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Bahrain’s GFH to restructure 2011 debt or sell assets

To slash costs by another 40 percent-document.

October 26, 2010 2:57 by

Bahrain’s Gulf Finance House (GFH) plans to restructure or sell assets to pay back $90 million in debt next year, a document showed, highlighting its struggle to meet obligations amid dried-up revenues.

The Islamic investment firm and other Bahraini investment houses have struggled to restart revenue growth, after a 2008 regional property crash pulled the rug out from under their business model of earning fees on investor money raised for private equity and property projects.

GFH, which has restructured two loans worth a total of about $400 million this year, said in an investor presentation seen by Reuters it plans to either restructure or sell down assets to repay $90 million in term debt next year.

It said earlier this year it would sell down assets to pay back its debt but has so far raised only $40 million in cash through asset sales.

“We expect to reschedule the 2011 debt or sell or substitute assets or shares for that debt,” a spokeswoman for GFH said in a statement e-mailed to Reuters.

“Discussions are well under way. It is expected revenue will cover any debt servicing, which is now at lower levels,” she said.

GFH posted a net loss of $40 million for the second quarter and did not book any income from investment banking services, the main income source during the region’s five-year oil and property boom that ended in 2008.

It plans to slash its paid-up capital by about 75 percent to absorb its losses and raise up to $500 million in additional funds through issuing a murabaha, an equity-linked Islamic money-market instrument.

GFH said in the presentation it would use $100 million of the murabaha as working capital and financing needs in 2011 and 2012.

The spokeswoman also said the firm is considering exiting its property projects in North Africa and India through two initial public offerings (IPOs).

“Some large investors have indicated that they may wish to accept land in such projects as their method of exit,” she also said. The investor presentation also showed GFH plans to cut its operating expenses by some 40 percent through the reduction of staff costs and funding costs.

The firm slashed its staff costs by 66 percent during the first half compared with a year earlier, partly through lay-offs.

(Reporting by Frederik Richter; Editing by Dinesh Nair and David Holmes)

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