Bahrain's Gulf Finance House (GFH) plans to restructure or sell assets to pay back $90 million in debt next year, a document showed, highlighting its struggle to meet obligations amid dried up revenues.
The Islamic investment firm and other Bahraini investment houses have struggled to restart revenue growth, after a 2008 regional property crash pulled the rug out from under their business model of earning fees on investor money raised for private equity and property projects.
GFH, which has restructured two loans worth a total of about $400 million this year, said in an investor presentation seen by Reuters that it plans to either restructure or sell down assets to repay $90 million in term debt next year.
It said earlier this year it would sell down assets to pay back its debt but has so far raised only $40 million in cash through asset sales.
A spokeswoman for GFH said in a statement e-mailed to Reuters: "We expect to reschedule the 2011 debt or sell or substitute assets or shares for that debt."
She said: "Discussions are well under way. It is expected revenue will cover any debt servicing, which is now at lower levels."
GFH posted a net loss of $40 million for the second quarter and did not book any income from investment banking services, the main income source during the region's five year oil and property boom that ended in 2008.
It plans to slash its paid up capital by about 75 percent to absorb its losses and raise up to $500 million in additional funds through issuing a murabaha, an equity linked Islamic money market instrument.
GFH said in the presentation it would use $100 million of the murabaha as working capital and financing needs in 2011 and 2012.
The spokeswoman also said the firm is considering exiting its property projects in North Africa and India through two initial public offerings (IPOs).
She also said: "Some large investors have indicated that they may wish to accept land in such projects as their method of exit." The investor presentation also showed GFH plans to cut its operating expenses by some 40 percent through the reduction of staff costs and funding costs.
The firm slashed its staff costs by 66 percent during the first half compared with a year earlier, partly through lay-offs. (Reuters)
For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.