Surging buyout activity in the Middle East is helping Global Investment House get ahead of plans to repay creditors after the Kuwaiti financial company restructured $1.7 billion of debt twice in the past five years.
The company generated $122 million from asset sales between July 2013 and the end of last year, exceeding a target of $35 million in its agreement with creditors, Ibrahim Saad, chairman of Global, said in an interview in Dubai. This year, asset sales also continue to be ahead of target, Saad said, declining to provide further details.
Global delisted its shares and created a so-called bad bank owned by creditors including Standard Chartered Plc, Deutsche Bank AG and Gulf Bank KSC as part of its second revamp agreement in 2013. The remaining part of the business, in which creditors were given a 70 percent stake, was left debt-free and given the mandate for the sale of assets from the bad bank and return the cash to creditors.
“In 2013 the banks weren’t sure if this plan would work,” said Saad, a former Carlyle Group executive, last week. “We’ve been able to sell more assets at better valuations than we expected and are now ahead of the asset realization plan.”
Valuations in the Middle East have been rising as private equity firms including Blackstone Group LP, Abraaj Group Ltd. and Fajr Capital compete to acquire businesses in the region. Abraaj last year was caught in a bidding war for Egyptian confectionery maker Bisco Misr, eventually losing out to U.S.- based Kellogg Co.
“If we could, we would sell most of the distressed portfolio as soon as possible,” said Saad, a Massachusetts Institute of Technology graduate. “The timing is very good for us as valuations and interest from buyers is high.”
Global also plans to relist its shares in Kuwait later this year and pay its first dividend since 2008. For the first quarter, the company reported a profit of 1.8 million Kuwaiti dinars ($5.9 million) after a fourth-quarter loss.
Ensuring the timely repayment of debt isn’t Saad’s only challenge: last year the executive management team resigned as creditors sought greater representation. While those resignations were later withdrawn, Global has also lost senior bankers including the heads of investment banking, brokerage and wealth management.
Stability is now returning, according to Saad. Board members representing the creditors have four of the seven seats, while the bank is promoting internally to fill the gaps left at the management level and plans to hire selectively.
“The shareholders, the board and the management are now completely aligned on the strategy and we wouldn’t have been able to make this much progress without that,” he said.
Global is now seeking to use its experience managing its own distressed assets to create a new business managing bad loans for other Middle East banks. It’s secured one mandate for a regional bank and is seeking others, Saad said.
The company is considering the initial public offering of one of its assets this year and is looking to grow its investment banking business and expand assets under management.
“At some levels I think we have exceeded the expectations of the creditors,” said Saad. “But I’m not satisfied with where we are and I think we can still do better and need to aggressively focus on growth.”