The plan is based on an offer from Egypt-based Gulf Arab Investment Company (GAIC)to buy – at a steep discount – the medium-term exposure held by a group of international and regional banks, organise a payment programme for BIB’s short-term depositors and assume control of a majority equity position in the bank (MEED 28:3:03).
‘The medium-term creditors have given ‘in principle’ approval to the offer,’ says a member of one of the two steering committees set up to negotiate a resolution to BIB’s debt default. ‘And a three-week exclusivity period has been agreed while due diligence is conducted and the details of the deal are worked out.’
One of the key questions is the level of discount GAIC is seeking on the $227.5 million of outstanding syndicated loans. Preliminary discussions focused on GAIC paying only 25 per cent of the book value of the exposure. ‘If GAIC tries to go any lower, it is probable that the medium-term creditors will walk away and force liquidation,’ says one of the creditors. ‘But they should want to do a deal as the BMA [Bahrain Monetary Agency – central bank] is insisting on depositor preference if liquidation takes place. And if it does, there will probably be less than 25 per cent of the debt left at the bottom of the pot.’
The GAIC proposal – led by its chairman, Sami Kaiksow, who is also vice-chairman of BIB – is expected to offer a restructured solution to the repayment of depositors, which will be phased over a 12-month period.
Two steering groups were formed to represent the two types of creditors. Representatives from Arab Bank, Arab Banking Corporation,ANZ Investment Bank, DZ Bank, Emirates Bank International, JP Morgan Chase & Companyand Lloyds TSBwill act on behalf of medium-term syndicated lenders, while representatives from HSBC, JP Morgan Chase & Company, BankMuscat, National Bank of Dubai, the Pension Fund Commission of Bahrain and Bahrain Telecommunications Company (Batelco)will represent the interests of short-term creditors (MEED 29:11:02).