As part of a measured response to its liquidity problems, Bahrain International Bank (BIB)has appointed Credit Suisse First Boston (CSFB)as its financial adviser. CSFB will assist BIB's negotiations with creditors and advise the bank on how to maximise returns from a proposed asset sale, the proceeds of which will be used to repay creditors. BIB has also appointed Norton Rose as its international legal counsell. It will advise BIB on creditor issues.
BIB has also made progress in formalising negotiations with its key creditors. Two distinct steering groups have been formed. The first, a seven-member committee, will represent BIB's medium-term syndicated lenders. It is made up of representatives from Arab Bank, Arab Banking Corporation, ANZ Investment Bank, DZ Bank, Emirates Bank International, JP Morgan Chase & Companyand Lloyds- TSB.
BIB has three outstanding medium-term syndicated loans: a $60 million facility due by the end of October; a $75 million facility due in December; and a $92.5 million facility maturing in December 2003.
BIB also has an additional $230 million of short-term liabilities, mainly in the form of non-bank corporate and individual depositors and interbank borrowings. A second, six-man steering group representing these creditors is being formed.
'It is the intention of BIB to prepare and complete over the next three or four weeks a definitive plan for the full repayment of its creditors,' says Robin McIlvenny, BIB's chief executive officer.
On 16 September, BIB put in place a voluntary standstill agreement asking creditors to forebear their claims for 90 days (MEED 27:9:02). 'The standstill is intended to give us a period of calm in which we can negotiate with creditors in an atmosphere free from pressure,' says McIlvenny. 'There is no formal standstill agreement in place, but we have been assured that the general view is positive and if none of the creditors break ranks the de facto situation will continue.'
BIB is to conduct no new business until agreements are reached with its creditors. 'We have sufficient assets to meet our liabilities,' says McIlvenny. 'The process will involve the orderly sale of our assets.' BIB is an investment bank with a strong real estate portfolio in the UK and a broad private equity portfolio in the US.
After a creditor agreement is reached, BIB will push ahead with its plans for a rights issue, which will primarily be used to raise fresh funds to finance a new business plan. The rights issue, which is strongly supported by the bank's board, is expected to raise $50 million-60 million.
'We have been strongly supported by the BMA [Bahrain Monetary Agency - central bank], which thinks we are doing everything right,' says McIlvenny. 'The BIB experience is likely to be a good test case, a blueprint for regional debt restructurings. There are other financial institutions that will probably find themselves in our position.'
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