BMB in technical default with debt rollover delayed

03 January 2003
Negotiations are continuing between Bahrain-based BMB Investment Bankand a group of syndicated lenders over the rolling over of a $75 million term loan. The facility matured on 23 December and BMB is now in a state of technical default.

'Negotiations are still on-going - they have not broken down - and we are moving as fast as we can,' says a BMB official. 'We have put two proposals to the banks and we are hoping that the negotiations can be completed by the end of January.'

As a response, London-based Fitch Ratingslowered BMB's long-term foreign currency rating to DDD from CCC on 24 December. Fitch also downgraded BMB's short-term foreign currency rating to D from C and reaffirmed its individual and support ratings at E and 5, respectively. The understanding is that the ratings downgrades will be rapidly reversed if agreement is reached between BMB and its syndicated creditors.

In a move to bring further health to its balance sheet BMB has obtained approval for a $20 million capital injection. It is expected to come in the form of a rights issue, though appetite for it among existing shareholders might well be influenced by the outcome of negotiations with the syndicated lenders.

With BMB's difficulties coming hard on the heels of trouble at Bahrain International Bank (BIB), attention has focused on the willingness and ability of the Bahrain Monetary Agency (BMA - central bank) to manage the restructuring process (Banking, MEED Special Report, 13:12:02, pages 23-28; MEED 20:12:02) . 'It's getting to the point at which either a lifeboat or liquidation are needed,' says Fitch's Gordon Scott. 'The lifeboat could come from the BMA or it could come from the creditors. But either way the BMA needs to get it right.'

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