Gulf Finance House, the Bahrain based investment bank, aims to reach an accord with its creditors this month to extend the maturity of a $100 million Islamic loan by three years as it seeks to defer asset sales.
In a phone interview today, Ted Pretty, group chief executive officer, said: “We’re in the documentation stage to extend the facility for up to three years and we expect the deal to be completed sometime this month, we felt that 2010 is not going to be a good enough market to sell valuable assets.”
The global financial crisis cut liquidity and lending, while Middle East property prices slumped, hurting investors in real estate projects in the region. Gulf Finance House took a $300 million non cash charge and cut liabilities by $290 million after exiting its investment in Dubai’s Dubailand development.
Gulf Finance said Feb 10 it repaid a $200 million loan to the group of 32 lenders led by German bank WestLB AG and refinanced another $100 million through a six-month facility.
The bank expects to reach an agreement with creditors on the $100 million facility before Aug 10, the date of its maturity, Gulf Finance said in a statement to the Bahrain bourse today.
The company’s net loss narrowed to $7.5 million in the first quarter of this year from a loss of $607 million in the fourth quarter of 2009. Gulf Finance shares jumped the most in almost two months to 35 fils in Kuwaiti trading today.
The bank will likely “breakeven” by the fourth quarter as operating and financing costs decline, and it plans to start an Islamic finance unit with an initial asset base of $200 million in the third quarter, Pretty said. The lender has also asked Standard & Poor’s to stop coverage of its debt, he added.
Pretty said: “I don’t see the commercial benefit in maintaining the rating. It’s not our intention to go back to the market,” as the company expects its financing to come from operating revenue and the sale of “non core assets,” he said.
Standard & Poor’s, which said it was withdrawing its ratings on Gulf Finance House at the firm’s request, cut the bank’s long term rating to CC from CCC- with a negative outlook, citing weakening liquidity and revenue generation, according to a report released today.
The report said: “Difficult operating conditions are hampering management’s efforts to improve Gulf Finance House’s business and financial profile."
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