ($14.5 million) at the end of 2009 from 42.3 million a year earlier.

The news raised concerns that cash was tight at the group, but a spokesman for Gulf Holding said the next quarterly coupon would be paid as scheduled on May 10.

The company also said its April 25 request to delist the $190,000,000 Villamar sukuk was prompted by a lack of trading activity in the market. Reuters data showed there has been little or no trading in these securities since at least December.

"The agreement was reached mutually by the company and the certificate holders," a Gulf Holding spokesman said.

He added that work on Villamar was proceeding well on all construction levels and the company expected to complete the project on schedule.

The Villamar project is part of the Bahrain Financial Harbour development, promoted by Bahrain- and Kuwait-listed Gulf Finance House. Some observers remain worried about the project's cash position.

The company's 2009 income consisted largely of a 5.1 million Bahraini Dinar ($13.5 million) fair value gain on investment property, while no income from the sale of property units appeared in the annual report.

Villamar's strategy of financing costs through off-plan sales has become more difficult to execute, one analyst said, pointing to an April 2010 report from research firm Cluttons.

The report said property prices in Bahrain have been under pressure since the regional property boom ended in 2008, while available commercial office space has doubled since 2006.

The report also said tenants are becoming increasingly unwilling to take on the capital cost of fitting out new premises, making off-plan sales more challenging. ($1=.3769 Bahraini Dinar) (Reuters)