Noor joins growing band asking for loan repayments extension

05/09/2011 00:00 AST

Noor Financial Investment is asking its banks for a six-year extension on loan repayments, joining a growing list of Kuwaiti investment houses forced to renegotiate debt after the financial crisis.

Kuwait's investment companies flourished in the early 2000s by borrowing short-term money, buying flashy investments and delivering big returns.

When banks curtailed lending after the crisis hit in 2008, however, their financing lifeline was cut off, leaving them with little cash and large debts to repay.

Noor said in a statement to the Kuwait Stock Exchange yesterday that it agreed with Gulf Bank, one of the country's biggest lenders, to reschedule the repayment of a 62.5 million Kuwaiti dinars (Dh842.9m) loan until 2017.

The loan matured last year, a source close to the company said, and Gulf Bank agreed to roll it over as negotiations progressed on an extension. In total, Noor owes about 155m dinars to five banks and is trying to extend the repayment of all of it.

The deal with Gulf Bank would serve as a "benchmark" for other extensions, the source said, adding that Noor wanted to resolve its issues within the next six months.

Committees have been appointed to represent Noor and the banks, and both sides have hired lawyers and accounting firms.

"The context is that investment companies in the GCC and Kuwait have been undergoing debt restructuring for the past two to three years," the source said.

While Noor's troubles add it to the roster of Kuwaiti firms crippled by debt, its borrowings are smaller than those of some peers.

The Investment Dar, which owns half of the British luxury car maker Aston Martin, reached a deal to restructure about US$3.6 billion (Dh13.22bn) of debt in March. Global Investment House, another publicly listed Kuwaiti company, sealed a $1.7bn restructuring in late 2009.

But Noor's restructuring is more than twice the size of the International Investment Group's (IIG). That company defaulted on a $200m Islamic bond in April last year, and in January this year revealed total debts of about $237m.

The trouble at Kuwaiti investment firms has underscored the fragility of financing models that use short-term debt to finance long-term investments. In a report on IIG's financial condition in January, the accountancy KPMG outlined concerns that could easily apply to other Kuwaiti investment companies.

IIG's profits, KPMG said, came solely from financing and investing, and its injections into subsidiaries through loans "have been rolled over several times already due to the inability of the group companies to generate sufficient cash flows to repay the amounts due".

The National