Global shareholders approve restructuring plan

03 September 2012

Proposal involves creation of special purpose vehicles to take on $1.7bn of debt

Shareholders of Kuwait’s Global Investment House have approved plans to restructure the company’s $1.7bn debt by creating two special purpose vehicles.

The proposal will include a separation of Global’s core fee businesses from its non-core assets and a transfer of debt obligations, which if approved by bank and bond creditors, would result in the firm becoming substantially deleveraged.

On 2 September, shareholders approved plans to create special purpose vehicles to take on the investment bank’s debt.

“Global will remain one company, substantially deleveraged and will focus on the core fee businesses: asset management, investment banking and brokerage,” says Moustafa N Zantout, senior vice-president, marketing and communications at Global.

Global in numbers (KDm)
 20112010
Net interest income-21.5-20.9
Fees earned14.120.7
Net revenue-12.4-38
Operating income-35.5-63
Net profit-57.5-73.2
Source: Bloomberg

One special purpose vehicle will hold the company’s assets, along with a debt of $1.3bn. The second will undertake a capital increase. Under the proposal, Global will offer KD122.2m ($435m) of new shares, which will be held by one or more of the special purpose vehicles.

Global and its advisers are already in discussions with the coordinating committee of the lenders, their advisers and bondholders regarding the proposals. A long form term sheet outlining the proposals has been circulated among the wider lender group and bondholders, according to Zantout.

Shareholders also agreed to write-off KD108.2m of losses. 

Global expects the proposals to strengthen its balance sheet. “It will improve our balance sheet as Global will be substantially deleveraged and will focus on the core fee businesses, which have generated a total revenue of KD14.1m in 2011,” says Zantout.

Global had sought shareholder approval to swap debt for equity as part of its restructuring, the second time in three years the firm has had renegotiate its financial obligations. 

MEED reported on 15 August that the latest deal was aimed at appeasing creditors, who had favoured a debt-for-equity swap and the transfer of assets after the collapse of the original restructuring deal agreed in 2009.

In May, the company had asked creditors to delay a debt repayment due in June until November while it worked on a new restructuring plan. 

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