Banque SBA raises capital after loan provision

21 June 1996

Paris-based Banque SBA is raising its equity capital by about FF 25 million ($4.8 million) to FF 185 million ($35.6 million)after provisions against a doubtful loan to a hotel chain with Syrian involvement turned its projected 1995 profit into a loss, a management source told MEEt) on 7 June.

The hotel group has won court protection in France against its creditors to give it time to restructure its debts. Under French rules the creditor banks are obliged to make provisions against their loans to the group until its future is resolved.

The source did not name the chain, but was understood to be referring to the Royal Monceau group of Syrian businessman Osman Aidi. The group won court protection against creditor banks following the breakdown of negotiations about rescheduling FF 1,200 million ($240 million) of debts (MEED 26:4:96).

The board of Banque SBA, whose main business is trade finance with Syria and Lebanon, had been ready to approve accounts showing a profit in 1995 when the loan issue came up. The board decided to use the bank's profits to soak up the provision and report a loss of about FF 25 million in 1995 instead, then raise the bank's equity capital to compensate. 'We prefer to be on the safe side,' the source said. 'In terms of operations, the bank is doing extremely well.' Banque SBA is 22 per cent owned by France's Banque Worms, which also has a managerial role, and the rest by Arab investors.

Banque Worms has agreed to take up part of the equity increase that could take its holding to between 30 and 32 per cent, depending on how much the other shareholders take.

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