LMH completes $331.6 million debt restructuring deal for FIC

04/04/2011 00:00 AST

Liquidity Management House (LMH), serving as structuring advisor on behalf of six Kuwait banking institutions, has successfully completed a KWD 92 million ($331.6 million) debt restructuring of First Investment Company (FIC).

Al Tamimi & Company's Kuwait office served as lead counsel on behalf of the creditors. The deal, between FIC and its creditors, which was made on 20 February 2011, was a unique Sukuk Al Wakala transaction for the purpose of restructuring the debt of FIC.

The transaction is the first of its kind in Kuwait in terms of utilising Sukuk for the purpose of restructuring a company's existing debt obligations. An initial closing happened in September 2010 involving one of FIC's major creditors. This allowed the remaining creditors to join the deal, which was finally closed on 20 February 2011.

The LMH team was led by Emad Al Monayea, Vice Chairman and CEO, Masroor Ahmed Siddiqui, Senior Vice President of investment banking, and Mubarak Al Refaei, Vice President of investment banking. Al Tamimi's involvement in the transaction, which included drafting and negotiation of the documentation, was led by Alex Saleh, Partner and Kuwait's Head of Office, and Philip H. Kotsis, Senior Counsel.

Philip Kotsis, commenting on the deal, said, "We believe this innovative deal will provide a positive outcome for both FIC and its creditors. Deals such as these are primarily dependent upon both the debtors and the creditors both wanting a constructive and realistic outcome while ensuring the proper incentives are present to make the transaction worthwhile for the creditors. The goal is not only to protect the creditors in these situations, but to develop a structure to enable the debtor to function in a manner to allow the debts to be satisfied over time.

"We believe this deal will achieve the goals and protect the interests of the creditors while providing FIC with a firm basis from which it can fulfil its debt obligations".

FIC is a Shari'ah-compliant company and its debt obligations consisted of numerous unsecured bilateral Islamic financing facilities to multiple creditors in Kuwait. According to the terms of the deal, the bilateral agreements will be replaced, subject to certain conditions precedent that must be satisfied in the coming months, through the creditors' subscription into the Sukuk Al Wakala.

A key incentive for the creditors joining in the Sukuk transaction is the obligation for FIC to collateralise the vast majority of its local and foreign assets to security agents acting on behalf of, and for the benefit of, the creditors in various jurisdictions. In doing so, the creditors will be placed in a stronger position through a secured transaction, as opposed to unsecure bilateral obligations. In return, FIC has the opportunity to move forward with its business operations and restructure its debt in a manner intended for the future sustainability and success of the company.

CPI Financial