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Wed 30 Jun 2010 07:59 PM

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Banks to extend Bahrain GFH $100m loan

Lenders will agree on extension because amount is spread over a large number of banks.

Banks to extend Bahrain GFH $100m loan
EXTENSION AGREED: Banks are likely to agree to a second extension to a $100m loan to Bahrains Gulf Finance House. (Getty Images)

Banks will likely agree a second extension to a $100 million loan to Gulf Finance House, due in August, over several years, underlining the firm's struggle to dispose of low valued assets to repay debts.

Two bankers familiar with the matter said lenders will probably sign up for the extension on the loan, part of an initial $300 million facility, because the amount spread out over a large number of banks is too small to hurt.

In February, Bahrain based GFH renegotiated the original sharia compliant murabaha facility by paying back $200 million and extending $100 million by six months to August.

A banker familiar with the talks, who requested anonymity, said: "I can't imagine the final document saying anything other than unanimous consent."

He added: "This is because the quantum number is not big and the pricing is still not too bad."

The source said GFH had now asked for a further extension on the $100 million which it wants to repay in instalments over about three years with the pricing reduced significantly from the current facility's 500 basis points over LIBOR.

A second source, who also did not wish to be identified, said banks had little choice but to accept the extension, adding that GFH had offered to extend the maturity by three years, but that banks would probably accept only two years.

There are 32 banks on the loan for which German lender WestLB acted as bookrunner. Bankers and analysts said GFH had been expected to ask for an extension as it was unable to sell enough assets since February to improve its liquidity.

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 $40 million.

Earlier this week, the Bahraini investment house said it is in final negotiations with lenders of the facility to extend its maturity to give the firm more time to revamp its business model and wait for asset prices to recover.

Like other investment houses in Bahrain and the Gulf region, GFH has struggled to generate new business after a regional property boom ended in 2008, sweeping away its business model of relying on fees charged on investor money raised for property and private equity projects. (Reuters)

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