Global Investment House, once one of the Middle East’s largest investment banks, is set to enter its second financial restructuring in two years as it looks unable to meet the repayment schedule of the original $1.7bn restructuring agreement, signed in 2009.
The company, which first defaulted in late 2008 during the financial crisis, has asked creditors to delay principal repayments on debt due in December, according to an e-mailed statement.
HSBC advised on the first restructuring, but Global, as the bank is often known locally, has now appointed Evercore, the US boutique, as adviser to a new round of talks with lenders.
Global has also asked to defer an increase in the rate of interest, which was supposed to start in December, and waive or defer certain covenants applicable under its debt arrangements, according to the statement.
“It was probably too optimistic in its original assumptions,” said a person familiar with the 2009 restructuring process. “They will probably seek to push out the terms as the three years envisaged initially was pretty ambitious.”
The first agreement involved placing $1.7bn of Global’s own investments into two closed-end funds – the Global Macro Fund and Real Estate Holdco – which would act as collateral for the creditors. These investments would be gradually sold over the next three years to repay debts.
If Global fails to repay $700m of the $1.72bn by the second year of the restructuring, the creditors can convert their debt into equity in the bank, according to the original agreement.
However, generating revenue from its asset management and brokerage arms has proved difficult, given the global financial turmoil, as have asset sales. So far Global has only repaid $200m to creditors.
Global stressed that it continues “to service all of its outstanding debt to date in accordance with its terms”, but a creditors’ committee of the bank’s lenders was set up at a meeting in Dubai on Thursday.
“They are not in default at the moment but they might go into it,” the person familiar with the situation said.
Global, led by Maha al-Ghunaim, a prominent Arab businesswoman in a region overwhelmingly dominated by male sheikhs and family patriarchs, was once one of the best known investment banks in the region.
However, the company’s reputation was hit when it defaulted, and it emerged that the bank had borrowed from its own funds under management.
Get alerts on Global Investment when a new story is published