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The Show Must Go On: Zain stays on sale

April 18, 2011 1:30 by Eva Fernandes

Kuwait’s Zain should remain for sale despite the death of Nasser al-Kharafi, one of telecom operator’s top shareholders and former chairman of the indebted Kharafi group.

“It all depends on who succeeds Kharafi, but Zain is likely to still be up for sale,” said Irfan Ellam, Al Mal Capital VP in Dubai. “It depends on the financial situation of the Kharafi group. Assets could be sold to pay down debts.”

The group’s interests span real estate, retail and financial services, but these were hit hard by the financial crisis and it has direct and indirect liabilities likely to total at least $5 billion, said Naser al-Nafisi, GM for Al Joman Center for Economic Consultancy in Kuwait.

A Kharafi consortium had agreed to sell a 46 percent stake in Zain to Etisalat for $12 billion, but the UAE firm scrapped its bid in March. A similar deal with an Indian-led group also failed in 2009. Yet analysts said Kharafi’s Zain stake—estimated to be 20 percent—was still for sale despite these setbacks and Kharafi’s death is unlikely to change this.

“Kharafi borrowed to get the Zain shares and borrowed to speculate in other investments. Kharafi has a lot of debt and Zain is a big liquid asset and some of its other assets are not so liquid,” said al-Nafisi.

Moody’s downgraded Kharafi unit National Industries Group (NIG) in March, citing concerns over a $475 million sukuk and warning the firm was highly leveraged.

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