Kuwait's Global hikes capital amid financial crisis

Generating fee income, rather than conducting fire sales, is major aim as firm restructures.
Kuwait's Global hikes capital amid financial crisis
By Rania El Gamal
Mon 15 Jun 2009 08:01 PM

Shareholders of Kuwait's Global Investment House agreed on Monday to more than double its capital to almost $1 billion as part of the investment bank's plans to restructure its debt and revamp its business.

Global is among the most prominent financial firms in the Gulf Arab region to face trouble as credit conditions tightened amid the global financial crisis.

The bank began talks to reschedule its debt in December, appointing HSBC as an adviser to hold talks with its lenders. It defaulted on most of its debt earlier this year.

Shareholders gave the green light to raise its capital to 281.2 million dinars ($973.7 million). The hike will include a 150 million dinar ($519.4 million) rights issue at 110 fils a share and allowing new investors to buy up any remaining unsubscribed shares from the capital increase.

Chairwoman Maha al-Ghunaim presented shareholders with the bank's upcoming restructuring plan, which will focus on its asset management, investment banking and brokerage business. "We will focus our activities more on fees and commissions and try to avoid fire sales," Ghunaim, once named one of the world's 100 most powerful women by Forbes Magazine, told shareholders in the bank's headquarters.

"We will scale back our direct investments and real estate."

Global said in December it aims to cut its principal investment book by at least a third from 1 billion dinars within a year.

Ghunaim said the bank had yet to reach an agreement with its roughly 50 creditors to reschedule its debt.

"It is not an easy process... Now we are talking about a restructuring agreement. It needs time," she told reporters after the shareholders' meeting.

Global had liabilities worth $3.1 billion at the end of 2008, according to previous statements.

Ghunaim said Global was not in talks with the country's sovereign wealth fund, the Kuwait Investment Authority (KIA) to take part in the capital hike, as it did with Gulf Bank in January.

"We are concentrating on our current shareholders who want to increase their stakes in the firm," she said, adding she hopes the majority of shares will be subscribed by the firm's current investors.

The troubles of Global and other investment firms, including major Islamic firm Investment Dar, led the government of the world's fourth-largest oil exporter to approve a rescue package worth 1.5 billion dinars earlier this year.

Shares of Global rose 8.47 percent on Monday. (Reuters)

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