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Wed 24 Nov 2010 07:14 PM

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Bahrain's GFH shareholders probe capital measures

Investment firm has posted steep losses since a 2008 regional property crash

Bahrain's GFH shareholders probe capital measures

A shareholder group critical of plans by troubled Gulf Finance House (GFH) to slash its capital formed a committee to review the measures in a closed door meeting last week, the firm said on Wednesday.

GFH has posted steep losses since a 2008 regional property crash and has since struggled to pay back its debt. It rolled over several loans this year in return for pledging some of its assets as securities to lenders.

A meeting on November 14 meeting passed a GFH plan to absorb losses through a reverse share split that will reduce paid up capital by 75 percent to $145.8 million, but disgruntled shareholders formed a committee to probe the implementation of capital measures.

Kuwaiti shareholders in particular have criticised GFH Chairman Esam Janahi for the company's past losses.

In a statement on Wednesday, GFH said: "A committee of shareholders to assist in the implementation of the bank's plans was also formed in order to review and support the proposed recapitalisation plan."

The Bahraini investment firm had banned media from attending the meeting.

It had been the third assembly after it failed to reach the necessary quorum at two attempts earlier in November.

GFH has hardly booked any income over the past two quarters as it searches for a new business model to replace the fees it earned on arranging finance for property and private equity projects during a five-year oil boom.

The company said shareholders also approved plans to raise up to $500 million in capital through issuing a murabaha, an equity linked Islamic financing instrument.

They also approved an asset swap that will involve Janahi's 10 percent stake in Bahraini retail bank Khaleeji Commercial Bank being transferred to GFH, increasing its shareholding in the bank to 47 percent.

GFH would significantly improve its liquidity situation if it can consolidate Khaleeji onto its balance sheet by raising its stake above 50 percent.

But bankers say the Central Bank of Bahrain (CBB) is unlikely to approve this as it seeks to prevent the trouble in Bahrain's investment sector from spilling into its generally healthy retail banking sector.(Reuters)

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