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Mon 22 Nov 2010 08:54 PM

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Gulf Finance House sees no obstacle to repaying debt

Bank is restructuring after the global financial crisis froze debt markets, hurting firms and investors

Gulf Finance House sees no obstacle to repaying debt
NEW CAPITAL: The bank is tight on cash but as long as they can raise capital, it can pursue the growth plan (Getty Images)

Gulf Finance House, a Bahrain- based investment bank, sees
no obstacles to repaying $300m of rescheduled debt starting from 2012
following its recapitalization plan, its chief executive officer said.

“There’s no doubt we are tight on cash because we are
selling assets, but part of the recapitalisation is to raise new cash which is
no different to what is happening to every major bank around the world,” Ted
Pretty said in a telephone interview from Manama on Monday. “The idea is you
don’t want all your debt maturing at the same time.”

Gulf Finance House is restructuring after the global
financial crisis froze debt markets, hurting companies and investors in the
region. The company said Oct. 27 its third- quarter loss widened to $115.1m,
from $29.3m a year earlier as it set aside money to cover bad loans.

Shareholders have approved a 1-for-4 reverse stock split, a
reduction in paid up capital and the issuance of an equity- linked convertible
murabaha of as much as $500m.

“You’ve done the hard work, you’ve cleaned up your balance
sheet, cut your costs, rescheduled your debt, you’ve now got a new strategy in
how you’re going to rebuild your business model- the fifth thing you need to do
is basically recapitalise,”Pretty said.

“You need the cash to go and invest in these new projects.”

Gulf Finance said in August it reached an agreement with a
group of banks led by WestLB AG for a two-year $100m Islamic murabaha loan with
a one-year extension option. It helped to restructure an old facility of the
same amount.

“As long as we can raise capital, we can pursue the growth
plan,” Pretty said, adding that pursuing Islamic finance opportunities in
Syria, Turkey, Jordan and Lebanon is a priority. “We don’t see expansion in the
GCC itself,” Pretty said, calling the Gulf Cooperation Council “overbanked.”

Conditions are “too tough” to consider a bond issuance
before 2012, he said, adding that his bank estimates about $100 billion in
corporate debt in the GCC needs to be refinanced by 2012.

“Our guarantee is to pay our sukuk down to 2012 from asset
sales,” he said. “That gives us plenty of time for asset prices to recover,
then we’ll wait and see what happens after that.”


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