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Tue 10 Aug 2010 12:38 PM

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Bahrain's GFH rolls over $100m loan - sources

The $100 million loan is rolled over into a new facility with a maturity of two years - banker.

Bahrain's GFH rolls over $100m loan - sources
GFH LOAN: The $100m loan is rolled over into a new facility with a maturity of two years. (Getty Images)

Bahrain's Gulf Finance House struck a last-minute deal with lenders to roll over a $100m loan, bankers said, giving the firm more time to sell assets and find new sources of revenue.

The murabaha loan that matured on Tuesday has been rolled over into a new facility with a maturity of two years, which GFH can extend by another twelve months, said one banker familiar with the matter.

"There was a deal and documentation has been exchanged," said the banker, who did not wish to be identified.

A murabaha loan is a form of Islamic financing which allows a bank to extend credit without charging interest, which is forbidden by Islamic law.

Investors welcomed the deal. Kuwait-listed shares of GFH rose 3.7 percent on Tuesday while Kuwait's index KWSE was up 0.11 percent.

A second banking source said the profit rate on the new facility is 200 basis points over LIBOR plus an additional payment in kind interest of 1.25 percent.

This is below the profit rate of 500 basis points over LIBOR that GFH paid for the expiring loan.

The loan was part of an original facility arranged by German lender WestLB that expired in February and GFH renegotiated by paying back $200 million and rolling over the remainder for six months.

The amount is spread over 32 banks and bankers have said that lenders would likely accept another extension as the amount per bank was too small to insist on settling the loan.

Like other investment houses in Bahrain and the Gulf region, GFH has not been able to generate new revenues after a regional property crash late in 2008 swept away its business model of relying on fees charged on investors' money raised for property and private equity projects.

GFH has shrunk its balance sheet to about $1.3 billion in assets and it has a market capitalisation of just under $300 million on the Bahraini bourse, where its shares hit an all-time low last month.

The firm that during the boom years arranged real estate projects from Morocco to India has struggled to sell down assets to free up liquidity to meet its debt obligations.

In May, it sold a stake in the Bahrain Financial Harbour real estate development for $262 million to Emar Bahrain, but this was mostly an asset swap with a cash component of only $40m. (Reuters)

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