The latest transaction has involved Mannai swapping more than half of its original debt of QR 1,000 million for equity. The deal not only lifted the debt burden hanging over the diversified group, it also opened the way for an initial public offering (IPO) to take place on the Doha Securities Market (DSM) in two-three years' time.

Mannai had always envisaged a refinancing this year, following the original rescue agreement on 17 July 2001, although the decision to pursue the debt/equity route was taken only after a surge in liquidity on the DSM in 2003. 'The reality is that if we had not had this deal, we would forever have been paying the interest payment on the debt and as a result the true value of the company would never have been fulfilled,' says Mannai's chief executive Keith Higley. 'The outstanding debt we now have is the normal amount for a company of our size and is made up of working capital and trade finance facilities.'

The details of the debt/equity swap are a closely guarded secret. What is known is that creditor banks have received equity in Mannai roughly in proportion to their lending status. In addition, since only Qatari or GCC entities can hold local shares, and six of the banks involved are foreign, the shares have been deposited with an institution in Qatar. Finally, the banks will gain some representation on the Mannai board. The group's management remains unchanged, with founder Ahmed Mannai continuing to head the group as honorary chairman. Khalid Mannai is chairman and Higley, brought in three years ago to manage the turnaround, is chief executive.

'It has been a complicated transaction as nothing like this has been done before in this part of the world: quite simply, there was no precedent,' says Higley. 'It is a tribute to the banks and the authorities that a place like Doha can manage such a sophisticated transaction.'

The debt/equity deal represents the second stage in the three-phase recovery programme. Stage one, which was ushered in with the July 2001 debt agreement with the bank consortium, saw the group's perilous financial position stabilised and the launch of a recovery strategy focusing on its core trading and industrial activities at home. Overseas interests, built up in the 1990s, were sold, along with Mannai Marine and five vessels owned by Mansal Offshore. The proceeds have been used to pay off some of the group's loan obligations, including a $20 million loan extended to kick-start the restructuring last summer. The disposal of assets, coupled with an internal cost-cutting programme, also resulted in the group's payroll dropping by 1,000 to 3,000 at the start of this year.

The refinancing has taken the pressure off the group's balance sheet and allowed the company to embark on the third and final phase of its restructuring programme - to become a publicly listed company. 'The authorities expect a company to show two years of profitability before it lists on the stock exchange. So what will happen in the next two-three years, or whenever the board believes the time is right, is that we will approach the DSM for a listing and float at least 40 per cent of the company's capital,' says Higley. The proposed IPO is being considered to provide an exit route for the swapped shares and to broaden the company's investor base. No plans are being considered at present to raise additional capital from the market.

The company says that even before the refinancing agreement, its businesses were generating operating profits. The problem was that these profits went on debt servicing, and not on growing the company. Now, with the repayment burden removed and the disposal programme nearing an end, the focus is very much on building the business. The aim is to start registering profits every quarter, to strengthen the balance sheet in preparation for the IPO. Says chairman Khalid Mannai: 'Much of our time over the past three years has been taken up with the restructuring. Now we can look forward to managing growth.'

The potential for growth has seldom been better in Doha for the local trading and contracting communities. Consumer spending has risen noticeably over the past 12 months on the back of a jump in government expenditure and a booming stock market, while construction activity has picked up significantly with the launch of the massive gas investment programme and an extensive infrastructure upgrade.

At Mannai, which has just moved into new headquarters, located near Ramada junction, the feel-good factor has been much in evidence recently with the vehicle, car rental, office supplies and travel agency divisions all reporting brisk business. Says Higley: 'We have said in the past that the headlines have been running two years ahead of the real economy. Now, the local economy is catching up. The advance party is here and the money is being spent.'

The message coming out of Mannai these days is that it is well on the way to recovery. With the refinancing agreement signed and Doha witnessing an unprecedented upturn, the foundations are in place for one of the most famous names in Qatari business to be restored to full health. That in itself is an achievement for a company that nearly disappeared from the scene just three years ago.