Font Size

- Aa +

Mon 26 Jan 2009 03:09 PM

Font Size

- Aa +

KIA poised to own 16% in troubled Gulf Bank

Oil-exporter's sovereign wealth fund eyes stake in Gulf Bank's emergency rights issue.

Kuwait Investment Authority (KIA), the oil-exporter's sovereign wealth fund, will own 16 percent in troubled Gulf Bank after the lender's emergency rights issue, an official said on Monday.

In December, shareholders in Gulf Bank approved a rescue plan ordered by the central bank to raise 375 million dinars ($1.29 billion) in a 100 percent emergency rights issue to cover derivatives losses of the same amount.

Under the rescue plan worked out by the government, the KIA has offered to buy up any remaining stock from the capital increase, which it will offer later to nationals in a public offering.

"Shareholders have subscribed to 68 percent of the capital increase... the rest will go to the KIA", General Manager Fawzy al-Thunayan told Reuters. "This means the KIA will own 16 percent of Gulf Bank."

The bank's investors have subscribed to 850.6 million shares, raising 255.17 million dinars, he said.

The central bank has halted trading in Gulf Bank until the end of the restructuring and the lender said in November its board of directors would resign after finalising the capital increase, and a new board would be elected.

Thunayan said he does not expect a new board before March 14, while the central bank would decide when it was time to allow a resumption of trade.

Last year, the government guaranteed all deposits at banks in a bid to restore confidence after Gulf Bank's difficulties raised investor fears that the problem ran deeper than first thought. (Reuters)

For all the latest market news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.