Debt troubles at Bahrain investment firm GFH

Debt troubles at Bahrain investment firm GFH

June 9 (Reuters) – Bahrain’s Gulf Finance House GFHB.BH (GFHK.KW) has been badly hit by a regional real estate crash and has struggled to reduce its debt as the repayment of a $100 million loan looms in August.

Its troubles underscore how the financial crisis has challenged banks and regulators in the oil exporting economies of the Gulf, once thought immune from shocks due to energy income, and how far some must go before regaining solid ground.

Below are questions and answers on the risks to GFH, its financial partners and Bahrain’s banking industry.

HOW LARGE IS THE BANK’S EXPOSURE?

The investment house in February narrowly escaped default by striking an eleventh-hour agreement with lenders to roll over a portion of a $300 million loan after massive write-downs on its property portfolio.

GFH has deleveraged its balance sheet over the past months and shrunk liabilities from a peak of $2.6 billion in mid-2008 to $855 million as of March 31.

This includes $169 million in placements from financial and other institutions and $397 million in financing liabilities.

It also includes a $100 million loan arranged by German lender WestLB that is due in August and a $50 million money market placement by First Energy Bank, established by GFH in 2008, which is due in 2011.

It also has an $80 million loan outstanding for which Bahrain’s Liquidity Management House (LMC) acted as lead arranger, maturing in several tranches until 2012.

About $137 million of a GFH sukuk, or Islamic bond, that matures in 2012 was outstanding at the end of the first quarter. …more